SCHEDULE 14A
(RULE 14A-101)
(AMENDMENT NO. 2)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
THE MONTANA POWER COMPANY
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[MONTANA_POWER_LOGO] [LOGO]
MAY , 2001
RESTRUCTURING PROPOSED--YOUR VOTE IS VERY IMPORTANT
Dear Shareholders:
The Board of Directors of The Montana Power Company announced in March 2000
that it would begin the process of divesting The Montana Power Company's
multiple energy businesses in order to focus on its telecommunications business,
Touch America, Inc. Following this announcement, The Montana Power Company
successfully entered into agreements to divest itself of all the energy
businesses, and now asks for your vote to complete the restructuring.
The Board has approved a merger whereby Touch America Holdings, Inc., a
recently created company, will own what is today the telecommunications business
of The Montana Power Company. In the merger, shareholders of The Montana Power
Company will be deemed to receive one share of Touch America Holdings, Inc. for
each share of The Montana Power Company. Immediately following this merger, the
remaining energy business of The Montana Power Company, its utility business,
will be sold to NorthWestern Corporation. Upon completion of this merger and the
sale of the utility business to NorthWestern, Touch America Holdings, Inc. will
own Touch America, Inc. and Tetragenics Company, which will be its
telecommunications operating business.
The Montana Power Company will hold a special meeting of our shareholders to
consider and vote on the merger and the sale of the utility business to
NorthWestern. In addition, shareholders of common stock will be asked to vote in
favor of the redemption of The Montana Power Company's outstanding Preferred
Stock, $4.20 Series and Preferred Stock, $6.00 Series. Whether or not you plan
to attend the special meeting, please take the time to vote by following the
instructions on your proxy card.
The place, date and time of the special meeting is as follows:
The Mother Lode Theatre
316 W. Park
Butte, Montana
July 25, 2001, 1:30 p.m., local time
I ENTHUSIASTICALLY SUPPORT THE RESTRUCTURING AND JOIN WITH THE MONTANA POWER
COMPANY'S BOARD IN RECOMMENDING THAT YOU VOTE FOR THE APPROVAL OF THE MERGER
AGREEMENT, THE SALE OF THE UTILITY BUSINESS TO NORTHWESTERN AND THE REDEMPTION
OF THE PREFERRED STOCK.
- ------------------------
Sincerely,
/s/ Robert P. Gannon
Robert Gannon
Chairman and Chief Executive Officer
The Montana Power Company
FOR A DISCUSSION OF RISK FACTORS WHICH YOU SHOULD CONSIDER IN EVALUATING THE
RESTRUCTURING, SEE "RISK FACTORS" BEGINNING ON PAGE 17.
Up to 108,384,000 shares of Touch America Holdings' common stock, par value
$.01 per share, and up to 580,389 shares of Touch America Holdings' Preferred
Stock, par value $.01 per share, may be issued in connection with the merger.
The Touch America Holdings' common stock will be listed on the New York Stock
Exchange and the Pacific Exchange, Inc. Touch America Holdings' common stock
will trade under the ticker symbol "TAA".
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
proxy statement/prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
THIS PROXY STATEMENT/PROSPECTUS IS DATED MAY , 2001, AND IS FIRST BEING
MAILED TO SHAREHOLDERS ON OR ABOUT MAY , 2001.
[MONTANA_POWER_LOGO]
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 25, 2001
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To the Shareholders of The Montana Power Company:
It is our pleasure to invite you to a special meeting of the shareholders of
The Montana Power Company on Wednesday, July 25, 2001, at 1:30 p.m., local time,
at the Mother Lode Theatre, 316 W. Park, Butte, Montana, for the following
purpose:
To consider and vote upon three separate but related proposals:
PROPOSAL ONE: Approval of the agreement and plan of merger among The Montana
Power Company, Touch America Holdings, Inc., a Delaware corporation and
wholly owned subsidiary of The Montana Power Company, and The Montana Power,
L.L.C., a Montana limited liability company and wholly owned subsidiary of
Touch America Holdings, dated as of February 20, 2001, the result of which
is that holders of common shares of The Montana Power Company will be deemed
to receive one share of Touch America Holdings' common stock for each share
of common stock of The Montana Power Company and holders of shares of
Preferred Stock, $6.875 Series of The Montana Power Company will be deemed
to receive one share of Touch America Holdings' Preferred Stock, $6.875
Series for each share of Preferred Stock, $6.875 Series of The Montana Power
Company.
PROPOSAL TWO: Approval of the sale of substantially all of the assets of The
Montana Power Company relating to its utility business as contemplated by
the Unit Purchase Agreement between NorthWestern Corporation, The Montana
Power Company and Touch America Holdings, Inc. dated as of September 29,
2000.
PROPOSAL THREE: Approval of the redemption of The Montana Power Company's
outstanding Preferred Stock, $4.20 Series and Preferred Stock, $6.00 Series.
Approval of the merger agreement is contingent upon the approval of the sale
of the utility business to NorthWestern. The Montana Power Company, Touch
America Holdings and The Montana Power, L.L.C. will not complete the merger
unless The Montana Power Company's shareholders approve the sale of the utility
business to NorthWestern. We cannot complete the merger and the sale of the
utility business to NorthWestern unless holders of at least two-thirds of all
the shares outstanding and entitled to vote at the special meeting vote together
as a single class to approve the merger agreement and the sale of the utility
business to NorthWestern.
Approval of the redemption of the preferred stock is not contingent upon the
approval of the sale of the utility business to NorthWestern or the merger
agreement. We cannot complete the redemption of the preferred stock unless
holders of a least a majority of all of our common shares outstanding and
entitled to vote at the special meeting vote to approve the redemption of the
preferred stock.
If the redemption of the preferred stock is not approved by at least a
majority of all of our common shareholders, each shareholder of The Montana
Power Company's Preferred Stock, $4.20 Series and Preferred Stock, $6.00 Series
will be deemed to receive in the merger one share of Touch America Holdings'
Preferred Stock, $4.20 Series and Preferred Stock, $6.00 Series, for each
outstanding share of The Montana Power Company's Preferred Stock $4.20 Series
and Preferred Stock $6.00 Series,
respectively. The terms of the Touch America Holdings' Preferred Stock, $4.20
Series and Preferred Stock, $6.00 Series will be identical to the terms of The
Montana Power Company Preferred Stock, $4.20 Series and Preferred Stock, $6.00
Series, respectively.
Separately, and independent of the merger and this special meeting, the
Board has determined it would be in the best interest of The Montana Power
Company and its shareholders to initiate a tender offer for the Preferred Stock,
$6.875 Series of The Montana Power Company. We are not asking for you to take
any action on this matter at the current time.
Shareholders who owned either our common or preferred stock on May 21, 2001
are entitled to vote on the merger agreement and the sale of the utility
business to NorthWestern at the special meeting. Shareholders who owned our
common stock on May 21, 2001 are entitled to vote on the redemption of the
preferred stock.
The members of the Board present at the relevant meetings have adopted and
approved the sale of the utility business to NorthWestern, the merger agreement
and the redemption of the preferred stock and recommended that our shareholders
vote for each of these proposals.
We will transact no other business at the special meeting, except for
business properly brought before the special meeting or any adjournment or
postponement of it by the Board.
The accompanying proxy is solicited by the Board of Directors of The Montana
Power Company, a Montana corporation, for use at the special meeting on
July 25, 2001, or at any adjournment thereof.
The accompanying proxy statement was mailed on or about May . These
materials are also available on our home page (www.mtpower.com).
FOR MORE INFORMATION ABOUT THE RESTRUCTURING DESCRIBED ABOVE AND THE RELATED
TRANSACTIONS, PLEASE REVIEW THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS, THE
MERGER AGREEMENT ATTACHED TO IT AS ANNEX A, AND THE UNIT PURCHASE AGREEMENT
ATTACHED TO IT AS ANNEX B.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. WE ARE ALSO OFFERING YOU THE CHANCE TO CAST YOUR VOTE BY TELEPHONE OR
COMPUTER. YOU MAY VOTE BY TELEPHONE OR COMPUTER BY FOLLOWING THE INSTRUCTIONS ON
YOUR PROXY CARD.
PLEASE DO NOT SEND ANY SHARE CERTIFICATES AT THIS TIME. FOLLOWING THE
MERGER, TOUCH AMERICA HOLDINGS, INC. WILL MAIL APPROPRIATE TRANSMITTAL MATERIALS
AND INSTRUCTIONS ADVISING YOU OF THE PROCEDURE TO BE USED FOR SURRENDER OF YOUR
MONTANA POWER COMPANY SHARE CERTIFICATES IN EXCHANGE FOR SHARE CERTIFICATES OF
TOUCH AMERICA HOLDINGS, INC. PRIOR TO THIS EXCHANGE, YOUR EXISTING SHARE
CERTIFICATES OF THE MONTANA POWER COMPANY WILL BE DEEMED TO REPRESENT FOR ALL
PURPOSES THE RIGHT TO RECEIVE CERTIFICATES REPRESENTING TOUCH AMERICA HOLDINGS,
INC.'S SHARES.
By Order of the Board of Directors,
/s/ Patrick T. Fleming
Corporate Secretary
Butte, Montana
May , 2001
2
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about The Montana Power Company and Touch America
Holdings, Inc. from other documents that are not included in or delivered with
this proxy statement/prospectus. This information is available to you without
charge upon your written or oral request. You can obtain those documents
incorporated by reference in this proxy statement/prospectus by requesting them
in writing or by telephone from MPC at the following address:
The Montana Power Company
C/O Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, NJ 07072
Individual Shareholders Should
Call:
1-800-793-1283
Banks and Brokers Should Call:
(201) 896-2633
If You Would Like to Request Documents, Please do so by July 16, 2001, in
Order to Receive Them Before Your Special Meeting.
See "Where You Can Find More Information" below on page 84.
TABLE OF CONTENTS
PAGE
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QUESTIONS AND ANSWERS ABOUT THE RESTRUCTURING............... 1
SUMMARY..................................................... 5
General................................................... 5
The Restructuring......................................... 7
The Companies............................................. 12
RISK FACTORS................................................ 17
SELECTED HISTORICAL CONDENSED CONSOLIDATED FINANCIAL DATA OF
MPC....................................................... 24
SELECTED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL DATA OF TOUCH AMERICA HOLDINGS.................. 25
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... 26
THE SPECIAL MEETING......................................... 27
Date, Time and Place...................................... 27
Purpose of the Special Meeting............................ 27
Record Date; Shares Entitled to Vote; Quorum.............. 27
Vote Required............................................. 27
Voting by MPC Directors and Executive Officers............ 28
Voting of Proxies......................................... 28
Changing the Vote......................................... 29
Revocability of Proxies................................... 29
Solicitation of Proxies................................... 29
THE RESTRUCTURING........................................... 30
General Description of the Restructuring.................. 30
Background of the Restructuring........................... 30
Reasons for the Restructuring and the MPC Board
Recommendation.......................................... 32
Use of Proceeds from the Sale of the Energy Businesses.... 35
Interests of MPC's Directors and Management in the
Restructuring........................................... 35
Outstanding Stock-Based Grants Under MPC's Long-Term
Incentive Plan.......................................... 36
Change of Control Agreements.............................. 37
Employee Benefit Plans.................................... 38
Indemnification........................................... 40
Listing of Touch America Holdings' Capital Stock.......... 40
Dividends................................................. 40
Material U.S. Federal Income Tax Consequences of the
Merger.................................................. 40
Accounting Treatment...................................... 42
Dissenters' or Appraisal Rights........................... 42
Resale of Touch America Holdings' Common Stock............ 44
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS; DIRECTORS;
AND EXECUTIVE OFFICERS.................................... 45
Security Ownership of Certain Beneficial Owners of MPC.... 45
Security Ownership of Management of MPC................... 45
i
PAGE
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REGULATORY MATTERS.......................................... 48
General................................................... 48
Federal Energy Regulatory Commission...................... 48
United States Antitrust Law............................... 49
State Approvals or Filings................................ 49
Other Permits or Licenses................................. 50
THE MERGER AGREEMENT........................................ 51
The Merger Between MPC and The Montana Power, L.L.C....... 51
Timing.................................................... 51
Merger Consideration...................................... 51
Conditions to the Completion of the Merger................ 51
Termination of the Merger Agreement....................... 51
THE PURCHASE AGREEMENT...................................... 52
The Sale of the Utility Business to NorthWestern.......... 52
Timing of Closing......................................... 52
Consideration............................................. 52
Conditions to the Completion of the Sale of the Utility
Business to NorthWestern................................ 52
No Solicitation by MPC and Touch America Holdings......... 53
Termination of the Purchase Agreement..................... 55
Termination Fees; Reimbursement of Expenses............... 56
Interim Operations of MPC................................. 57
Indemnification........................................... 59
Amendment; Extension and Waiver........................... 60
Representations and Warranties............................ 61
THE REDEMPTION OF THE PREFERRED STOCK....................... 61
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF
TOUCH AMERICA HOLDINGS.................................... 62
DESCRIPTION OF TOUCH AMERICA HOLDINGS' CAPITAL STOCK........ 73
General................................................... 73
Common Stock.............................................. 73
Preferred Stock........................................... 73
ii
PAGE
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COMPARISON OF SHAREHOLDER RIGHTS............................ 75
Corporate Governance...................................... 75
Authorized Capital Stock.................................. 75
Number of Directors....................................... 76
Classified Board.......................................... 76
Cumulative Voting......................................... 76
Vacancies on the Board.................................... 77
Removal of Directors...................................... 77
Vote Required for Shareholder Actions..................... 78
Shareholder Action By Written Consent..................... 78
Special Meetings of Shareholders.......................... 79
Amendments to Governing Documents......................... 79
Preemptive Rights......................................... 80
Indemnification of Directors, Officers, Employees and
Agents.................................................. 80
Limitation on Director Liability.......................... 80
Business Combinations..................................... 81
Dissenters' or Appraisal Rights........................... 81
Anti-Takeover Statutes.................................... 82
Shareholder Rights Plan................................... 82
LEGAL MATTERS............................................... 83
EXPERTS..................................................... 83
SHAREHOLDER PROPOSALS....................................... 83
OTHER MATTERS............................................... 83
WHERE YOU CAN FIND MORE INFORMATION......................... 84
ANNEXES
- ---------------------
Annex A Agreement and Plan of Merger
Annex B Unit Purchase Agreement
Annex C Montana Business Corporation Act Sections 35-1-826 through
35-1-839
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QUESTIONS AND ANSWERS ABOUT THE RESTRUCTURING
Q: WHEN AND WHERE IS THE SHAREHOLDERS MEETING?
A: The special shareholders meeting will take place on Wednesday, July 25, 2001
at The Mother Lode Theatre, 316 W. Park, Butte, Montana.
Q: WHAT WILL HAPPEN IN THE RESTRUCTURING?
A: The restructuring is comprised of three steps: (1) the redemption of
preferred stock, (2) the merger and (3) the sale of the utility business to
NorthWestern. First, prior to the merger, MPC will redeem the outstanding
Preferred Stock, $4.20 Series and Preferred Stock, $6.00 Series. Second, MPC
will merge with and into The Montana Power, L.L.C., with The Montana Power,
L.L.C., which is wholly owned by Touch America Holdings surviving the
merger. As a result of this merger, Touch America Holdings will become the
owner of the telecommunications business and the utility business of MPC,
and shareholders of MPC will become stockholders of Touch America Holdings.
Finally, immediately following the merger, Touch America Holdings will sell
The Montana Power, L.L.C. to NorthWestern. As a result of the restructuring,
NorthWestern will own and control MPC's regulated electric and natural gas
utilities which represented approximately 67% of MPC's 2000 consolidated
revenue, (excluding intersegment revenues and discontinued operations). At
the same time, Touch America Holdings will own Touch America, Inc. and
Tetragenics Company, its telecommunications operating businesses.
Q: WHAT WILL I RECEIVE FOR MY SHARES?
A: As a result of the merger, each common shareholder of MPC will be deemed to
receive one share of Touch America Holdings' common stock for each MPC
common share that he or she holds and each MPC preferred shareholder will be
deemed to receive one share of Touch America Holdings' Preferred Stock,
$6.875 Series for each MPC Preferred Stock, $6.875 Series that he or she
holds. See "Description of Touch America Holdings' Capital Stock" below on
page 73.
If the redemption of the preferred stock is not approved by at least a
majority of all common shares outstanding and entitled to vote at the
special meeting, each shareholder of Preferred Stock, $4.20 Series and
Preferred Stock, $6.00 Series will be deemed to receive in the merger one
share of Touch America Holdings' Preferred Stock, $4.20 Series and Preferred
Stock, $6.00 Series, for each outstanding share of Preferred Stock $4.20
Series and Preferred Stock $6.00 Series, respectively. The terms of the
Touch America Holdings' Preferred Stock, $4.20 Series and Preferred Stock,
$6.00 Series will be identical to the terms of the Preferred Stock, $4.20
Series and Preferred Stock, $6.00 Series, respectively. See "The Redemption
of the Preferred Stock" below on page 61.
Q: WHAT HAPPENS TO MY FUTURE DIVIDENDS?
A: On October 24, 2000, the MPC Board voted to eliminate common dividend
payments effective the first quarter of 2001. The final quarterly dividend
declared by MPC was $.20 per share payable on November 1, 2000. However,
preferred dividends of MPC will not be affected by this decision.
Following the restructuring and for the foreseeable future, Touch America
Holdings does not expect to pay dividends on its common stock.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
proxy statement/prospectus, please complete and sign your proxy and return
it in the enclosed postage-paid envelope as soon as possible so that your
shares may be represented at the special meeting. You also have the option
to vote by telephone or computer. If voting by telephone or computer, dial
the toll-free number or access the Internet address
1
indicated on your proxy. You will be prompted to enter the control number
printed on your proxy and to follow the subsequent simple directions that
will be provided. You may also vote in person at the special meeting.
However, if your broker holds your shares in street name and you intend to
come to the meeting and vote, you must bring a letter from your broker
identifying you as the beneficial owner of the shares and authorizing you to
vote. See "The Special Meeting--Voting of Proxies" below on page 28.
If you sign, date and send your proxy and do not indicate how you want to
vote, we will count your proxy as a vote for the approval of the proposals.
See "The Special Meeting--Voting of Proxies" below on page 28.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: If you want to change your vote you can choose to do any of the following:
(1) Send a later-dated, signed proxy card to MPC's Secretary; (2) submit a
later vote by telephone or computer as described above; or (3) attend the
special meeting in person and vote. You may change your vote by using any
one of these methods regardless of the procedure used to cast your previous
vote. See "The Special Meeting--Revocability of Proxies" below on page 29.
Q: WHAT DO I DO IF I WANT TO REVOKE MY PROXY?
A: You may revoke your proxy card by sending a notice of revocation to MPC's
Secretary at the address under "The Summary--The Companies" below on
page 12.
Q: IF MY BROKER HOLDS MY SHARES IN "STREET NAME," WILL MY BROKER VOTE MY SHARES?
A: If you provide your broker with voting instructions to vote your "street
name" shares, your broker will be permitted to vote on the restructuring. If
you do not provide your broker with instructions on how to vote your "street
name" shares, your broker will not be permitted to vote on the
restructuring. You should therefore be sure to provide your broker with
instructions on how to vote your shares. You should check the voting form
used by your brokers to see if they offer telephone or computer voting.
If you do not give voting instructions to your broker, you will not be
counted as voting for purposes on the restructuring unless you appear and
vote in person at the special meeting. If your broker holds your shares in
"street name" and you intend to come to the meeting and vote, you must bring
a letter from your broker identifying you as the beneficial owner of the
shares and authorizing you to vote. See "The Special Meeting--Voting of
Proxies" below on page 28.
Q: WHAT WILL HAPPEN IF I ABSTAIN FROM VOTING OR FAIL TO VOTE?
A: The delivery of a properly executed proxy card that does not contain voting
instructions will be voted in favor of the proposals. However, the failure
to deliver a properly executed proxy card will have the same effect as a
vote against all the proposals. An abstention or failure to vote at the
meeting will also have the same effect as a vote against proposals. See "The
Special Meeting--Voting of Proxies" below on page 28.
Q: SHOULD I SEND IN MY SHARE CERTIFICATES NOW?
A: No. If the merger is completed, Touch America Holdings will mail to you
appropriate transmittal materials and instructions advising you of the
procedure to be used for the surrender of MPC share certificates for share
certificates of Touch America Holdings. Following the merger, your existing
MPC share certificates will automatically be deemed to represent for all
purposes the right to receive share certificates of Touch America Holdings.
2
Q: WHAT VOTE IS REQUIRED TO APPROVE AND ADOPT THE RESTRUCTURING?
A: The affirmative vote of at least two-thirds of the shares outstanding and
entitled to vote as of the record date, May 21, 2001, either in person or by
proxy, voting together as a single class, is required to approve the merger
agreement and the sale of the utility business to NorthWestern.
The affirmative vote of at least a majority of the common shares outstanding
and entitled to vote as of the record date, May 21, 2001, either in person
or by proxy, is required to approve the redemption of the Preferred Stock,
$4.20 Series and the Preferred Stock, $6.00 Series. See "The Special
Meeting--Vote Required" below on page 27.
Q: WHO ELSE MUST APPROVE THE RESTRUCTURING?
A: In connection with the sale of the utility business to NorthWestern, in
addition to the approval of MPC's shareholders, the purchase agreement
requires that MPC and NorthWestern obtain the approval of state and federal
regulatory agencies before the sale of the utility business to NorthWestern
can be completed. At the federal level, these approvals include approval of
the Federal Energy Regulatory Commission. The waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act expired on January 17, 2001. At
the state level, regulatory approval must be obtained from the Montana
Public Service Commission. The Federal Energy Regulatory Commission issued
an order on February 20, 2001 authorizing the transaction under Section 203
of the Federal Power Act. See "Regulatory Matters" below on page 48.
In connection with the merger, in addition to the approval of MPC
shareholders, the merger agreement requires that Touch America Holdings list
its common stock on the New York Stock Exchange and the Pacific
Exchange, Inc. and receive a ruling from the IRS or an opinion of outside
counsel satisfactory to the MPC Board with respect to tax consequences of
the merger. The merger agreement also requires certain approvals from the
Federal Energy Regulatory Commission. The Federal Energy Regulatory
Commission's order on February 20, 2001 authorized the disposition or
transfer of control over jurisdictional facilities in connection with the
merger. On March 30, 2001, the Federal Energy Regulatory Commission approved
the transfer of the Milltown Hydroelectric License. See "Regulatory Matters"
below on page 48.
The redemption does not require any approvals in addition to the approval of
MPC's common shareholders.
Q: TO WHAT EXTENT ARE THE MERGER, THE SALE OF THE UTILITY BUSINESS AND THE
REDEMPTION OF THE PREFERRED STOCK CONTINGENT UPON EACH OTHER?
A: Approval of the merger agreement is contingent upon the approval of the sale
of the utility business to NorthWestern. However, the approval of the
redemption of the preferred stock is not contingent upon approval of either
the merger agreement or the sale of the utility business to NorthWestern,
nor are the approval of the merger agreement and the sale of the utility
business to NorthWestern contingent upon approval of the redemption of the
preferred stock.
Q: WHEN IS THE RESTRUCTURING EXPECTED TO BE COMPLETED?
A: We are working as quickly as possible and expect to complete the
restructuring within 6 months from the date of this proxy
statement/prospectus.
Q: DO I HAVE DISSENTERS' OR APPRAISAL RIGHTS?
A: Yes. If you follow the relevant procedures under Montana law, you may demand
"dissenters' rights" and receive fair market value for your MPC shares in
cash. You will receive such cash in lieu of Touch America Holdings' shares,
but only if you deliver
3
notice of intent to exercise such dissenters' rights to MPC prior to the
vote to approve the merger agreement and the sale of the utility business to
NorthWestern AND do not vote in favor of the merger proposal and the sale of
the utility business to NorthWestern proposal. See "The
Restructuring--Dissenters' or Appraisal Rights" below on page 42.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about any aspects of the restructuring or if you
need additional copies of this proxy statement/ prospectus or the enclosed
proxy card, you should contact:
CIC Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, NJ 07072
Individual shareholders should call:
1-800-793-1283
Banks and Brokers should call:
(201) 896-2633
Q: WHERE CAN I FIND MORE INFORMATION ABOUT MPC?
A: You can find more information about MPC from various sources described under
"Where You Can Find More Information" below on page 84.
Q: HOW IMPORTANT IS MY VOTE?
A: YOUR VOTE IS CRITICAL BECAUSE THE MERGER AND THE SALE OF THE UTILITY BUSINESS
TO NORTHWESTERN CANNOT BE CONSUMMATED WITHOUT THE AFFIRMATIVE VOTE OF
TWO-THIRDS OF MPC'S SHAREHOLDERS VOTING TOGETHER AS A SINGLE CLASS, AND THE
REDEMPTION OF THE PREFERRED STOCK CANNOT BE CONSUMMATED WITHOUT THE
AFFIRMATIVE VOTE OF A MAJORITY OF MPC'S COMMON SHAREHOLDERS. AN ABSTENTION
OR FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER,
THE SALE OF THE UTILITY BUSINESS TO NORTHWESTERN AND THE REDEMPTION OF THE
PREFERRED STOCK.
4
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO UNDERSTAND THE RESTRUCTURING FULLY AND FOR A MORE COMPLETE
DESCRIPTION OF THE LEGAL TERMS OF THE RESTRUCTURING, YOU SHOULD READ CAREFULLY
THIS ENTIRE PROXY STATEMENT/PROSPECTUS AND THE OTHER DOCUMENTS TO WHICH WE HAVE
REFERRED YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 84. WE HAVE
INCLUDED PAGE REFERENCES PARENTHETICALLY TO DIRECT YOU TO A MORE COMPLETE
DESCRIPTION OF THE TOPICS PRESENTED IN THIS SUMMARY.
GENERAL
RECOMMENDATIONS BY THE MPC BOARD (PAGE 32)
At the September 29, 2000 MPC Board meeting, at which all the board members
but one were present, regarding the sale of the utility business to NorthWestern
and the October 24, 2000 MPC Board meeting, at which all the board members but
two were present, regarding the restructuring, the merger and the redemption of
the preferred stock, the MPC Board, after due consideration:
- determined that the restructuring is consistent with, and in furtherance
of, the best interest of MPC and its shareholders;
- determined that the sale of the utility business to NorthWestern and the
other transactions contemplated by the purchase agreement are consistent
with, and in furtherance of, the best interest of MPC and its
shareholders;
- adopted and approved the purchase agreement and the other transactions
contemplated by the purchase agreement;
- determined that the merger is consistent with, and in furtherance of, the
best interest of MPC and its shareholders;
- adopted and approved the merger agreement and the other transactions
contemplated by the merger agreement;
- determined to recommend that MPC shareholders vote for the approval of the
merger agreement and the sale of the utility business to NorthWestern;
- determined that the redemption of the preferred stock is consistent with,
and in furtherance of, the best interest of MPC and it shareholders; and
- adopted and approved the redemption and determined to recommend that MPC
shareholders vote for the approval of the redemption of the preferred
stock.
INTERESTS OF MPC'S DIRECTORS AND MANAGEMENT IN THE RESTRUCTURING (PAGE 35)
At the completion of the restructuring, Touch America Holdings' Board of
Directors will consist entirely of the current MPC Board:
- Robert P. Gannon,
- Jerrold P. Pederson,
- Tucker Hart Adams,
- Alan F. Cain,
- John G. Connors,
- R.D. Corette,
5
- Kay Foster,
- John R. Jester,
- Carl Lehrkind III,
- Deborah D. McWhinney and
- Noble E. Vosburg.
At the completion of the restructuring, it is anticipated that the following
officers of MPC and Touch America, Inc. will become executive officers of Touch
America Holdings:
- Robert P. Gannon,
- Jerrold P. Pederson,
- Michael J. Meldahl,
- Patrick T. Fleming,
- Michael E. Zimmerman,
- Perry J. Cole,
- Daniel G. Gay, and
- Daniel J. Sullivan.
Robert P. Gannon, currently the Chairman and Chief Executive Officer of MPC,
will continue as Chairman and Chief Executive Officer of Touch America Holdings.
U.S. FEDERAL INCOME TAX CONSEQUENCES (PAGE 40)
In the opinion of Thelen Reid & Priest LLP, MPC's outside tax counsel, the
merger will qualify as a tax-free reorganization, and neither MPC, its
shareholders, nor Touch America Holdings will recognize gain or loss for U.S.
federal income tax purposes.
6
THE RESTRUCTURING
THE MERGER BETWEEN MPC AND THE MONTANA POWER, L.L.C. (PAGE 51)
THE MERGER AGREEMENT IS ATTACHED AS ANNEX A TO THIS PROXY
STATEMENT/PROSPECTUS. WE ENCOURAGE YOU TO READ THE MERGER AGREEMENT. IT IS THE
PRINCIPAL DOCUMENT GOVERNING THE MERGER.
CONDITIONS TO THE COMPLETION OF THE MERGER (PAGE 51)
The completion of the merger is subject to, among other things, federal
regulatory approval and MPC receiving a ruling from the IRS or an opinion of
outside counsel satisfactory to the MPC Board with respect to tax consequences
of the merger.
TERMINATION OF THE MERGER AGREEMENT (PAGE 51)
The merger agreement may be terminated at any time prior to the completion
of the merger:
- by MPC's shareholders, or
- by the MPC Board if it should determine that the merger would not be
advisable or not be in the best interests of MPC or MPC's shareholders.
THE SALE OF THE UTILITY BUSINESS TO NORTHWESTERN (PAGE 52)
THE PURCHASE AGREEMENT IS ATTACHED AS ANNEX B TO THIS PROXY
STATEMENT/PROSPECTUS. WE ENCOURAGE YOU TO READ THE PURCHASE AGREEMENT. IT IS THE
PRINCIPAL DOCUMENT GOVERNING THE SALE OF THE UTILITY BUSINESS TO NORTHWESTERN.
MUTUAL CONDITIONS TO THE COMPLETION OF THE SALE OF THE UTILITY BUSINESS TO
NORTHWESTERN (PAGE 52)
The completion of the sale of the utility business to NorthWestern depends
upon meeting a number of conditions, including the accuracy of representations
and warranties, regulatory approvals and third party consents.
ADDITIONAL CLOSING CONDITIONS FOR NORTHWESTERN'S BENEFIT (PAGE 53)
In addition, NorthWestern's obligation to complete the sale of the utility
business to NorthWestern is subject to, among other things, the completion of
the merger and the termination of a number of MPC benefit plans.
TERMINATION OF THE PURCHASE AGREEMENT (PAGE 55)
The purchase agreement may be terminated at any time prior to the completion
of the sale of the utility business to NorthWestern by mutual written agreement
of Touch America Holdings, MPC and NorthWestern and under other circumstances as
described below on page 54.
TERMINATION FEES; REIMBURSEMENT OF EXPENSES (PAGE 56)
MPC or Touch America Holdings must pay a termination fee of $50 million and
a reimbursement of expenses fee of up to $10 million to NorthWestern upon
certain circumstances as described below on page 56.
7
THE REDEMPTION OF THE PREFERRED STOCK (PAGE 61)
On October 24, 2000, the members of the MPC Board present at the meeting
unanimously approved the redemption of all the outstanding Preferred Stock,
$4.20 Series and Preferred Stock, $6.00 Series. Pursuant to MPC's Restated
Articles of Incorporation, dated March 24, 1998, the redemption of this
preferred stock depends on an affirmative vote of at least a majority of the
holders of MPC common stock. The redemption of this preferred stock is a taxable
transaction.
As of December 31, 2000 the amount outstanding under the Preferred Stock,
$6.00 Series was $16,000,000, and the amount outstanding under the Preferred
Stock, $4.20 Series was $6,000,000.
8
A DESCRIPTION OF THE RESTRUCTURING
The following charts reflect the corporate structure of MPC and Touch
America Holdings prior to the restructuring, immediately following the merger,
and following the sale of the utility business to NorthWestern, at which point
the restructuring will be complete.
STEP I
THE MONTANA POWER COMPANY PRIOR TO RESTRUCTURING
(POST-SALE OF OIL & GAS, INDEPENDENT POWER AND COAL BUSINESSES AND POST-MERGER
OF ENTECH, INC. INTO ENTECH LLC)
[LOGO]
STEP II
THE MERGER
[LOGO]
9
STEP III
POST-MERGER
[LOGO]
STEP IV
POST-MERGER
(PRIOR TO THE SALE OF THE UTILITY BUSINESS BUT AFTER THE TRANSFER (BY MEANS OF
DIVIDEND) OF ENTECH LLC, TETRAGENICS COMPANY AND TOUCH AMERICA TO TOUCH AMERICA
HOLDINGS, INC.)
[LOGO]
10
STEP V
TOUCH AMERICA HOLDINGS AFTER COMPLETION OF THE RESTRUCTURING
(AFTER THE SALE OF UTILITY BUSINESS)
[LOGO]
11
THE COMPANIES
THE MONTANA POWER COMPANY
40 E. Broadway Street
Butte, Montana 59701-9394
(406) 497-2000
Utility Business
MPC currently operates regulated electric and natural gas utilities. MPC's
electric and natural gas service territory covers approximately 107,600 square
miles, or approximately 73 percent of Montana. Dominant industries operating
within MPC's service territory are manufacturing of wood, petroleum, and metal
products; metal and coal mining; agriculture; and tourism and recreation. MPC
serves approximately 446,000 customers, or approximately 80 percent of the
population within its service territory.
MPC's regulated electric utility purchases, transmits bulk quantities of
energy, and distributes energy from transmission system to consumer electric
energy. MPC provides electric energy to 191 communities and their surrounding
rural areas throughout Montana. MPC also provides electric energy to Yellowstone
National Park.
In addition to its regulated electric and natural gas utilities, MPC has
certain electric generation-related operations. Milltown Dam, constructed in
1906, is a three MW hydroelectric plant located near Missoula, Montana.
Generation from the facility is used to serve retail customers of MPC's electric
utility. Colstrip Unit 3 and Colstrip Unit 4 are twin 805 MW gross rated
coal-fired plants. MPC sold its 30% interest in Colstrip Unit 3 to PPL Montana
in December 1999, but MPC's 30% leased interest in Colstrip Unit 4 was not
included in that transaction. MPC's Colstrip Unit 4 interest is an unregulated
asset. Its leasehold interest is the result of a 1985 sale/leaseback
transaction. As lessee, MPC makes annual lease payments and utilizes all of the
electrical generation associated with its 30% interest in Colstrip Unit 4, which
is approximately 220 MW. MPC has entered into two long-term power sales
agreements, which utilize such generation from Colstrip Unit 4.
MPC also operates a number of direct subsidiaries:
- One Call Locators, Ltd. operates a line locating service in several states
that provides services to utilities and others that own or operate
underground pipes and wires,
- Discovery Energy Solutions, Inc. provides a variety of energy-related
products and services designed to reduce the energy costs of its
customers, who are primarily industrial, commercial, and institutional
entities in the western United States,
- Canadian-Montana Pipe Line Corporation owns and operates natural gas
pipeline border-crossing facilities for the transportation of natural gas
between Canada and Montana.
- Montana Power Services Company was formed as an entity to hold common
corporate properties and provides centralized shared administrative
services for MPC and its various subsidiaries and business units. This
company has held title to various buildings and software licenses shared
by such business units, but by the time of completion of the sale of the
utility business to NorthWestern, it is expected to have transferred such
assets to either Touch America, Inc. or MPC, and
- Colstrip Community Services Company historically provided real estate and
other services in Colstrip, Montana. Such services have been taken over by
PPL Montana or the city of Colstrip, and this company no longer has any
active operations or services.
12
MPC also owns the equity interests in two business trusts established in
connection with financing transactions:
- Montana Power Capital 1 is a statutory business trust created under
Delaware law, the sole purpose of which is to issue preferred securities
for the benefit of MPC. In November 1996, the entity issued $65 million of
preferred securities, the proceeds of which went to MPC.
- MPC Natural Gas Funding Trust entity is a special purpose statutory
Delaware business trust that is the financing vehicle used in connection
with recovery of transition costs associated with the transfer of the
natural gas utility's production assets to unregulated affiliates in 1997.
In December 1998, this entity issued $63 million in transition bonds to
refinance these transition costs for the benefit of natural gas customers.
Non-Utility Businesses
As of April 30, 2001 MPC has sold all of its non-utility energy businesses
consisting of its oil and gas business, coal business and independent power
production business.
TOUCH AMERICA HOLDINGS, INC.
16 East Granite Street
Butte, Montana 59701-9394
(406) 497-2000
Touch America Holdings is a company incorporated in the State of Delaware.
Following the restructuring, Touch America Holdings will become the owner of the
operating businesses of Touch America, Inc. and Tetragenics Company, and the
owner of the single membership interest in Entech LLC.
Touch America, Inc.
Touch America, Inc. owns a 18,000-mile fiber-optic network that is expected
to reach 26,000 miles by year-end 2001. Touch America, Inc. uses the network to
provide voice, data, and video transport services to wholesale, commercial
business and residential customers. Products include:
- dark fiber and conduit rights,
- wholesale bandwith capacity sales, and
- private line, ATM, frame relay, voice, wireless, Internet and colocation
services.
Touch America, Inc. is focused on increasing network traffic principally through
a combination of relationships with anchor customers, large-volume commercial or
wholesale customers, alliances with third parties, and acquisitions.
On June 30, 2000, Touch America, Inc. acquired from Qwest Communications
International Inc. wholesale and retail private line, ATM, frame relay, and
long-distance telecommunications services which currently serve approximately
250,000 customer accounts in the Pacific Northwest, Rocky Mountain, and upper
Midwest regions. Touch America, Inc. also acquired approximately 1,800 route
miles of fiber within these regions.
Touch America, Inc. is constructing a 4,300 mile fiber network, in
conjunction with AT&T. The network includes new fiber routes from:
- Minneapolis to Chicago;
- St. Louis, Missouri to Plano, Illinois;
- Sacramento to Salt Lake City;
13
- Salt Lake City to Denver;
- Denver through Nebraska and Iowa to Chicago;
- and Seattle to Billings, Montana.
It is expected that various third parties, including AT&T, will cover
approximately one-half of the estimated $488 million total project cost.
Touch America, Inc. and Sierra Pacific Communications, a subsidiary of
Sierra Pacific Resources, entered into a joint venture in 2000, Sierra Touch
America LLC, to construct a new 750-mile fiber optic network between Sacramento
and Salt Lake City. Under terms of the agreement, Sierra Touch America also will
assume part interest in the metropolitan fiber networks Sierra Pacific
Communications has in Reno and Las Vegas. Customers served by the local networks
will have the opportunity to access and receive information directly from Touch
America, Inc.'s broadband fiber network.
In January 2000, Touch America, Inc. entered into a Lease and Exchange
Option Agreement with Velocita, formerly PF.Net Construction Corp., a
telecommunications company based in New Jersey. Touch America, Inc. will lease
approximately 5,900 route miles from Velocita and Velocita will lease
approximately 4,400 miles of fiber from Touch America, Inc., with all segments
expected to be complete by the end of 2001.
Touch America, Inc. and Xcel Energy, formerly New Century Energies, entered
into a joint venture in 1999, with Northern Colorado Telecommunications LLC, to
provide a full range of telecommunications services, including private-line
services, to enterprises in the Denver metropolitan area. Primarily through its
PCS and LMDS technologies, Touch America, Inc. is creating "last-mile"
connections, which connect a fiber network via wireless applications. In 1999,
Touch America, Inc. and Qwest Wireless, formerly US West Wireless, entered into
a joint venture, TW Wireless, to provide "one number" telephone service in an
eight-state region of the Pacific Northwest and Upper Midwest. That service
provides a customer with one directory number for cell phone and home or
business telephones.
14
[LOGO]
Tetragenics Company
Tetragenics, an affiliate of Touch America, Inc., develops, manufactures,
and markets alarm control systems, communication monitoring and control systems,
automation systems, intelligent remote units, and computer based products.
Tetragenics provides the tools to monitor and control any type of communication
system, such as microwave, fiber optic, hardwire, satellite, and radio.
In 1999, Tetragenics formed a partnership with New Horizon Technologies,
LLC, where Tetragenics is 50.5% owner of this partnership. New Horizon
Technologies provides monitoring and energy information systems technologies.
Tetragenics provides engineering, research and design, and network operating
system monitoring equipment to Touch America, Inc. Tetragenics also provides
engineering services and equipment for TW Wireless, the joint venture between
Touch America, Inc. and Qwest Wireless. Other Tetragenics' customers include:
- American Towers Company,
- Verizon,
- Midstate Electric Cooperative,
- ComEd,
- California Department of Water Resources,
- Army Corps of Engineers,
15
- Rochester Gas and Electric,
- City of Tacoma,
- Louisiana Hydro Electric,
- Avista Utilities,
- Northern Telephone,
- Montana Power,
- Lewis County Public Utility District,
- Butte Water Division, and
- Glacier National Park, as well as other customers across the United
States, Canada, and Mexico.
Entech LLC
Entech Inc., a Montana corporation, is a wholly-owned subsidiary which owns
MPC's non-regulated businesses. Prior to the restructuring, Entech, Inc. will
merge with and into Entech LLC, a Montana limited liability company and a
wholly-owned subsidiary of MPC.
Following the restructuring, Entech LLC will become a wholly-owned
subsidiary of Touch America Holdings. Entech LLC will not own any operating
companies but will remain in existence solely to satisfy any contingent
obligations or liabilities that may exist in connection with the sales of the
oil and gas business, the coal business and the independent power production
business. See "Background of the Restructuring" below on page 30.
MARKET PRICE AND DIVIDEND INFORMATION
MPC's common shares are listed on the New York Stock Exchange and the
Pacific Exchange, Inc.. The following table presents the closing price of one
MPC common share, as reported on the New York Stock Exchange Composite
Transaction reporting system on September 29, 2000, the last full trading day
prior to the public announcement of the sale of the utility business to
NorthWestern, and on May , 2001, the last trading day for which this
information could be calculated prior to the date of this proxy
statement/prospectus.
MPC
COMMON
DATE SHARE
- ---- --------------
September 29, 2000.......................................... $ 33.38
May , 2001................................................ $ []
On October 24, 2000, the MPC Board voted to eliminate common dividend
payments effective the first quarter of 2001. The final quarterly dividend
declared by MPC was $.20 per share payable on November 1, 2000. However,
preferred dividends of MPC will not be affected by this decision.
Following the restructuring and for the foreseeable future, Touch America
Holdings does not expect to pay dividends on its common stock.
16
RISK FACTORS
SHAREHOLDERS OF MPC SHOULD CONSIDER CAREFULLY ALL THE INFORMATION CONTAINED
IN THIS PROXY STATEMENT/ PROSPECTUS, INCLUDING THE FOLLOWING MATTERS:
RISKS RELATING TO THE RESTRUCTURING
DELAY IN REGULATORY APPROVALS WILL DELAY AND POSSIBLY PREVENT THE
RESTRUCTURING
The consummation of the restructuring is conditioned upon receiving approval
from various governmental regulatory authorities. These include:
- determination by the Montana Public Service Commission that The Montana
Power, L.L.C. will continue to be a fit, willing and able supplier of
reasonably adequate services and facilities, at just and reasonable rates;
- approval by the Federal Energy Regulatory Commission under the Federal
Power Act; and
- the expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act.
The Federal Energy Regulatory Commission issued an order on February 20,
2001 authorizing the transaction under Section 203 of the Federal Power Act and
a separate order on March 30, 2001 approving the transfer of the Milltown
Hydroelectric License. Additionally, the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act commenced on December 21, 2000 and
expired on January 17, 2001. While we expect to obtain the other required
regulatory approvals within 6 months, MPC, Touch America Holdings and
NorthWestern cannot be certain that all of the other required approvals and
consents will be obtained, nor can they be certain that the approvals and
consents will be obtained within the time contemplated by the purchase
agreement. A delay in obtaining the required approvals and consents will delay
and possibly prevent the consummation of the sale of the utility business to
NorthWestern. In addition, MPC, Touch America Holdings and NorthWestern may
obtain the required approvals and consents, but with terms or conditions that
would materially affect the rates, terms or conditions of the services provided
by the utility business. NorthWestern will not be obligated to consummate the
transaction if these terms or conditions would have a material adverse effect on
MPC or The Montana Power, L.L.C. and their prospective subsidiaries.
For additional information on the required regulatory approvals, see
"Regulatory Matters" below on page 48.
RISKS RELATING TO THE INDUSTRY IN WHICH TOUCH AMERICA HOLDINGS WILL OPERATE
FOLLOWING THE RESTRUCTURING
Following the restructuring, MPC will have been transformed into Touch
America Holdings, whose operating businesses will be comprised solely of MPC's
telecommunications businesses. You should carefully consider the following
factors which relate to Touch America Holdings. While many of these factors were
applicable to the telecommunications businesses of MPC prior to the
restructuring, following the restructuring the telecommunications business will
constitute the entire business of Touch America Holdings as compared to its
current status as one of the several operating businesses of MPC. Consequently,
the following factors are highly relevant in connection with your decision to
approve the restructuring and to be deemed to receive shares of Touch America
Holdings in exchange for your shares of MPC.
RISKS RELATING TO TOUCH AMERICA HOLDINGS' BUSINESS
SUCCESS REQUIRES TIMELY AND COST EFFECTIVE ADAPTATION TO TECHNOLOGICAL
CHANGE
Touch America Holdings expects that new products and technologies will
emerge and that existing products and technologies, including voice transmission
over the Internet and high speed transmission of packets of data, will further
develop. These new products and technologies may reduce the prices for Touch
America Holdings' services or they may be superior to, and render obsolete, the
products and
17
services Touch America Holdings offers and the technologies Touch America
Holdings uses. It may be very expensive for Touch America Holdings to upgrade
its products and technologies in order to continue to compete effectively.
Consequently, Touch America Holdings' future success depends, in part, on its
ability to anticipate and adapt in a timely and cost-effective manner to
technological changes.
DIFFICULTIES IN CONSTRUCTING THE NETWORK COULD INCREASE ITS ESTIMATED COST,
DELAY ITS SCHEDULED COMPLETION AND REDUCE TOUCH AMERICA HOLDINGS'
PROFITABILITY
The construction, operation and any upgrading of the network is a
significant undertaking. Administrative, technical, operational and other
problems that could arise may be more difficult to address and solve due to the
significant size and complexity of the planned network. Touch America Holdings
will also be dependent on timely performance by third-party suppliers and
contractors. In addition, important aspects of the network will rely on
technology that is in the development stage or that is largely commercially
unproven. New technology also may not be compatible with existing technology.
Many of these factors and problems are beyond Touch America Holdings' control.
As a result, the entire network may not be completed as planned for the cost and
in the time frame that is currently estimated. Any significant increase in the
estimated cost of the network or any significant delay in its anticipated
completion could adversely affect Touch America Holdings' ability to retain,
attract and capture customers and realize earnings growth.
DIFFICULTIES IN EXPANDING THE NETWORK COULD INCREASE ITS ESTIMATED COST AND
REDUCE TOUCH AMERICA HOLDINGS' PROFITABILITY
Future expansions of the network's electronic and software components may be
necessary in order to respond to:
- a growing number of customers;
- increased demands by customers to transmit larger amounts of data; and
- changes in customers' service requirements.
Any expansion of the network will require substantial additional financial,
operational and managerial resources. If Touch America Holdings is unable to
expand the network on a timely basis and at a commercially reasonable cost, then
it will not retain customers or attract and capture new customers necessary for
earnings growth.
IF TOUCH AMERICA HOLDINGS CANNOT QUICKLY AND EFFICIENTLY INSTALL ITS
HARDWARE, IT MAY NOT BE ABLE TO EFFECTIVELY GENERATE REVENUE
Touch America Holdings' network will consist of many different pieces of
hardware, including switches, computers that route traffic and perform service
functions, fiber optic cables, electronics and combination radio
transmitter/receivers, known as transceivers, and associated equipment, which
are difficult to install. If this hardware cannot be installed quickly, the time
in which customers can be connected to the network and Touch America Holdings
can begin to generate revenue from the network will be delayed. If Touch America
Holdings fails to complete its network on time or if the network fails to
perform as specified, Touch America Holdings' strategy of creating an end-to-end
national network will be delayed and it will not achieve targeted earnings
growth.
TOUCH AMERICA HOLDINGS NEEDS TO INCREASE THE VOLUME OF TRAFFIC ON THE
NETWORK OR THE NETWORK WILL NOT CONTINUE TO GENERATE PROFITS
Touch America Holdings must substantially increase the current volume of
voice, data, Internet and video transmission on the network in order to realize
the anticipated cash flow, operating efficiencies and cost benefits of the
network. If Touch America Holdings does not develop sufficient commitments with
new large-volume customers as well as maintain its relationships with current
18
customers, Touch America Holdings will be unable to increase traffic on the
network, which could adversely affect Touch America Holdings' ability to realize
earnings growth.
TOUCH AMERICA HOLDINGS MAY NOT BE ABLE TO CONNECT ITS NETWORK TO THE
NETWORKS OF INCUMBENT OR OTHER CARRIERS ON FAVORABLE TERMS OR AT ALL AND
REALIZING ADDITIONAL PROFIT MAY BE DIFFICULT
Touch America Holdings requires interconnection agreements with incumbent
and other carriers to connect its customers to the public telephone network and
to other Internet service providers. In addition, it leases telecommunications
capacity and obtains rights to use fiber from other carriers in order to extend
the range of its network. The costs of obtaining local and long distance
services from other carriers comprise a significant proportion of Touch America
Holdings' operating expenses.
There is no assurance that Touch America Holdings will be able to negotiate
or renegotiate interconnection agreements in all of its markets on favorable
terms, or in a timely fashion. The incumbent carriers are already established
providers of local telephone services to all or virtually all telephone
subscribers within their respective service areas and their physical connections
from their premises to those of their customers are expensive and difficult to
duplicate. The interest of incumbent carriers in retaining a direct relationship
with their customers could reduce their willingness to cooperate with Touch
America Holdings. Unacceptable interconnection terms or untimely response from
incumbent and other carriers may cause poor customer service and make it
difficult to attract new customers. It may result in higher costs and loss of
customers and could adversely affect Touch America Holdings' ability to realize
earnings growth.
NETWORK FAILURE, BREACHES OR DELAYS AND ERRORS IN TRANSMISSIONS EXPOSE TOUCH
AMERICA HOLDINGS TO POTENTIAL LIABILITY, AND LOSS OF CUSTOMERS AND REVENUE
Touch America Holdings' network will use a collection of communications
equipment, software, operating protocols and proprietary applications for the
high-speed transportation of large quantities of data among multiple locations.
Given this complexity, it may be possible that data will be lost or distorted.
Delays in data delivery may cause significant losses to a customer using the
network. The network may also contain undetected design faults and software bugs
that, despite testing, may be discovered only after the network has been
installed and is in use. Network failures, delays and errors could also result
from natural disasters, power losses, security breaches and computer viruses.
The failure of any equipment or facility on the network could result in the
interruption of customer service until necessary repairs or the installation of
replacement equipment. These failures, faults or errors could cause delays,
service interruptions, expose Touch America Holdings to customer liability or
require expensive modifications that could increase costs and result in the loss
of customers and could adversely affect Touch America Holdings' ability to
realize earnings growth.
TOUCH AMERICA HOLDINGS' BUSINESS PLAN REQUIRES THE DEVELOPMENT OF EFFECTIVE
BUSINESS SUPPORT SYSTEMS TO IMPLEMENT CUSTOMER ORDERS TO PROVIDE AND BILL
FOR SERVICES
Touch America Holdings' business plan depends on its ability to develop
effective business support systems. This is a complicated undertaking requiring
significant resources and expertise and support from third-party vendors.
Business support systems are needed for implementing customer orders to install
circuits and equipment and to begin service and monthly billing for these
services.
These business support systems will be required to expand and adapt with
Touch America Holdings' rapid growth. The failure to develop effective business
support systems could result in poor customer service, loss of customers, higher
costs and adversely affect Touch America Holdings' ability to realize earnings
growth.
19
TOUCH AMERICA HOLDINGS MUST OBTAIN AND MAINTAIN PERMITS AND RIGHTS-OF-WAY TO
DEVELOP THE NETWORK
The operation of Touch America Holdings' networks requires that it obtain
many local franchises and other permits. Touch America Holdings must also obtain
rights to use underground conduit and aerial pole space and other rights-of-way
and fiber capacity. The process of obtaining these franchises, permits and
rights is time consuming and burdensome and increases the cost of doing
business. If it is unable, on acceptable terms and on a timely basis, to obtain
and maintain the franchises, permits and rights needed to implement its business
plan, the buildout of its network could be slowed materially, adversely
affecting the ability to retain and attract customers and realize earnings
growth. In addition, the cancellation or non-renewal of the franchises, permits
or rights to be obtained, or the loss of the rights-of-way obtained, could have
the same adverse results.
RISKS RELATED TO COMPETITION IN THE TELECOMMUNICATIONS INDUSTRY
TOUCH AMERICA HOLDINGS' OPERATES IN A HIGHLY COMPETITIVE INDUSTRY WITH
PARTICIPANTS THAT HAVE GREATER RESOURCES AND EXISTING CUSTOMERS THAN TOUCH
AMERICA HOLDINGS, WHICH COULD LIMIT TOUCH AMERICA HOLDINGS' ABILITY TO
INCREASE ITS MARKET SHARE
Touch America Holdings' success depends upon its ability to increase its
share of the telecommunication services market by providing high quality
services at prices equal to or below those of its competitors. Increased
competition could lead to price reductions, fewer large-volume sales,
under-utilization of resources, reduced operating margins and loss of market
share. Many of its competitors have, and some potential competitors are likely
to enjoy, substantial competitive advantages, including the following:
- greater name recognition
- greater financial, technical, marketing and other resources
- larger installed bases of customers and revenue
- well-established relationships with current and potential customers
- more extensive knowledge of the high-volume long distance services
industry
- greater international presence
Touch America Holdings' competitors include, among others, Level 3
Communications, Inc., Global Crossing Ltd., 360networks, Inc., Broadwing Inc.,
Qwest Communications International, Inc. and Williams Communications
Group Inc., as well as the three U.S. long distance fiber optic networks that
are owned by each of AT&T Corp., MCI WorldCom, Inc. and Sprint Corp.
In addition, significant new competitors could arise as a result of:
- increased consolidation and strategic alliances in the industry resulting
from recent Congressional and Federal Communications Commission actions;
- allowing foreign carriers to compete in U.S. markets;
- further technological advances; and
- further deregulation and other regulatory initiatives.
LOWER PRICES FOR PRODUCTS AND SERVICES WILL REDUCE TOUCH AMERICA HOLDINGS'
PROFIT MARGIN
AT&T Corp., MCI WorldCom, Inc., Sprint Corp., Global Crossing Ltd.,
360networks, Inc., Broadwing Inc., Qwest Communications International, Inc., and
Williams Communications Group, Inc. currently own and others are constructing
nationwide long-distance fiber optic networks. In addition, there are numerous
local and regional long distance networks. Increased capacity may cause
significant decreases in the prices for services. Prices may also decline due to
capacity increases resulting from technological advances and strategic
alliances. These price declines may be particularly severe if recent trends
causing increased demand for capacity, such as Internet usage, change. Increased
competition
20
has already led to a decline in rates charged for various telecommunications
services. Consequently, lower prices may adversely affect Touch America
Holdings' ability to realize earnings growth.
RISKS RELATED TO REGULATION
CHANGES IN REGULATION COULD INCREASE COSTS, REDUCE PROFITABILITY OR THWART
GROWTH
Federal legislation provides for a significant deregulation of the U.S.
telecommunications industry, including the local exchange, long-distance and
cable television industries. This legislation remains subject to judicial review
and additional Federal Communications Commission rulemaking. Consequently, its
effects are difficult or impossible to predict. In addition, communications
services are also subject to significant regulation at the federal, state, local
and international levels. Many regulatory actions are under way or are being
contemplated by federal, state, local and international authorities. These laws
and regulations could increase Touch America Holdings' costs, causing the loss
of customers and revenues. Further, these laws and regulations could impede or
prohibit growth.
TOUCH AMERICA HOLDINGS MUST COMPLY WITH FEDERAL AND STATE TAX AND OTHER
SURCHARGES ON ITS SERVICE THE LEVELS OF WHICH ARE UNCERTAIN
Telecommunications providers pay a variety of surcharges and fees on their
gross revenues from interstate services and intrastate services. Interstate
surcharges include Federal Universal Service Fees and Common Carrier Regulatory
Fees. In addition, state regulators impose similar surcharges and fees on
intrastate services. The division of Touch America Holdings' services between
interstate services and intrastate services is a matter of interpretation and
may in the future be contested by the Federal Communications Commission or
relevant state commission authorities.
The Federal Communications Commission is currently considering the
jurisdictional nature of ISP-bound traffic, as a result of a March 24, 2000
decision by the United States Court of Appeals for the D.C. Circuit related to
the jurisdictional nature of analog, dial-up traffic to the Internet. A change
in the characterization of their jurisdictions could cause Touch America
Holdings' payment obligations, pursuant to the relevant surcharges, to increase.
In addition, pursuant to periodic revisions by state and federal regulators of
the applicable surcharges, Touch America Holdings may be subject to increases in
the surcharges and fees currently paid.
RISKS REGARDING STOCK PRICE AND OPERATIONS
THE PRICE OF TOUCH AMERICA HOLDINGS' COMMON STOCK MAY FLUCTUATE
SIGNIFICANTLY, WHICH MAY RESULT IN LOSSES FOR INVESTORS
The market price for Touch America Holdings' common stock may be volatile.
It is expected that Touch America Holdings' common stock will be subject to
fluctuations as a result of a variety of factors, including factors beyond its
control. These include:
- quarterly variations in operating results;
- changes in financial estimates by securities analysts;
- changes in market valuations of telecommunications and Internet-related
companies;
- announcements by Touch America Holdings or its competitors of new products
or of significant acquisitions, strategic relationships or joint ventures;
- any loss of a major customer;
- additions or departures of key personnel;
- any deviations in net revenues or in losses from levels expected by
securities analysts;
- future sales of common stock; and
- volume fluctuations, which are particularly common among highly volatile
securities of Internet related companies.
21
OPERATING RESULTS ARE LIKELY TO FLUCTUATE IN FUTURE PERIODS AND MAY FAIL TO
MEET THE EXPECTATIONS OF SECURITIES ANALYSTS AND INVESTORS
Touch America Holdings' annual and quarterly operating results are likely to
fluctuate significantly in the future as a result of numerous factors, many of
which are outside of Touch America Holdings' control. These factors include:
- the amount and timing of capital expenditures and other costs relating to
the expansion of Touch America Holdings' network and the marketing of
Touch America Holdings' services;
- the ability to develop and commercialize new services by Touch America
Holdings or its competitors;
- the ability to order or deploy Touch America Holdings' services on a
timely basis to adequately satisfy end-user demand;
- Touch America Holdings' ability to successfully operate its network;
- the rate at which customers subscribe to Touch America Holdings' services;
- decreases in the prices for Touch America Holdings' services due to
competition, volume-based pricing and other factors;
- Touch America Holdings' ability to retain Internet service provider,
enterprises and telecommunications carrier customers and limit end-user
churn rates;
- receipt of timely payment from Touch America Holdings' Internet service
provider and other customers;
- the mix of product and service orders between consumer end-users and
business end-users which typically have higher margins;
- the success of Touch America Holdings' relationships with third parties in
generating significant end-user demand;
- the development and operation of Touch America Holdings' billing and
collection systems and other operational systems and processes;
- the incorporation of enhancements, upgrades and new software and hardware
products into Touch America Holdings' network and operational processes
that may cause unanticipated disruptions;
- the changing interpretation and enforcement of regulatory developments and
court rulings concerning the 1996 Telecommunications Act, interconnection
agreements and the anti-trust laws;
- Touch America Holdings' ability to integrate the businesses it acquires
into its business efficiently; and
- the availability of equipment and services from key vendors.
As a result, it is likely that in some future quarters Touch America Holdings'
operating results will be below the expectations of securities analysts and
investors. If this happens, the trading price of Touch America Holdings' common
stock would likely decline.
ANTI-TAKEOVER PROVISIONS COULD LIMIT TOUCH AMERICA HOLDINGS' SHARE PRICE AND
DELAY A CHANGE OF MANAGEMENT
Touch America Holdings' certificate of incorporation and by-laws contain
provisions that could make it more difficult or even prevent a third party from
acquiring Touch America Holdings without the approval of its incumbent board of
directors. These provisions, among other things:
- divide Touch America Holdings' board of directors into three classes, with
members of each class to be elected in staggered three-year terms;
- prohibit stockholder action by written consent in place of a meeting;
- limit the right of stockholders to call special meetings of stockholders;
- limit the right of stockholders to present proposals or nominate directors
for election at annual meetings of stockholders; and
22
- authorize Touch America Holdings' board of directors to issue preferred
stock in one or more series without any action on the part of
stockholders.
These provisions could limit the price that investors might be willing to
pay in the future for shares of Touch America Holdings' common stock and
significantly impede the ability of the holders of Touch America Holdings'
common stock to change management. In addition, Touch America Holdings will
adopt a Shareholder Protection Rights Plan between the effective date of Touch
America Holdings' registration statement on Form S-4 and the effective time of
the merger, which has anti-takeover effects. The rights plan, if triggered,
would cause substantial dilution to a person or group that attempts to acquire
Touch America Holdings on terms not approved by Touch America Holdings' board of
directors. Provisions and agreements that inhibit or discourage takeover
attempts could reduce the market value of Touch America Holdings' common stock.
For additional information, see "Description of Touch America Holdings' Capital
Stock" below on page 73 and "Comparison of Shareholder Rights" below on
page 75.
TOUCH AMERICA HOLDINGS HAS MADE AND MAY MAKE ACQUISITIONS OF COMPLEMENTARY
TECHNOLOGIES OR BUSINESSES IN THE FUTURE, WHICH MAY DISRUPT ITS BUSINESS
Touch America Holdings intends to consider acquisitions of businesses and
technologies in the future on an opportunistic basis. Acquisitions of businesses
and technologies involve numerous risks, including the diversion of management
attention, difficulties in assimilating the acquired operations, loss of key
employees from the acquired company, and difficulties in transitioning key
customer relationships. In addition, these acquisitions may result in dilutive
issuances of equity securities, the incurrence of additional debt, large
one-time expenses and the creation of goodwill or other intangible assets that
result in significant amortization expense. Any acquisition may not provide the
benefits originally anticipated, and there may be difficulty in integrating the
service offerings and networks gained through acquisitions and strategic
investments with Touch America Holdings' own service offerings and networks. In
a strategic investment where the acquisition is of a minority interest in a
company, the acquirer may lack control over the operations and strategy of the
business, and it cannot be guaranteed that such lack of control will not
interfere with the integration of services and distribution channels of the
business with Touch America Holdings' own strategy and business operations.
Further, there may be unexpected liabilities and contingencies that may
accompany such strategic investments and acquisitions. There is no guarantee
that Touch America Holdings will:
- identify attractive acquisition and strategic investment candidates;
- complete and finance additional acquisitions on favorable terms; or
- integrate the acquired assets into Touch America Holdings' own business.
Any of these factors could materially harm Touch America Holdings' business or
Touch America Holdings' operating results in a given period.
23
SELECTED HISTORICAL CONDENSED CONSOLIDATED FINANCIAL DATA OF MPC
MPC is providing the following financial information to aid you in your
analysis of the financial aspects of the restructuring. This information is only
a summary and you should read it in conjunction with MPC's audited consolidated
financial statements as of December 31, 2000 and 1999 and for each of the three
years in the period ended December 31, 2000 as retroactively reclassified to
report MPC's coal businesses and former oil and natural gas businesses as
discontinued operations. You should also read this information in conjunction
with the historical consolidated financial statements of MPC and the related
notes contained in annual reports and other information that MPC has previously
filed with the Securities and Exchange Commission, or SEC. See "Where You Can
Find More Information" below on page 84.
As mentioned above, historical financial information presented in MPC's 2000
Annual Report on Form 10-K reflects discontinued operations accounting treatment
for MPC's former oil and natural gas operations and MPC's coal operations. The
MPC Board approved a definitive agreement to sell MPC's former oil and natural
gas operations on August 22, 2000, and it approved a definitive agreement to
sell MPC's coal operations on September 14, 2000. Both agreements were subject
to customary closing conditions. We applied discontinued operations accounting
treatment to both of these operations effective on these dates. As a result, we
have reclassified our financial statements for all periods presented to show
results of operations, financial position, and cash flows on a
continuing/discontinued basis. The following table presents MPC's selected
historical condensed consolidated financial data for each of the five years in
the period ended December 31, 2000.
FOR THE YEAR ENDED
-----------------------------------------------------
DECEMBER 31,
-----------------------------------------------------
UNAUDITED
---------
1996 1997 1998 1999 2000
--------- -------- -------- -------- --------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA
Operating revenues.................................. $ 666 $ 680 $ 771 $ 777 $1,000
Operating expenses.................................. 509 532 617 639 922
Operating income.................................... 157 148 154 138 78
Net income from continuing operations for common
shares............................................ 69 74 122 95 73
Basic net income per common share from continuing
operations........................................ 0.64 0.67 1.11 0.86 0.69
Basic net income per common share................... 1.02 1.14 1.47 1.34 1.86
Diluted net income per common share from continuing
operations........................................ 0.64 0.67 1.11 0.86 0.68
Diluted net income per common share................. 1.02 1.14 1.47 1.33 1.84
Ratio of earnings to fixed charges.................. 2.52x 2.28x 2.84x 2.49x 2.39x
AT DECEMBER 31,
-----------------------------------------------------
UNAUDITED
---------
1996 1997 1998 1999 2000
--------- -------- -------- -------- --------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
BALANCE SHEET DATA
Total assets.................................... $2,698 $2,806 $2,928 $3,049 $2,817
Long-term debt.................................. 633 653 698 619 309
Preferred shares subject to mandatory
redemption, at stated value................... 65 65 65 65 65
Preferred shares, at stated value............... 58 58 58 58 58
Common shareholders' equity..................... 971 1,012 1,089 1,009 1,106
Cash dividends per common share................. 0.80 0.80 0.80 0.80 0.60
Book value per share............................ 8.89 9.24 9.88 9.56 10.66
Average basic common shares outstanding
(millions).................................... 109 109 110 110 105
24
SELECTED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
OF TOUCH AMERICA HOLDINGS
The following selected unaudited pro forma condensed consolidated financial
information gives effect to the approvals of the proposed merger and sale of the
utility business to NorthWestern, as solicited in this proxy
statement/prospectus. In addition, this selected financial information
illustrates the effects for the year ended December 31, 2000 of the redemption
of preferred stock solicited in this proxy statement/prospectus and the
acquisition of certain divested businesses of Qwest Communications
International Inc. It also illustrates the effects of the February 2001 sale of
Continental Energy Services, Inc. and the April 2001 sale of our coal
businesses. The selected unaudited pro forma consolidated financial information
is presented for illustrative purposes only. You should not rely on this
information as being indicative of the results of operations or financial
position that would have been achieved had the proposals solicited in this proxy
statement/prospectus occurred at the beginning of each of the periods or on the
date indicated, or the future results that Touch America Holdings will
experience after the restructuring. The selected unaudited pro forma
consolidated financial information (i) has been derived from and should be read
in conjunction with the "Unaudited Pro Forma Consolidated Financial Statements
of Touch America Holdings" and the related notes included on page 69 and
(ii) should be read in conjunction with the consolidated financial statements of
MPC for 2000, as reported on MPC's Annual Report on Form 10-K filed with the SEC
on April 10, 2001. For a chart on Touch America Holdings after the restructuring
is completed, see page 11 above.
FOR THE YEAR ENDED
----------------------------------------------------
DECEMBER 31,
----------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE
AMOUNTS)
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
Operating revenues........................................ $ 30 $ 47 $ 89 $377 $478
Operating expenses........................................ 40 49 65 314 413
Operating income (loss)................................... (10) (2) 24 63 65
Net income (loss) from continuing operations for common
shares.................................................. (17) (1) 14 45 38
Basic net income (loss) from continuing operations per
common share............................................ (0.15) (0.01) 0.13 0.41 0.36
Diluted net income from continuing operations per common
share................................................... (0.15) (0.01) 0.13 0.41 0.36
AT DECEMBER 31,
----------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
UNAUDITED PRO FORMA BALANCE SHEET DATA
Assets relating to telecommunications operations.... $ 52 $ 102 $ 190 $ 291 $ 752
Long-term debt, excluding debt to be assumed by
NorthWestern...................................... 259 279 324 245 97
Preferred shares subject to mandatory redemption.... -- -- -- -- --
Preferred shares, at stated value................... 58 58 58 36 36
Common shareholders' equity......................... 971 1,012 1,089 1,009 1,032
Cash dividends per common share from
telecommunications operations..................... -- -- -- -- --
Book value per share................................ 8.89 9.24 9.88 9.56 9.76
Average common shares outstanding (millions)........ 109 109 110 110 105
25
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus and the documents that are incorporated
herein by reference include various forward-looking statements about MPC and
Touch America Holdings that are subject to risks and uncertainties.
Forward-looking statements include the information concerning future financial
performance, business strategy, projected plans and objectives of MPC and Touch
America Holdings set forth under:
- "Questions and Answers About the Restructuring";
- "Summary";
- "Selected Unaudited Pro Forma Consolidated Financial Data";
- "Comparative Per Share Data";
- "The Restructuring";
- "The Merger Agreement";
- "The Purchase Agreement; and
- "Unaudited Pro Forma Condensed Consolidated Financial Statements--Touch
America Holdings".
Statements preceded by, followed by or that otherwise include the words
"believes," "expects," "anticipates," "intends," "estimates," "plans" or similar
expressions are generally forward-looking in nature and not historical facts.
In addition to the certain factors described under "Risk Factors," the
following important factors could cause actual future results for MPC and Touch
America Holdings to differ materially from those expressed in the
forward-looking statements:
- changes in economic conditions;
- changes in laws, regulations or regulatory policies;
- developments in legal or public policy doctrines;
- technological developments;
- an inability to consummate the redemption of preferred stock, the merger
or the sale of the utility business to NorthWestern;
- potential changes in the applicable accounting standards for the
restructuring;
- the risk of a significant delay in the expected completion of, and
unexpected consequences resulting from, the restructuring; and
- any other presently unknown or unforeseen factors.
Most of these factors are difficult to accurately predict and are generally
beyond the control of MPC and Touch America Holdings.
The areas of risk described above should be considered in connection with
any written or oral forward-looking statements that may be made after the date
of this proxy statement/prospectus by MPC or Touch America Holdings or anyone
acting for them. Except for their ongoing obligations to disclose material
information under the federal securities laws, neither MPC nor Touch America
Holdings undertake any obligation to release publicly any revisions to any
forward-looking statements to report events or circumstances after the date of
this proxy statement/prospectus or the occurrence of unanticipated events.
26
THE SPECIAL MEETING
WE ARE FURNISHING THIS PROXY STATEMENT/PROSPECTUS TO SHAREHOLDERS OF MPC AS
PART OF THE SOLICITATION OF PROXIES BY THE MPC BOARD FOR USE AT THE SPECIAL
MEETING.
DATE, TIME AND PLACE
MPC will hold its special meeting on Wednesday, July 25, 2001, at
1:30 p.m., local time, at the Mother Lode Theater, 316 W. Park, Butte, Montana.
PURPOSE OF THE SPECIAL MEETING
At the special meeting, we are asking holders of record of MPC's common
shares and preferred shares to consider and vote on (i) a proposal to approve
the merger agreement between MPC, Touch America Holdings and The Montana Power,
L.L.C. and (ii) a proposal to approve the sale of the utility business to
NorthWestern. See "The Restructuring," below on page 30, "The Merger Agreement"
below on page 51 and "The Purchase Agreement" below on page 52. We are also
asking holders of record of MPC's common shares to consider and vote on a
proposal to approve the redemption of MPC's outstanding Preferred Stock, $4.20
Series and Preferred Stock, $6.00 Series. See "The Restructuring" below on
page 30 and "The Redemption of the Preferred Stock" below on page 61.
At the September 29, 2000 MPC Board meeting, at which all the board members
but one were present, and the October 24, 2000 MPC Board meeting at which all
the board members but two were present, the MPC Board approved and adopted the
merger agreement, the purchase agreement and the other transactions contemplated
by the merger agreement and the purchase agreement, and approved the redemption
of the preferred stock. The MPC Board has determined that these transactions and
the restructuring envisioned is consistent with, and in furtherance of, the best
interest of MPC and its shareholders.
MEMBERS OF THE MPC BOARD PRESENT AT THE SEPTEMBER 29, 2000 AND THE OCTOBER
24, 2000 BOARD MEETINGS RECOMMEND THAT MPC'S SHAREHOLDERS VOTE FOR THE APPROVAL
OF THE MERGER AGREEMENT, THE SALE OF THE UTILITY BUSINESS TO NORTHWESTERN AND
THE REDEMPTION OF THE PREFERRED STOCK.
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
Only MPC's shareholders of record at the close of business on May 21, 2001,
the record date, are entitled to notice of and to vote at the special meeting.
On April 1, 2001, 103,760,218 MPC common shares were issued and outstanding and
held by approximately 29,762 holders of record and approximately 580,389 MPC
preferred shares were issued and outstanding and held by approximately 2,527
holders of record. A quorum will be present at the special meeting if the
holders of a majority of the votes of shares entitled to vote on the record date
are represented in person or by proxy. If a quorum is not present at the special
meeting, the special meeting will be adjourned or postponed to solicit
additional proxies. Holders of record of MPC common shares and MPC preferred
shares on the record date are entitled to one vote per share at the special
meeting on the proposal to approve the merger agreement and the sale of the
utility business to NorthWestern, while holders of record of MPC common shares
on the record date are entitled to one vote per share at the special meeting on
the proposal to approve the redemption of the preferred stock.
VOTE REQUIRED
The approval of (i) the merger agreement, and (ii) the sale of the utility
business to NorthWestern, requires the affirmative vote of at least two-thirds
of the common and preferred shares outstanding and entitled to vote at the
special meeting of the shareholders as of the record date, either in person or
by proxy, voting together as a single class. The approval of the redemption of
the preferred stock requires
27
the affirmative vote of at least a majority of the common shares outstanding and
entitled to vote at the special meeting of the shareholders as of the record
date, either in person or by proxy. The holders of preferred shares are not
entitled to vote on the redemption of these shares.
VOTING BY MPC DIRECTORS AND EXECUTIVE OFFICERS
At the close of business on April 1, 2001, directors and executive officers
of MPC owned and were entitled to vote less than 1% of MPC common shares
outstanding on that date. Each MPC director and executive officer has indicated
his or her present intention to vote, or cause to be voted, MPC common shares
owned by him or her for the approval of the merger agreement, the sale of the
utility business to NorthWestern and the redemption of the preferred stock.
VOTING OF PROXIES
All shares represented by properly executed proxies received in time for the
special meeting will be voted at the special meeting in the manner specified by
the shareholders giving those proxies. If a proxy card is signed, dated and
returned or if a proxy is submitted by telephone or Internet without specifying
voting instructions, the shares will be voted for the approval of the merger
agreement, sale of the utility business to NorthWestern and the redemption of
the preferred stock.
In addition to manually executing and returning a proxy by mail,
shareholders may vote by telephone or the Internet. If voting by telephone or
computer, the shareholder should dial the toll-free number or access the
Internet address, in each case as indicated in the shareholder's proxy. The
shareholders will then be prompted to enter the control number printed on the
proxy and to follow the subsequent instructions.
Abstentions and broker non-votes will be counted as present at the special
meeting for purposes of determining a quorum, but will not be counted for any
vote.
Only shares affirmatively voted for the approval of the merger agreement,
the sale of the utility business to NorthWestern and the redemption of the
preferred stock, including properly executed proxies that do not contain voting
instructions, will be counted as favorable votes for the proposal. The delivery
of an improperly executed proxy card or AN ABSTENTION OR FAILURE TO VOTE AT THE
MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST APPROVAL OF THE MERGER
AGREEMENT, THE SALE OF THE UTILITY BUSINESS TO NORTHWESTERN AND THE REDEMPTION
OF THE PREFERRED STOCK. Also, under New York Stock Exchange and Pacific
Exchange, Inc. rules, brokers who hold MPC shares in street name for customers
who are the beneficial owners of those shares may not give a proxy to vote those
shares without specific instructions from those customers. If a broker holds the
shares of a shareholder in street name and the shareholder intends to come to
the special meeting and vote, the shareholder must bring a letter from his or
her broker identifying him or her as the beneficial owner of the shares and
authorizing the shareholder to vote.
On January 23, 2001, the MPC Board appointed Jerrold P. Pederson, Patrick T.
Fleming and Robert P. Gannon as the persons to vote the proxies for the
shareholders at the special meeting. The persons named as proxies by a
shareholder may propose and vote for one or more adjournments of the special
meeting, including adjournments to permit further solicitations of proxies. No
proxy voted against the proposal to approve the merger agreement, the sale of
the utility business to NorthWestern or the redemption of the preferred stock
will be voted in favor of any adjournment or postponement.
MPC does not expect that any matter other than the proposals to approve the
merger agreement, the sale of the utility business to NorthWestern and the
redemption of the preferred stock will be brought before the special meeting.
If, however, other matters incident to the conduct of the meeting are properly
presented at the special meeting, the persons named as proxies will vote in
accordance with the recommendation of the MPC Board.
28
CHANGING THE VOTE
Voting by use of a proxy on the enclosed form, telephone or computer does
not preclude a shareholder from changing the shareholder's vote. Shareholders
may change their vote at any time prior to the exercise of their vote, by
submitting a duly executed proxy, telephone or computer vote to MPC with a later
date or by appearing at the special meeting and voting in person. Shareholders
may change their vote by any of these methods, regardless of the method used to
cast their previous vote.
REVOCABILITY OF PROXIES
A shareholder may also revoke a proxy at any time prior to its exercise by
filing with MPC's Secretary a duly executed revocation of proxy. Attendance at
the special meeting without voting will not itself revoke a proxy.
SOLICITATION OF PROXIES
MPC will mail a copy of this proxy statement/prospectus to each holder of
record of MPC shares on the record date. We have selected Corporate Investor
Communications, Inc. to assist in the solicitation of proxies for a fee of
$10,000 plus expenses. Solicitations will be made by mail and may also be made
by our officers, or by other regular employees, or by employees of Corporate
Investor Communications, Inc. personally, by telephone or by other electronic
means. We also will request that brokers and other nominees solicit proxies or
authorizations from shareholders whose shares are held in accounts, street name,
at brokerage firms. In addition, we will pay the customary broker or nominee
charges for forwarding proxy materials to you. MPC will bear the cost of the
solicitation of proxies from its shareholders.
IF THE MERGER IS COMPLETED, TOUCH AMERICA HOLDINGS WILL MAIL TO YOU
APPROPRIATE TRANSMITTAL MATERIALS AND INSTRUCTIONS ADVISING YOU OF THE PROCEDURE
TO BE USED FOR THE SURRENDER OF MPC SHARE CERTIFICATES FOR SHARE CERTIFICATES OF
TOUCH AMERICA HOLDINGS. FOLLOWING THE MERGER, YOUR EXISTING MPC SHARE
CERTIFICATES WILL AUTOMATICALLY BE DEEMED TO REPRESENT FOR ALL PURPOSES THE
RIGHT TO RECEIVE SHARE CERTIFICATES OF TOUCH AMERICA HOLDINGS. ACCORDINGLY, MPC
SHAREHOLDERS SHOULD NOT SEND IN THEIR MPC SHARE CERTIFICATES UNTIL RECEIVING
THESE MATERIALS.
29
THE RESTRUCTURING
THE DISCUSSION IN THIS PROXY STATEMENT/PROSPECTUS OF THE RESTRUCTURING, THE
PRINCIPAL TERMS OF THE PURCHASE AGREEMENT DATED AS OF SEPTEMBER 29, 2000, AMONG
MPC, TOUCH AMERICA HOLDINGS AND NORTHWESTERN, AND THE PRINCIPAL TERMS OF THE
MERGER AGREEMENT DATED AS OF FEBRUARY 20, 2001, AMONG MPC, THE MONTANA POWER,
L.L.C. AND TOUCH AMERICA HOLDINGS, IS SUBJECT TO, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT AND THE PURCHASE AGREEMENT. COPIES
OF THESE AGREEMENTS ARE ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS ANNEX A
AND B, RESPECTIVELY, AND ARE INCORPORATED HEREIN BY REFERENCE.
GENERAL DESCRIPTION OF THE RESTRUCTURING
In the restructuring, MPC will merge with and into The Montana Power,
L.L.C., a Montana limited liability company and wholly-owned subsidiary of Touch
America Holdings. Pursuant to the merger agreement, shareholders of MPC will
become shareholders of Touch America Holdings. Immediately following the merger,
The Montana Power, L.L.C., constituting MPC's utility business, will be sold to
NorthWestern. As a result of these transactions, Touch America Holdings will
become the owner of the telecommunications operating businesses of Touch
America, Inc. and Tetragenics Company.
BACKGROUND OF THE RESTRUCTURING
MPC was formed in 1912 through the merger of four small regional electric
companies. Through an evolutionary expansion into related businesses, as of the
beginning of 2000, MPC operated or invested in businesses in North America,
Europe and Asia, supplying energy--non-regulated electricity, natural gas, oil
and coal--and providing energy and telecommunications services.
MPC's utility business in the western two-thirds of Montana is transmission
and distribution of electricity and natural gas, serving nearly 450,000 total
customers. Its nonutility businesses were primarily natural gas exploration,
production and marketing, coal mining, and an independent power group, which
developed, owned and operated nonutility electric generation facilities.
In recent years, MPC's growth business has been focused around Touch
America, Inc., its telecommunications subsidiary. Presently, Touch
America, Inc. has a 18,000-mile fiber-optic network in the United States and has
plans to expand that network to 26,000 miles by the end of 2001. The divestiture
would allow a sharper focus on this telecommunications business.
Given the tremendous growth in the telecommunications industry generally,
and Touch America, Inc. specifically, in the beginning of 2000 MPC began
considering a restructuring of its businesses to focus on the telecommunications
business. On March 28, 2000, after a careful review of options and strategies,
MPC announced that it would begin the process of divesting MPC's multiple energy
businesses, separating them from Touch America, Inc. and Tetragenics. It was
MPC's intent to exit the energy businesses quickly in order to create a clear
vision for the future and to focus on Touch America, Inc.
The decision to divest the energy businesses of MPC was based on a belief
that the divestiture would allow a focus on the fast-growing telecommunications
business of Touch America, Inc., while enabling the energy companies to grow,
thrive and add value under new ownership. The MPC Board focused on the fact that
MPC's structure, which had been created to be responsive to the demands of a
regulated intrastate utility business, could not continue to meet the demands
and ensure the success of both the energy and telecommunications businesses,
which are very different.
Consequently, MPC retained Goldman, Sachs & Co. to assist it in the sale of
the utility business, the coal business, the oil and gas business and the
independent power production business, as well as the restructuring of MPC from
an energy related business to Touch America Holdings, a telecommunications
business with a simple corporate structure more appropriate to a national
30
telecommunications holding company. With the assistance of Goldman, Sachs & Co.,
MPC entered into a competitive bid process to determine all qualified buyers for
the various businesses.
Each competitive bid process was initiated by Goldman Sachs & Co. contacting
interested parties. A number of these parties expressed interest in certain
businesses, entered into confidentiality agreements with MPC and submitted
indicative bids. Following a review of the overall price and material terms of
the indicative bids, certain parties were then invited to conduct due diligence
and submit final bids, along with a description of any material terms relating
to the proposed bid. The winning bidder was selected on the basis of overall
price, the terms of the offer and additional factors such as closing risk. On
determining the superior bid, MPC entered into exclusive negotiations with the
winning bidder. In determining a buyer, the MPC Board was particularly focused
on achieving strong prices from well-regarded companies with good reputations
for integrity, community involvement and fair treatment of all employees.
Following a competitive bid process, MPC rapidly entered into agreements with
third parties to divest itself of the coal business, the oil and gas business
and the independent power production business.
On August 28, 2000, MPC announced that PanCanadian Petroleum Limited of
Calgary had agreed to acquire the oil and gas business for $475 million in cash.
PanCanadian Petroleum Limited is one of Canada's largest producers and marketers
of crude oil, natural gas and gas liquids. MPC believes that there will be a
meshing of business strategies and cultural synergies between PanCanadian
Petroleum Limited and the oil and gas business. The sale of the oil and gas
business was completed on October 31, 2000. MPC recorded a gain on the sale in
the fourth quarter 2000, net of income taxes and a regulatory liability of
approximately $33 million, of approximately $62 million. PanCanadian Petroleum
Limited is contractually committed to continue total compensation levels to all
former employees of MPC's oil and gas business until October 31, 2002 and to
provide enhanced severance benefits to any employee terminated during that
period other than for cause.
On September 15, 2000, MPC announced that Westmoreland Coal Company had
agreed to acquire the coal business for $138 million in cash. The sale of the
coal business was completed on April 30, 2001. Westmoreland Coal Company is
contractually committed to continue total compensation levels to all former
employees of MPC's coal business until twenty-four months following the
completion of the sale of the coal business and to provide enhanced severance
benefits to any employee terminated during that period other than for cause.
On September 20, 2000, MPC announced that privately held BBI Power
Corporation had agreed to acquire the independent power production business for
$85 million in cash. On January 12, 2001, BBI Power Corporation assigned its
right to acquire the independent power production business to a wholly-owned
subsidiary, CES Acquisition Corp. The sale of the independent power production
business was completed on February 21, 2001. MPC recorded a gain on the sale in
the first quarter 2001, net of income taxes, of approximately $31 million. BBI
Power Corporation and CES Acquisition Corp. are contractually committed to
continue total compensation levels to all former employees of MPC's independent
power production business until twenty-four months following the completion of
the sale of the independent power production business and to provide enhanced
severance benefits to any employee terminated during that period other than for
cause.
Following the announcement of these transactions, and in preparation for the
sale of the utility business to NorthWestern, on September 26, 2000, MPC
announced the formation of a stand-alone transition organization to assist MPC
with the divestiture of the utility business, comprised of the following
individuals: J.D. Haffey, E.M. Senechal, E.J. Kindt, D.N. Ottolino,
P.K. Merrell, W.A. Pascoe, D.A. Johnson, P.R. Corcoran and M.P. Manion. All of
these individuals are officers of the MPC utility division. The leadership group
will provide NorthWestern with an experienced team to lead the utility business
into the future, and to reassure MPC's customers and the public that a ready,
willing and able
31
organization will continue to provide safe and reliable electric and natural gas
service to its customers in Montana.
MPC received three final bids in relation to the sale of the utility
business. After reviewing each bid with respect to price, material terms, and
additional factors such as closing risk, the MPC Board determined that
NorthWestern's bid was superior. In reaching this conclusion, the MPC Board took
into account, among other things, its belief that NorthWestern was a
well-regarded company with a good reputation for integrity, community
involvement and fair treatment of all employees. NorthWestern is an energy and
communications solutions company with $5 billion in annual revenues and a long
history of providing electric and natural gas service to customers in South
Dakota and Nebraska. MPC then entered into exclusive negotiations with
NorthWestern and determined not to negotiate with the two remaining bidders. On
October 2, 2000, MPC announced that NorthWestern had agreed to acquire the
utility business for approximately $1.1 billion, including the assumption of up
to $488 million of debt. The agreement entered into with NorthWestern is
described under the heading "The Purchase Agreement" below on page 52. This
agreement, and the sale of the utility business to NorthWestern thereunder, was
approved by the MPC Board on September 29, 2000.
In connection with the sale of the utility business to NorthWestern, and the
restructuring generally, the MPC Board met on October 24, 2000. 9 of MPC's 11
directors were present. All 9 directors that were present approved and adopted
the merger agreement and the redemption of the preferred stock and recommended
that MPC's shareholders approve the merger agreement, the sale of the utility
business to NorthWestern and the redemption of the preferred stock. In addition,
the members of the MPC Board present at this meeting approved a tender offer for
all of the outstanding shares of MPC's $6.875 Series Preferred Stock.
Following the merger and the sale of the utility business to NorthWestern,
the gross cash proceeds of the sale of the oil and natural gas businesses, the
coal businesses, the independent power production business and the utility
business, totaling approximately $1.3 billion, is to be re-deployed to take
advantage of Touch America, Inc.'s multiple telecommunications opportunities.
REASONS FOR THE RESTRUCTURING AND THE MPC BOARD RECOMMENDATION
At the September 29, 2000 MPC Board meeting, at which all the board members
but one were present, regarding the sale of the utility business to NorthWestern
and the October 24, 2000 MPC Board meeting, at which all the board members but
two were present, regarding the restructuring, the merger and the redemption of
the preferred stock, the MPC Board, after due consideration:
- determined that the restructuring is consistent with, and in furtherance
of, the best interest of MPC and its shareholders;
- determined that the sale of the utility business to NorthWestern and the
other transactions contemplated by the purchase agreement are consistent
with, and in furtherance of, the best interest of MPC and its
shareholders;
- adopted and approved the purchase agreement and the other transactions
contemplated by the purchase agreement;
- determined that the merger is consistent with, and in furtherance of, the
best interest of MPC and its shareholders;
- adopted and approved the merger agreement and the other transactions
contemplated by the merger agreement;
- determined to recommend that MPC shareholders vote for the approval of the
merger agreement and the sale of the utility business to NorthWestern;
32
- determined that the redemption of the preferred stock is consistent with,
and in furtherance of, the best interest of MPC and it shareholders; and
- adopted and approved the redemption and determined to recommend that MPC
shareholders vote for the approval of the redemption of the preferred
stock.
The decision to divest the energy businesses of MPC was based on a belief
that the divestiture would allow a focus on the fast-growing telecommunications
business of Touch America, Inc., while enabling the energy companies to grow,
thrive and add value under new ownership.
The MPC Board found that the management demands of operating a regulated,
integrated electric and natural gas utility company are very different from
those of operating a national, growth oriented fiber optic telecommunications
company, and that these differing demands are such that separate ownership and
management of the businesses should be far more efficient. The MPC Board
determined that the complete attention of MPC's management team was needed in
order to continue to aggressively grow Touch America, Inc.'s national
fiber-optic and wireless networks, including increasing traffic and revenues and
building brand awareness. In the rapidly-changing telecommunications business
climate, opportunities must be acted upon with urgency, requiring corporate
structures that are focused and less complicated than MPC's present structure.
The MPC Board also believed that the realities of size and scale in the energy
and telecom business could not be ignored. Without the separation of the energy
and the telecommunications businesses, the MPC Board believed that the whole of
MPC would become less than the sum of the parts because management might not be
able to adequately focus on all the businesses at once, adversely affecting
MPC's employees, customers, communities and shareholders.
The MPC Board believes that the combination of Touch America Holdings'
management, personnel, technical expertise and financial strength, will create a
company with capabilities and resources better positioned to succeed and grow in
the competitive telecommunications marketplace.
The MPC Board believes that the redemption of the preferred stock, and the
tender offer for the remaining series of preferred stock, will allow Touch
America Holdings to have a less complicated equity structure in line with other
national, growth oriented telecommunication companies. This structure will allow
a proper valuation of Touch America Holdings, and provide the shareholders of
Touch America Holdings' common shares with greater voting power.
In considering the tax consequences of the merger, the MPC Board was advised
that the form of the transaction adopted was superior from a tax perspective to
other alternatives given MPC's objectives and existing structure. In particular,
the merger facilitates the prompt and timely transfer of the regulated electric
and natural gas transmission and distribution assets into an entity that can be
sold.
The MPC Board is of the opinion that the restructuring will provide
substantial financial benefits to MPC shareholders, employees and customers. It
believes that current perceptions of MPC's value result from complicated
analyses of combined telecommunication and diversified energy and electric and
natural gas utility businesses. Thus, the current structure makes valuation of
the separate businesses very difficult and less likely to reflect full value.
The restructuring should permit the market to focus fully on the separated
telecommunications and energy and utility businesses. The MPC Board believes
employees will likewise benefit from the improved focus resulting from the
restructuring. Whether employees are employed in the utility, oil and gas, coal,
independent power or telecommunication business, the MPC Board believes the
company employing them will be focused on that business, providing them an
enhanced opportunity to grow the business and to strive to assure its long-term
success. The MPC Board believes customers should benefit from this enhanced
focus because managers of the restructured businesses should be able to seek new
investment without competing for capital with an affiliated telecommunication or
energy or utility business. Capital invested in growing
33
the business should assure customers continued access to desired products and
services. The restructuring should also provide incentives for managers of each
of the telecommunications, energy, and utility businesses to seek new sources
for efficiency and cost reduction to compete in their respective industries.
Finally, the MPC Board believes investment of the proceeds realized through the
restructuring will provide capital resources necessary for Touch America
Holdings to execute its growth plans and achieve competitive investor returns in
the telecommunications industry. As a result, Touch America Holdings will
continue developing a presence in a national market, moving away from the energy
and utility businesses' market presence in Montana and the northwestern United
States.
In approving the transaction and making these determinations and
recommendations, the MPC Board consulted with Company management as well as its
outside legal counsel and financial advisors, and considered a number of
factors, including the following factors:
- the benefits of the transactions described above;
- the review and analysis of MPC's and Touch America, Inc.'s business,
financial condition, earnings, risks and prospects;
- the effect of the transaction on the capital structure and financial
ratios of MPC;
- the possibility that the transaction could result in a lower investment
grade credit rating for Touch America Holdings than for MPC;
- current industry, economic and market conditions and the prospects of
further restructuring and consolidation in the telecommunications
industry;
- the risks of completing the sale of the coal, independent power production
and oil and gas businesses and the utility business;
- the ability to complete the merger as a tax-free transaction for U.S.
federal income tax purposes and to have the exchange of MPC shares be
tax-free to shareholders;
- the terms and conditions of the purchase agreement, including the
conditions to closing, the potential termination fees payable, the amount
of the consideration, and the fact that the consideration is all in cash;
- the proposed composition of senior management and the Board of Directors
of Touch America Holdings;
- the potential benefits to the employees of MPC's energy businesses from
the expanded opportunities that are anticipated to be available under new
ownership intent on growing those businesses;
- the interests of MPC's customers;
- that while the transaction is likely to be completed, there are risks
associated with obtaining necessary regulatory approvals, and as a result
of this and other conditions to the completion of the transaction, it is
possible that the transaction may not be completed even if approved by
shareholders;
- the impact of regulation of the energy businesses under the state of
Montana and federal laws;
- the risks inherent in the telecommunications industry; and
- the interests that a number of executive officers of MPC may have with
respect to the transaction in addition to their interests as shareholders
of MPC.
34
The MPC Board believes that, overall, the potential benefits of the merger,
the sale of the utility business to Northwestern, and the restructuring
generally, to MPC and its shareholders outweighed the risks.
This discussion of the information and factors considered by the MPC Board
in making its decision is not intended to be exhaustive but includes all
material factors considered by the MPC Board. In view of the wide variety of
factors considered in connection with its evaluation of the transaction and the
complexity of these matters, the MPC Board did not find it useful to and did not
attempt to quantify, rank or otherwise assign relative weights to these factors.
In addition, the MPC Board did not undertake to make any specific determination
as to whether any particular factor, or any aspect of any particular factor, was
favorable or unfavorable to its ultimate determination, but rather the MPC Board
conducted an overall analysis of the factors described above, including thorough
discussions with and questioning of MPC's management and legal, financial and
accounting advisors. In addition, individual members of the MPC Board may have
given different weight to different factors.
USE OF PROCEEDS FROM THE SALE OF THE ENERGY BUSINESSES
The sale of the utility business to NorthWestern is anticipated to result in
Touch America Holdings receiving $602 million in cash. In addition, NorthWestern
will assume all of MPC's outstanding debt relating to the utility business in
the amount of up to $488 million. The sale of the oil and gas business, the coal
business and the independent power production business is anticipated to result
in Touch America Holdings receiving approximately an additional $698 million in
cash. From these proceeds, MPC will pay various restructuring-related costs,
including estimated legal, advisory and banking costs of approximately 2.5% of
the total proceeds and will pay Federal and state income taxes on such proceeds.
Touch America Holdings plans to use the proceeds from these sales primarily
for working capital purposes and to provide capital in positioning Touch
America, Inc. in the business of telecommunications.
THE MPC BOARD RECOMMENDS THAT MPC'S SHAREHOLDERS VOTE FOR THE APPROVAL OF
THE MERGER AGREEMENT, THE SALE OF THE UTILITY BUSINESS TO NORTHWESTERN AND THE
REDEMPTION OF THE PREFERRED STOCK.
INTERESTS OF MPC'S DIRECTORS AND MANAGEMENT IN THE RESTRUCTURING
At the completion of the restructuring, Touch America Holdings' Board of
Directors will consist entirely of the current MPC Board:
- Robert P. Gannon,
- Jerrold P. Pederson,
- Tucker Hart Adams,
- Alan F. Cain,
- John G. Connors,
- R.D. Corette,
- Kay Foster,
- John R. Jester,
- Carl Lehrkind III,
- Deborah D. McWhinney, and
- Noble E. Vosburg.
The current MPC Board was selected to form the initial board of Touch
America Holdings because of its business expertise and because it has the
necessary experience in the telecommunications business based on its affiliation
with Touch America, Inc.
35
At the completion of the restructuring, it is anticipated that the following
officers of MPC and Touch America, Inc. will become executive officers of Touch
America Holdings:
- Robert P. Gannon,
- Jerrold P. Pederson,
- Michael J. Meldahl,
- Patrick T. Fleming,
- Michael E. Zimmerman,
- Perry J. Cole,
- Daniel G. Gay, and
- Daniel J. Sullivan.
Robert P. Gannon, currently the Chairman and Chief Executive Officer of MPC,
will continue as Chairman and Chief Executive Officer of Touch America Holdings.
Each of the officers listed above has entered into an individual severance
benefit agreement with MPC which provides certain benefits if their employment
terminates on account of or within 36 months after a change of control.
On December 8, 2000, Richard F. Cromer, former executive vice president and
chief operating officer of MPC's energy supply division, terminated his
employment as an executive officer of MPC. His termination was in connection
with, as a result of, or in anticipation of a change of control of MPC.
Consequently, he is entitled to the benefit of his change of control agreement.
OUTSTANDING STOCK-BASED GRANTS UNDER MPC'S LONG-TERM INCENTIVE PLAN
MPC's employees and executive officers participate in MPC's Long-Term
Incentive Plan. The Plan permits the granting of stock options, stock
appreciation rights, restricted stock, performance shares and dividend
equivalent shares and contains a change of control provision applicable to
awards made on or after May 11, 1999 unless otherwise provided in the applicable
award agreement. The consummation of the restructuring will constitute a change
of control for purposes of the Plan. Pursuant to the Plan's terms, upon a change
of control:
- Stock options granted after May 11, 1999 but before August 21, 2000 then
unexercised and outstanding will become fully vested and exercisable in
accordance with the terms and conditions of the Plan and the applicable
stock option award agreement, and
- All restrictions, terms and conditions applicable to all restricted stock
then outstanding will be deemed lapsed and satisfied.
A number of MPC's executive officers own options that will vest at the
consummation of the restructuring. The following list sets forth the identity of
these individuals and the number of shares underlying these individuals' options
that are subject to accelerated vesting:
- Robert P. Gannon (261,150)
- Jerrold P. Pederson (160,900)
- Michael Meldahl (148,150; 8,000 of these shares are restricted)
- Richard F. Cromer (84,000)
- Jack D. Haffey (84,000)
- Perry Cole (85,250)
- Bill Pascoe (54,200)
- David Johnson (48,000)
- Pamela Merrell (48,000)
- Michael Zimmerman (48,000)
36
- Ellen Senechal (24,000)
- David Smith (24,000)
- Dan Sullivan (16,000)
Stock options granted prior to May 12, 1999 are all fully vested and
exercisable. Stock options granted on June 21, 1999 will vest on June 21, 2001
irrespective of the restructuring. In addition, Mr. Meldahl's 4,000 shares of
restricted stock will vest on May 11, 2001.
CHANGE OF CONTROL AGREEMENTS
MPC has entered into individual severance benefit agreements with 35 of its
employees to provide benefits after a change of control of MPC, if their
employment is terminated within the next 36 months by MPC without "cause," as
defined in such agreements, or by the employees with "good reason," as defined
in such agreements. The definition of "good reason" in these agreements includes
any reduction in the employee's job responsibilities, salary or benefits as well
as the ability of the employee to terminate employment for any reason during the
13th month after the change of control.
There are three different tiers of these agreements. The agreements provide
that if, within three years after the occurrence of a change of control, the
employee is terminated by MPC without cause, or the employee terminates
employment with MPC for good reason, the employee is entitled to
- 299.9 percent for a "Tier 1" participant, 200 percent for a "Tier 2"
participant and 100 percent for a "Tier 3" participant of the sum of the
highest annual rate of base salary paid to the employee during the
three-year period immediately preceding the change of control and the
highest annual bonus paid to such individual during such three-year
period,
- 200 percent of the annual contribution to the employee's cash balance
pension plan,
- the present value of the cost to provide welfare benefits under MPC's life
insurance, health, dental, disability and other welfare plans for a period
of three years following termination, and
- a prorated portion of the target annual bonus in the year in which the
change of control occurred.
In addition, in the event that any amounts paid to a Tier 1 participant
under his or her agreement, or otherwise in connection with his or her
termination, are subject to the excise tax imposed under the Internal Revenue
Code of 1986, as amended, in connection with a change of control, MPC shall pay
an additional amount called a Gross-Up Payment equal to the amount of any such
excise taxes and any state or federal taxes on the Gross-Up Payment.
The Tier 2 and Tier 3 agreements address the situation where the amounts
paid under his or her agreement, or otherwise in connection with his or her
termination, would be subject to the excise tax imposed under the Internal
Revenue Code of 1986, as amended, in connection with the change of control. If
such payments or benefits less such excise tax are less than the maximum amount
of the payments or benefits which could otherwise be payable to the individual
without the imposition of the excise tax, then, to the extent necessary to
eliminate the imposition of the excise tax (a) such cash payment and benefits
shall first be reduced if necessary, to zero and (b) all other non-cash payments
and benefits shall not be reduced.
MPC has entered into Tier 1 agreements with Messrs. Cromer, Gannon, Haffey,
Meldahl and Pederson and three other executive officers of MPC. In addition, MPC
has entered into Tier 2 agreements with five individuals and Tier 3 agreements
with 22 individuals.
Pursuant to their Tier 1 agreements and based on estimates prepared using
the current data, Messrs. Cromer, Gannon, Haffey, Meldahl and Pederson would be
entitled to payments of approximately $1.9 million, $4.1 million, $1.7 million,
$2.9 million and $1.9 million, respectively, in the
37
event their respective employment is terminated without cause or for good reason
in connection with, or within 36 months following, the change of control. The
three other executive officers who are party to a Tier 1 agreement with MPC
would be entitled to an aggregate payment of approximately $3.7 million if the
employment of each such individual were to be terminated without cause or for
good reason in connection with, or within 36 months following, the change of
control. The five individuals who are party to a Tier 2 agreement would be
entitled to an aggregate payment of approximately $2.4 million if the employment
of each such individual were to be terminated in connection with, or within
36 months following, the change of control. In addition, the 22 individuals who
are party to a Tier 3 agreement with MPC would be entitled to an aggregate
payment of approximately $4.4 million if the employment of each such individual
were to be terminated without cause or for good reason in connection with, or
within 36 months following, the change of control.
Pursuant to the terms of the purchase agreement, NorthWestern has agreed to
honor these individual change of control severance agreements and to assume all
liability for any amounts or benefits due thereunder. However, NorthWestern will
not assume the obligations under the individual change of control severance
agreement of any employee of MPC who is an employee of Touch America, Inc. prior
to the restructuring or who transfers to Touch America, Inc. in connection with
the restructuring.
It is anticipated that Messrs. Gannon, Meldahl and Pederson, as well as two
additional holders of a Tier 1 agreement, one holder of a Tier 2 agreement and
13 holders of Tier 3 agreements will be employed by Touch America, Inc.
following the restructuring. Touch America, Inc. will assume the obligations of
MPC pursuant to the individual change of control severance agreements with
respect to such employees. The closing of the transaction with NorthWestern will
constitute a change of control for purposes of these employees' individual
change in control severance agreements with Touch America, but the transfer of
an employee from MPC to Touch America, Inc. will not constitute a termination of
that employee's employment for purposes of these agreements. However, payments
described above will be owed to each such Touch America employee if his or her
employment is subsequently terminated within 36 months of the change of control
by Touch America without "cause," as defined in such agreements or by the
individual employee with "good reason," as defined in such agreements. The
definition of "good reason" in these agreements includes any reduction in the
employee's job responsibilities, salary or benefits as well as the ability of
the employee to terminate employment for any reason during the 13th month after
the change of control.
EMPLOYEE BENEFIT PLANS
During the period from the sale of the utility business to NorthWestern
until twenty-four months following the sale of the utility business to
NorthWestern, NorthWestern has agreed to maintain base salary, wages,
compensation levels and employee pension and welfare benefit plans and programs
for the benefit of the employees of the utility business, which, in the
aggregate, are at least equal to, or equivalent in value to, the base salary,
wages, compensation levels, and benefit plans provided to employees of the
utility business on the date of the purchase agreement, plus any base salary and
wage adjustments made in the ordinary course of business between the date of the
purchase agreement and the sale of the utility business to NorthWestern.
If the employment of any employee of the utility business is terminated
within twenty-four months after the sale of the utility business to NorthWestern
by
- action of NorthWestern or any of its affiliates other than for cause, as
defined in the purchase agreement, or
- action of an employee following (A) a reduction in such employee's base
salary equal to or greater than fifteen percent or (B) such employee's
decision not to relocate more than fifty miles from his or her then
current job location,
38
then NorthWestern has agreed to pay each such employee a lump sum severance
benefit, less required tax withholding and other withholding obligations
required by applicable law, in an amount equal to the sum of (x) ten percent of
such employee's base salary multiplied by such employee's "years of service" up
to a maximum of one hundred percent of such base salary, plus (y) $6000.
However, bonus plans and other incentive compensation plans and programs of
MPC and/or any of its affiliates, or comparable cash equivalent plans, in which
the employees of the utility business are eligible to participate, including
terminated or retired employees who remain eligible to participate under the
terms of such plans, as in effect on the date of the purchase agreement, are
only required to be maintained by NorthWestern through the end of the calendar
year in which the sale of the utility business to NorthWestern occurs and the
bonuses and incentive compensation to be paid thereunder by NorthWestern and/or
its affiliates will be determined
- in accordance with calculation methods directed by Touch America Holdings,
such methods to be consistent with the terms of such incentive
compensation plans in effect on the date of the purchase agreement, and
the utility business' past practices, as appropriate, and
- in such a manner so that the effects of the transaction contemplated by
the purchase agreement will not unduly burden or benefit the employees of
the utility business.
In addition, NorthWestern will provide each employee of the utility business
with credit for all prior service with MPC and its affiliates for all purposes
under each employee benefit plan, program, or arrangement of NorthWestern or its
affiliates in which such employee is eligible to participate, except to the
extent that such service credit would result in a duplication of benefits with
respect to the same period of service.
NorthWestern has agreed to
- waive all limitations as to preexisting conditions, exclusions and waiting
periods with respect to participation and coverage requirements applicable
to the covered participants and their covered dependents under any benefit
plan, in which such covered participants and their covered dependents may
be eligible to participate after the sale of the utility business to
NorthWestern and
- provide each covered participant and their covered dependents with credit
for any co-payments and deductibles paid prior to the sale of the utility
business to NorthWestern in satisfying any applicable deductible or
out-of-pocket requirements under any benefit plan in which such covered
participants and their covered dependents are eligible to participate
after the sale of the utility business to NorthWestern.
Effective as of the sale of the utility business to NorthWestern,
NorthWestern has agreed to sponsor and maintain MPC's 401(k) plan, or a
comparable plan for the eligible participants and beneficiaries, including
continuing MPC's stock investment fund for the exclusive benefit of the eligible
participants and beneficiaries who had balances in such fund on the sale of the
utility business to NorthWestern, for at least twenty-four months after the sale
of the utility business to NorthWestern.
Furthermore, as a condition to NorthWestern's obligation to purchase the
utility business, MPC has agreed that the employee stock ownership plan portion
of MPC's 401(k) plan will either be terminated or transferred to Touch America
Holdings prior to the sale of the utility business to NorthWestern. MPC intends
to transfer the ESOP portion of Plan to Touch America Holdings. That means the
employees of the utility business, as well as the other businesses previously
sold by MPC, will cease to participate in the ESOP portion of the plan.
For a discussion of the impact of the restructuring on the awards made to
employees under MPC's Long-Term Incentive Plan See "--Interests of MPC's
Directors and Management in the Restructuring"
39
above on page 35 and "--Outstanding Stock-Based Grants Under MPC's Long-Term
Incentive Plan" above on page 36.
In addition, NorthWestern will maintain and shall be responsible for all
current and future obligations of the utility business with respect to
- any post-retirement health or welfare benefit plan, program or arrangement
maintained for all retirees and employees of the utility business as of
the sale of the utility business to NorthWestern and
- the utility discount provided to a number of retired employees and other
employees of the utility business.
The post retirement health and welfare benefits described above shall be
continued for their full terms as provided in the applicable plan, program or
arrangement as in effect on the sale of the utility business to NorthWestern,
and the utility discount described above shall be continued at least until
residential customer choice for electric and natural gas utility service is
fully implemented in Montana.
INDEMNIFICATION
Under the purchase agreement, NorthWestern has agreed to indemnify the
directors, officers, employees and agents of Touch America Holdings against any
and all adverse consequences suffered, incurred or sustained by them relating to
MPC, The Montana Power, L.L.C. and MPC's subsidiaries resulting from or arising
out of the operation of the business of MPC, The Montana Power, L.L.C. and MPC's
subsidiaries following the sale of the utility to NorthWestern. The purchase
agreement also provides for additional indemnification obligations of Touch
America Holdings and NorthWestern including but not limited to environmental,
tax and litigation matters. Finally, the purchase agreement provides for
financial limitations on indemnification obligations. See "The Purchase
Agreement--Indemnification" below on page 59.
LISTING OF TOUCH AMERICA HOLDINGS' CAPITAL STOCK
It is a condition to the completion of the merger that Touch America
Holdings' common stock issuable to MPC's shareholders pursuant to the merger
agreement be approved for listing on the New York Stock Exchange and the Pacific
Exchange, Inc., subject to official notice of issuance.
DIVIDENDS
On October 24, 2000, the MPC Board voted to eliminate common dividend
payments effective the first quarter of 2001. The final quarterly dividend
declared by MPC was $.20 per share payable on November 1, 2000. However,
preferred dividends of MPC will not be affected by this decision.
The purchase agreement also provides that prior to the completion of the
sale of the utility business to NorthWestern, MPC cannot declare, set aside or
pay a dividend other than a regular quarterly cash common dividend not to exceed
either twenty (20) cents per share or the payment of dividends required to be
paid on MPC preferred stock.
Following the restructuring and for the foreseeable future, Touch America
Holdings does not expect to pay dividends on its common stock.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The discussion below is the opinion of Thelen Reid & Priest LLP, outside tax
counsel to MPC, as to the material U.S. federal income tax consequences of the
merger of MPC into The Montana Power,
40
L.L.C. to the holders of MPC common stock and MPC preferred stock who are
citizens or residents of the United States or that are domestic corporations.
The discussion below:
- is based upon current provisions of the Internal Revenue Code, currently
applicable Treasury regulations promulgated thereunder, and judicial and
administrative decisions, all of which are subject to change, possibly
with retroactive effect;
- does not purport to address all aspects of U.S. federal income taxation
that may affect particular shareholders in light of their particular
circumstances, that are generally assumed to be known by investors or that
may affect shareholders to which special provisions of the U.S. federal
income tax laws may apply based on their particular circumstances or
status (see "Qualifications" below);
- assumes that the shares of MPC common stock and preferred stock are held
as capital assets; and
- assumes that the merger and related transactions will take place in
accordance with all of the terms and conditions of the merger agreement
and as described in this proxy statement/ prospectus without the waiver or
modification of any of those terms or conditions.
In addition, no information is provided in this document with respect to the
tax consequences of the merger under foreign, state or local laws.
TAX-FREE REORGANIZATION
MPC has received a private letter ruling from the Internal Revenue Service
that the participation of The Montana Power, L.L.C. in the merger will not
disqualify the merger from treatment as a tax-free reorganization. Based on this
ruling and on the assumptions set forth above, it is the opinion of Thelen
Reid & Priest LLP that the merger will qualify as a tax-free reorganization for
U.S. federal income tax purposes. If the merger so qualifies:
- MPC shareholders will not recognize gain or loss on the exchange of their
MPC common stock for Touch America Holdings' common stock, nor on the
exchange of their MPC preferred stock for Touch America Holdings'
preferred stock.
- The tax basis of Touch America Holdings' stock received in the merger will
be the same as the tax basis of the MPC stock surrendered.
- The holding period of Touch America Holdings' stock received in the merger
will include the holding period of the MPC stock surrendered therefor.
In addition, neither MPC nor Touch America Holdings will recognize gain or
loss as a result of the merger.
QUALIFICATIONS
As noted above, the foregoing discussion does not address aspects of U.S.
federal income taxation that may be relevant to MPC shareholders to which
special provisions of the U.S. federal income tax law may apply based on their
particular circumstances or status. For example, the discussion does not address
aspects of U.S. federal income taxation that may be relevant to:
- dealers in securities or currencies;
- traders in securities;
- financial institutions;
- tax-exempt organizations;
41
- insurance companies;
- persons holding MPC shares as part of a hedging, "straddle," conversion or
other integrated transaction;
- non-United States persons;
- persons whose functional currency is not the United States dollar;
- persons who acquired their shares of common stock through the exercise of
employee stock options or otherwise as compensation; or
- shareholders that exercise dissenters' rights.
The opinion of Thelen Reid & Priest LLP that the merger will qualify as a
tax-free reorganization is not binding on the Internal Revenue Service or the
courts. If it is ultimately determined that the merger is not a tax-free
reorganization, then MPC and its shareholders will recognize gain or loss in
connection with the merger.
THE PRECEDING DISCUSSION SETS FORTH THE MATERIAL U.S. FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER BUT DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT THERETO. THUS, MPC SHAREHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES
TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS AND EFFECT OF
U.S. FEDERAL, STATE, LOCAL AND OTHER APPLICABLE TAX LAWS AND THE EFFECT OF ANY
PROPOSED CHANGES IN THE TAX LAWS.
ACCOUNTING TREATMENT
Touch America Holdings will record the sale of the utility business to
NorthWestern when the transaction is consummated. Touch America Holdings expects
to record the difference between the net sales price less the net book value of
the assets and liabilities sold, net of transaction costs and income taxes, as a
gain or loss on this sale, depending on the net book value of The Montana Power,
L.L.C. at the time of sale.
Upon shareholder approval of the sale of the utility business to
NorthWestern, Touch America Holdings expects to account for the utility business
as a discontinued operation. Accordingly, Touch America Holdings expects to
retroactively report the results of operations from the utility business as
discontinued operations, net of tax for all periods presented. Touch America
Holdings expects to present the discontinued utility business operations on a
net basis consistent with generally accepted accounting principles requirements.
Touch America Holdings will record the effects of the restructuring,
including the merger, using historical bases of assets and liabilities.
DISSENTERS' OR APPRAISAL RIGHTS
AS A SHAREHOLDER, IF YOU PROPERLY FOLLOW THE RELEVANT PROCEDURES IN
ACCORDANCE WITH APPLICABLE PROVISIONS OF MONTANA LAW (SECTION 35-1-826 THROUGH
35-1-839), YOU MAY DEMAND "DISSENTERS' RIGHTS" AND RECEIVE IN CASH THE FAIR
MARKET VALUE OF YOUR SHARES IMMEDIATELY BEFORE THE COMPLETION OF THE
RESTRUCTURING. YOU WILL RECEIVE SUCH CASH IN LIEU OF RECEIVING TOUCH AMERICA
HOLDINGS' SHARES.
To exercise these rights, you must:
(1) deliver to MPC, AT ANY TIME BEFORE THE VOTE on July 25, 2001 to approve
the merger agreement and the sale of the utility business to NorthWestern,
written notice of intent to demand payment for your shares if the merger is
effected and the sale of the utility business to NorthWestern is completed; and
42
(2) NOT VOTE IN FAVOR OF THE MERGER AGREEMENT AND THE SALE OF THE UTILITY
BUSINESS TO NORTHWESTERN. If you sign, date and mail your proxy card without
indicating how you want to vote, your proxy will be counted as a vote in favor
of the approval of the merger agreement and the sale of the utility business to
NorthWestern, since the MPC Board will vote properly executed blank proxy cards
in favor of approval of the merger and the sale of the utility business to
NorthWestern.
You must deliver a written notice of intent and vote against the proposals
in order to exercise your dissenters' rights. A vote against the proposals will
not by itself be sufficient.
If the merger agreement and the sale of the utility business to NorthWestern
are approved, then MPC will deliver a written dissenters' notice to all
shareholders who have previously satisfied the statutory requirements listed
above for exercising dissenters' rights. The Dissenters' Notice must be sent by
MPC within ten days after MPC shareholders approve the restructuring, including
the merger agreement and the sale of the utility business to NorthWestern. The
Dissenters' Notice must:
(1) state where the payment demand must be sent and where and when
certificates for certified shares of holders demanding dissenters' rights must
be deposited;
(2) inform shareholders of uncertificated shares for which dissenters'
rights have been demanded to what extent transfer of the shares will be
restricted after the payment is received;
(3) supply a form for demanding payment which includes the date of the first
announcement to the news media or to shareholders of the terms of the merger
agreement and the sale of the utility business to NorthWestern and requires the
person asserting dissenters' rights to certify whether he or she acquired
beneficial ownership of the shares for which dissenters' rights are demanded
before that date;
(4) set a date not fewer than 30 or more than 60 days after the date the
Dissenters' Notice is delivered by which MPC must receive the dissenting MPC's
shareholder's payment demand; and
(5) be accompanied by a copy of the Montana Business Corporation Act
Sections 35-1-826 through 35-1-839.
If you exercise dissenters' rights, once you receive a Dissenters' Notice as
described above, you must within the time set forth in the Dissenters' Notice:
(1) demand payment;
(2) certify whether you acquired beneficial ownership of your shares for
which dissenters' rights are demanded before the date set forth in the
Dissenters' Notice; and
(3) deposit your certificates in accordance with the terms of the
Dissenters' Notice.
If a dissenter is dissatisfied with the payment or offer of fair value by
MPC, he or she may notify the corporation of the dissenter's own estimate of
fair value and may demand payment of that amount. The dissenter must make the
demand within 30 days after the Company offers payment for the shares, or the
right to demand payment as stated here is waived.
If a demand for alternative payment by a dissenter remains unsettled, then
MPC must petition the Montana District Court in Silver Bow County to determine
the fair value of the shares. If such a proceeding is not instituted within 60
days, MPC must pay the dissenter the amount demanded. The court will then make
the determination.
An MPC shareholder who demands payment and deposits his or her certificates
in accordance with the Dissenters' Notice and Montana law will retain all other
rights of an MPC shareholder until these rights are canceled or modified by the
consummation of the merger as provided in the merger agreement. A SHAREHOLDER
WHO DOES NOT DEMAND PAYMENT OR DEPOSIT HIS OR HER CERTIFICATES WHEN AND WHERE
REQUIRED, EACH BY THE DATE SET IN THE DISSENTERS' NOTICE, IS NOT ENTITLED TO
PAYMENT UNDER THE
43
MONTANA BUSINESS CORPORATION ACT DISSENTERS' RIGHTS PROVISIONS FOR HIS OR HER
SHARES FOR WHICH DISSENTERS' RIGHTS ARE DEMANDED. In that event, you will be
deemed to receive Touch America Holdings' shares in lieu of cash for your MPC
shares.
Except in the case of after-acquired shares, if the shareholders approve the
merger agreement and the sale of the utility business to NorthWestern, and upon
receipt of a payment demand as described above, MPC will pay to each dissenter
who has satisfied the statutory requirements, the amount that MPC estimates to
be the fair value of his or her shares for which dissenters' rights are
demanded, plus accrued interest.
MPC's payment to each dissenting MPC shareholder will be accompanied by the
following:
(1) MPC's balance sheet as of the end of a fiscal year ending not more than
16 months before the date the payment will be made, an income statement for that
year, a statement of changes in shareholder equity for that year and MPC's
latest available interim financial statements, if any;
(2) a statement of MPC's estimate of the fair value of the shares for which
dissenter's right are demanded;
(3) an explanation of how the interest paid to the dissenter was calculated;
(4) a statement of dissenters' rights to demand payment if the dissenter
disagrees with MPC's assessment of the fair value of his or her shares for which
dissenters' rights are demanded under the appropriate Montana statutes; and
(5) a copy of the Montana Business Corporation Act Sections 35-1-826 through
35-1-839.
THE FAILURE OF A MPC SHAREHOLDER TO COMPLY STRICTLY WITH THE MONTANA
BUSINESS CORPORATION ACT STATUTORY REQUIREMENTS WILL RESULT IN A LOSS OF
DISSENTERS' RIGHTS. A COPY OF THE RELEVANT STATUTORY PROVISIONS IS ATTACHED AS
ANNEX C. MPC SHAREHOLDERS SHOULD REFER TO ANNEX C FOR A COMPLETE STATEMENT
CONCERNING DISSENTERS' RIGHTS, AND THE FOREGOING SUMMARY OF SUCH RIGHTS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ANNEX C.
If a shareholder exercises dissenters' rights, the dissenting shareholder is
entitled to receive the fair value of his or her shares for which dissenters'
rights are demanded in cash. Such value may be higher or lower than the value of
the Touch America Holdings' shares issuable under the merger agreement.
RESALE OF TOUCH AMERICA HOLDINGS' COMMON STOCK
Touch America Holdings' stock issued in the transaction will not be subject
to any restrictions on transfer arising under the Securities Act of 1933, except
for shares issued to any MPC shareholder who is, or is expected to be, an
"affiliate" of MPC for purposes of Rule 145 under the Securities Act. It is
expected that these shareholders will agree not to transfer any Touch America
Holdings' stock received in the transaction except pursuant to an effective
registration statement under the Securities Act or in a transaction not required
to be registered under the Securities Act. This proxy statement/prospectus does
not cover resales of Touch America Holdings' stock received by any person upon
completion of the transaction, and no person is authorized to make any use of
this proxy statement/prospectus in connection with any resale.
44
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS;
DIRECTORS; AND EXECUTIVE OFFICERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF MPC
The following table provides, as of February 15, 2001, information with
respect to persons who are known to MPC to beneficially own more than five
percent of the common and preferred shares of MPC.
NAME AND ADDRESS
OF BENEFICIAL OWNER AMOUNT AND NATURE OF OWNERSHIP PERCENT OF CLASS
- ------------------- ------------------------------------ ----------------
Lehman Brothers Holdings, Inc. 50,420 shares of Preferred Stock, 8.7(1)
3 World Financial Center $6.875 Series(1)
New York, NY 10285
Janus Capital Corporation 5,633,810 common shares(1) 5.3(1)
100 Fillmore Street
Denver, Colorado 80206-4923
Thomas H. Bailey
100 Fillmore Street
Denver, Colorado 80206-4923
- ------------------------
(1) The Schedule 13G reports referred to below state that these securities were
acquired in the ordinary course of business and not for the purpose of
having an effect on changing or influencing the control of MPC and were not
acquired in connection with, or as a participant in, any transaction having
such purpose or effect.
On February 14, 2000, Lehman Brothers Holdings, Inc., a broker/dealer
registered under Section 15 of the Securities Exchange Act of 1934, filed a
Schedule 13G report with the Securities and Exchange Commission reporting their
ownership of Preferred Stock, $6.875 Series.
On February 15, 2001, Janus Capital Corporation, an Investment Adviser
registered under Section 203 of the Investment Advisers Act of 1940, and Thomas
H. Bailey, a 12.2% owner and Chairman of the Board of Janus Capital Corporation,
filed a joint Schedule 13G report with the Securities and Exchange Commission
reporting their ownership of MPC common shares.
SECURITY OWNERSHIP OF MANAGEMENT OF MPC
The following table shows, as of April 1, 2001, all of the common and
preferred shares owned beneficially by each person who is or was a director of
MPC since December 31, 2000. In addition, the following table shows, as of
April 1, 2001, all of the common shares owned beneficially by
- MPC's Chief Executive Officer, Robert P. Gannon,
- MPC's four most highly compensated executive officers other than
Mr. Gannon, who were serving as executive officers as of the end of the
last fiscal year,
- Richard F. Cromer who resigned as an executive officer of MPC on
December 8, 2000, but who would have been amongst the four most highly
compensated executive officers at the end of the last fiscal year but for
his resignation and
- the directors and executive officers of MPC as a group.
45
NAME OF OWNER COMMON PREFERRED % OF CLASS
- ------------- --------- --------- ----------
Tucker Hart Adams(1)(8)..................................... 4,723 0 *
Alan F. Cain(2)(8).......................................... 7,717 0 *
John G. Connors(8).......................................... 24,570 0 *
R. D. Corette(8)............................................ 11,369 0 *
Richard F. Cromer(3)(9)(10)................................. 116,621 250 *
Kay Foster(4)(8)............................................ 11,348 0 *
Robert P. Gannon(5)(9)(10).................................. 187,489 0 *
Jack D. Haffey(9)(10)....................................... 89,237 0 *
John R. Jester(8)........................................... 11,985 0 *
Carl Lehrkind, III(6)....................................... 18,322 0 *
Michael Meldahl(9)(10)(12).................................. 92,830 4 *
Deborah D. McWhinney(8)..................................... 6,025 0 *
Jerrold P. Pederson(9)(10).................................. 142,782 0 *
Noble E. Vosburg(7)(8)...................................... 10,222 0 *
Michael E. Zimmerman(9)(10)................................. 69,372
All Directors and Executive Officers as a Group (22 in
Number)(11)............................................... 1,093,103 4 *
- ------------------------
* Less than one percent of each class of common and preferred
(1) Includes 96 shares of common stock held by Dr. Adams' spouse.
(2) Includes 27 shares of common stock held by Mr. Cain's spouse for which
Mr. Cain disclaims beneficial ownership.
(3) Includes 2,668 shares of common stock held by Mr. Cromer's spouse for which
he disclaims beneficial ownership; 179 shares of common stock held in a
custodian account for his granddaughter for which Mr. Cromer is the
custodian and which he has voting and investment power; and 250 units of
the Quarterly Income Preferred Stock (QUIPS), Series A issued by Montana
Power Capital 1, a subsidiary of MPC. These units do not have voting rights
with respect to MPC. Mr. Cromer resigned as an executive officer of MPC on
December 8, 2000.
(4) Includes 324 shares of common stock held by Ms. Foster's spouse.
(5) Includes 33,439 shares held by Mr. Gannon's spouse, 75 shares held by
Mr. Gannon's son and 125 shares held by Mr. Gannon's daughter for which
Mr. Gannon disclaims beneficial ownership.
(6) Includes 2,200 shares of common stock held by the Trustee for
Lehrkind's, Inc., Profit Sharing Plan #2 for which Mr. Lehrkind is a
beneficiary and for which he has shared voting and investment power; and
9,130 shares of common stock held by Lehrkind's, Inc., for which he has
shared voting and investment power.
(7) Includes 268 shares of common stock held by Mr. Vosburg's spouse for which
Mr. Vosburg disclaims beneficial ownership.
(8) Includes deferred stock units held in MPC's Non-Employee Directors' Stock
Compensation Plan:
Ms. Adams--4,541;
Mr. Cain--5,742;
Mr. Connors--1,958;
Mr. Corette--5,543;
Ms. Foster--5,182;
Mr. Jester--8,985;
Ms. McWhinney--960; and
Mr. Vosburg--5,205.
The holders of these units have no voting or investment power.
46
(9) Includes shares in MPC's Retirement Savings Plan 401(k) attributable to
MPC's and the employee's contributions as follows:
Mr. Gannon--18,643;
Mr. Cromer--12,746;
Mr. Haffey--15,477;
Mr. Meldahl--9,501;
Mr. Pederson--17,682; and
Mr. Zimmerman--7,920.
(10) Includes option shares exercisable within 60 days of December 31, 2000:
Mr. Gannon--121,650;
Mr. Cromer--90,626;
Mr. Haffey--61,334;
Mr. Meldahl--64,150;
Mr. Pederson--117,500; and.
Mr. Zimmerman--55,762.
(11) Includes 141,012 shares held for executive officers in MPC's Retirement
Savings Plan 401(k); 698,924 option shares exercisable within 60 days of
December 31, 2000.
(12) Includes four shares of Preferred Stock, $6.00 Series.
47
REGULATORY MATTERS
GENERAL
A summary of the material regulatory matters affecting approval of the sale
of the utility business to NorthWestern and the merger of MPC and The Montana
Power, L.L.C. are set forth below. The parties to the purchase agreement have
agreed to take commercially reasonable steps to obtain all governmental
approvals and clearances necessary to consummate the sale of the utility
business to NorthWestern.
While we believe that we will receive the regulatory approvals and
clearances for the sale of the utility business to NorthWestern and the merger
of MPC and The Montana Power, L.L.C., there can be no assurances as to the
timing of these approvals and clearances or our ability to obtain these
approvals and clearances on satisfactory terms or otherwise. Consummation of the
sale of the utility business to NorthWestern and the merger of MPC and The
Montana Power, L.L.C. is conditioned upon receipt of final orders from the
various federal and state commissions described below and that the final orders
satisfy conditions described in "The Purchase Agreement--Conditions to the
Completion of the Sale of the Utility Business to NorthWestern" below on
page 52. There can be no assurance that any of these approvals or clearances
will be obtained or, if obtained, will satisfy the conditions described in such
section.
FEDERAL ENERGY REGULATORY COMMISSION
Section 203 of the Federal Power Act provides that no public utility may
sell or otherwise dispose of its jurisdictional facilities, directly or
indirectly merge or consolidate its facilities with those of any other person,
or acquire any security of any other public utility without first having
obtained authorization from the Federal Energy Regulatory Commission. Because
MPC owns "jurisdictional facilities" under the Federal Power Act, the Federal
Energy Regulatory Commission's approval under Section 203 is required before the
merger of MPC and The Montana Power, L.L.C. and the sale of the utility business
to NorthWestern. Section 203 provides that the Federal Energy Regulatory
Commission is required to grant its approval if the sale of the utility business
to NorthWestern is found to be "consistent with the public interest." The
Federal Energy Regulatory Commission's current policy provides that it will
evaluate the following criteria in analyzing whether a transaction satisfies the
requirements of Section 203 of the Federal Power Act:
- the effect of the transaction on competition, to determine if the
transaction will result in an increase in market power;
- the effect of the transaction on regulated rates, to determine if
ratepayers will be protected from any adverse effects of the transaction;
and
- the effect of the transaction on state and federal regulation, to
determine if the transaction will result in any impairment of state or
Federal regulation.
MPC and NorthWestern filed their joint application under Section 203 of the
Federal Power Act on December 20, 2000. The Federal Energy Regulatory Commission
issued an order on February 20, 2001 authorizing the transaction under
Section 203 of the Federal Power Act.
Section 8 of the Federal Power Act requires approval of the Federal Energy
Regulatory Commission prior to the transfer of a hydroelectric license. Because
MPC has a hydroelectric license under the Federal Power Act for the operation of
the Milltown Dam hydroelectric facility, and MPC is merging into The Montana
Power, L.L.C., the Federal Energy Regulatory Commission's approval is required
prior to the transfer of the license by operation of law from MPC to The Montana
Power, L.L.C. The Federal Energy Regulatory Commission will grant a license
transfer if the transferee is qualified to hold the license and operate the
facility and if the transfer is in the public interest. MPC
48
and The Montana Power, L.L.C. filed a joint application for the transfer of the
license on December 22, 2000 and the Federal Energy Regulatory Commission
approved the transfer on March 30, 2001.
Additionally, MPC and The Montana Power, L.L.C. applied, on December 18,
2000, to the Federal Energy Regulatory Commission to transfer MPC's Natural Gas
Act Section 3 authorization and Presidential Permit to operate and maintain gas
pipeline border facilities for the importation of gas at Whitlash, Montana/Aden,
Alberta and the importation and exportation of gas at Carway, Montana. The
transfer and assignment from MPC to The Montana Power, L.L.C. will be granted by
the Federal Energy Regulatory Commission if:
- it is not inconsistent with the public interest as it will not impair the
ability to render transportation services in the United States at
reasonable rates after the transfer;
- the Montana Power, L.L.C. has no contracts with any foreign government or
person concerning control of operation or rates for the delivery or
receipt of natural gas which may restrict any United States companies from
extending their activities in the same general area; and
- there will be no change in the use or operation of the border facilities.
MPC believes the transfer and assignment will satisfy these criteria.
UNITED STATES ANTITRUST LAW
The Hart-Scott-Rodino Antitrust Improvements Act and the related rules and
regulations prohibit MPC and NorthWestern from completing the sale of the
utility business to NorthWestern until they submit required information to the
Antitrust Division of the Department of Justice and the Federal Trade Commission
and until applicable waiting period requirements have been satisfied. Even after
the Hart-Scott-Rodino waiting period expires or terminates, the Antitrust
Division or the Federal Trade Commission may later challenge the sale of the
utility business to NorthWestern on antitrust grounds. MPC and NorthWestern do
not believe that the sale of the utility business to NorthWestern will violate
federal antitrust laws. If the transaction is not completed within 12 months
after the expiration or earlier termination of the initial Hart-Scott-Rodino
waiting period, MPC and NorthWestern would be required to submit new information
to the Antitrust Division and the Federal Trade Commission, and a new
Hart-Scott-Rodino waiting period would begin. NorthWestern and MPC each filed a
notification and report form under the Hart-Scott-Rodino Antitrust Improvements
Act and the waiting period commenced on December 21, 2000 and expired on
January 17, 2001.
STATE APPROVALS OR FILINGS
State regulatory approvals and filings will be obtained and made, as
applicable, prior to the consummation of the sale of the utility business to
NorthWestern, including as follows:
- The Montana Public Service Commission has jurisdiction to determine
whether the sale of the utility business to NorthWestern will affect The
Montana Power, L.L.C.'s ability to be fit, willing and able to provide
reasonably adequate service and facilities at just and reasonable rates.
On January 11, 2001, MPC filed an application with the Montana Public
Service Commission for approval with respect to the sale of the utility
business to NorthWestern.
- In connection with the restructuring, state laws governing the various
state agencies that regulate telecommunications carriers, such as Touch
America, Inc., and their operations within the states, the Public Service
Commissions (PSC) or Public Utilities Commissions (PUC) as most are named,
also provide that no telecommunications common carrier may discontinue,
reduce or impair service or make changes in the interests controlling the
carrier's ownership without either first having obtained an authorization
from the respective state PSC or PUC for the changes or without first at
least providing prior or subsequent written notice of such changes. Based
on prior experience and knowledge of state PSC or PUC consideration of
transfers of ownership which are more form than substance as is the case
here, state PSC/PUC approval processes
49
authorizing or recording these transactions will largely be ministerial;
that is; the results of the transactions themselves will ensure by their
inherent nature compliance with the statuatory criteria of the various
state agencies.
OTHER PERMITS OR LICENSES
The merger of MPC into The Montana Power, L.L.C. will result in The Montana
Power, L.L.C. holding federal and state regulatory permits currently held by
MPC. Therefore, appropriate action will need to be taken to provide the
necessary notifications to, and obtain necessary approvals from, the applicable
regulatory agencies relative to the merger and the change in name of the
permit/license holder. Such permits/licenses include:
- those associated with MPC's underground storage tanks regulated by the
Montana Department of Environmental Quality and the Wyoming Department of
Environmental Quality;
- air quality permits regulated by the Montana Department of Environmental
Quality;
- regulated waste generator Environmental Protection Agency identification
numbers;
- shallow injection wells regulated by the Environmental Protection Agency;
- FCC licenses used for internal operations associated with the utility
business's land mobile and microwave radio systems;
- transmission facilities permitted under the Montana Major Facility Siting
Act or Utility Siting Act and regulated by the Montana Department of
Environmental Quality; and
- various licenses/permits similar to real property easements issued by
federal and state agencies authorizing MPC's transmission and distribution
lines to cross federal or state real property.
50
THE MERGER AGREEMENT
THE FOLLOWING SUMMARY OF THE MERGER AGREEMENT IS QUALIFIED BY REFERENCE TO
THE COMPLETE TEXT OF THE MERGER AGREEMENT, WHICH IS INCORPORATED BY REFERENCE
AND ATTACHED AS ANNEX A.
THE MERGER BETWEEN MPC AND THE MONTANA POWER, L.L.C.
Under the merger agreement, MPC will merge with and into The Montana Power,
L.L.C., a subsidiary of Touch America Holdings, with The Montana Power, L.L.C.
being the surviving entity. Upon completion of the merger, MPC's shareholders
will become shareholders of Touch America Holdings. Additionally, upon
completion of the merger, Touch America Holdings and the Montana Power, L.L.C.
shall transfer to Touch America Holdings any assets or liabilities Touch America
Holdings plans to hold in its own name.
TIMING
The merger will become effective upon the filing of the Articles of Merger
pursuant to the Montana Business Corporation Act and the Montana Limited
Liability Company Act with the Secretary of State of the State of Montana.
MERGER CONSIDERATION
The merger agreement provides that each issued MPC common share and each
issued MPC preferred share will, at the effective time of the merger, be
automatically converted into one share of Touch America Holdings' common stock
and one share of Touch America Holdings' preferred stock, respectively.
CONDITIONS TO THE COMPLETION OF THE MERGER
Each party's obligation to complete the merger is subject to the
satisfaction of the following conditions:
- Federal Energy Regulatory Commission approval,
- approval by MPC's shareholders and Touch America Holdings, as the sole
member of The Montana Power, L.L.C.,
- MPC receiving a ruling from the IRS or an opinion of outside counsel
satisfactory to the MPC Board with respect to tax consequences of the
merger, and
- approval for listing on the New York Stock Exchange and the Pacific
Exchange, Inc. of Touch America Holdings' common stock.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time, whether before or after
approval of the merger agreement by the MPC shareholders, or by the MPC Board if
it determines for any reason that the merger would be inadvisable or not in the
best interest of MPC's shareholders.
51
THE PURCHASE AGREEMENT
THE FOLLOWING SUMMARY OF THE PURCHASE AGREEMENT IS QUALIFIED BY REFERENCE TO
THE COMPLETE TEXT OF THE PURCHASE AGREEMENT, WHICH IS INCORPORATED BY REFERENCE
AND ATTACHED AS ANNEX B.
THE SALE OF THE UTILITY BUSINESS TO NORTHWESTERN
Under the purchase agreement, following the merger, Touch America Holdings
will sell its single membership interest in The Montana Power, L.L.C. which will
constitute the utility business of MPC to NorthWestern.
TIMING OF CLOSING
The closing will occur 5 business days after the day on which the last of
the conditions set forth in the purchase agreement has been satisfied or waived,
unless MPC and NorthWestern agree to a different date.
CONSIDERATION
The purchase agreement provides that NorthWestern will pay MPC $602 million
in cash. In addition, NorthWestern will assume up to $488 million of MPC's debt.
The consideration was determined as a result of negotiations between MPC and
NorthWestern.
CONDITIONS TO THE COMPLETION OF THE SALE OF THE UTILITY BUSINESS TO NORTHWESTERN
MUTUAL CLOSING CONDITIONS
The obligations of MPC, Touch America Holdings and NorthWestern to complete
the sale of the utility business to NorthWestern is subject to the satisfaction
or waiver of the following conditions:
- accuracy as of closing of the representations and warranties made by MPC,
Touch America Holdings and NorthWestern to the extent set forth in the
purchase agreement,
- performance and compliance with, in all material respects of the
agreements and obligations required to be performed or complied with by
MPC, Touch America Holdings and NorthWestern at or prior to the sale of
the utility business to NorthWestern,
- all regulatory approvals necessary to permit MPC, Touch America Holdings
and NorthWestern to consummate the transactions contemplated by the
purchase agreement being obtained at or prior to the sale of the utility
business to NorthWestern,
- receipt of a certificate of an executive officer of Touch America Holdings
and NorthWestern as to the satisfaction of closing conditions for the sale
of utility business to NorthWestern,
- absence of legal prohibition on completion of the sale of the utility
business to NorthWestern, and
- all third party consents shall have been obtained and be in full force and
effect.
52
ADDITIONAL CLOSING CONDITIONS FOR NORTHWESTERN'S BENEFIT.
NorthWestern's obligation to complete the sale of the utility business to
NorthWestern is subject to the following additional conditions:
- the completion of the the merger of Entech Inc into Entech LLC and the
merger of MPC into The Montana Power, L.L.C.,
- the termination or transfer of MPC benefit plans, including but not
limited to, the ESOP Provisions of The Montana Power Company and
Subsidiaries Employee Retirement Savings Plan and The Montana Power
Company Long-Term Incentive Plan,
- the resignation of Touch America Holdings as manager of The Montana Power,
L.L.C., and
- the assignment of contracts, including but not limited to those relating
to MPC's trading and marketing business, to The Montana Power, L.L.C. or
MPC's subsidiaries by MPC.
NO SOLICITATION BY MPC AND TOUCH AMERICA HOLDINGS
MPC and Touch America Holdings have agreed that MPC and Touch America
Holdings and their subsidiaries and directors, officers, employees, advisors or
other representatives will not, directly or indirectly:
- solicit, encourage in any way including furnishing information, receive,
negotiate, assist or otherwise facilitate or accept any offer or inquiry
from any person concerning an acquisition proposal, or
- participate in any discussions or negotiations regarding any acquisition
proposal involving it.
The purchase agreement states that the term "acquisition proposal" means any
proposal or offer with respect to:
(1) a merger, reorganization, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
- prior to the merger and the sale of the utility business to NorthWestern,
MPC or any of its subsidiaries, and
- from and after the merger but prior to the sale of the utility business to
Northwestern, Touch America Holdings or any of its subsidiaries, or
(2) any direct or indirect acquisition of all or any substantial portion of
the assets or 10% or more of the equity securities of
- prior to the merger and the sale of the utility business to NorthWestern,
MPC or any of its subsidiaries, and
- from and after the merger but prior to the sale of the utility business to
NorthWestern, Touch America Holdings or any of its subsidiaries, other
than, in any such case, the transactions contemplated by the purchase
agreement and the sale of MPC's oil and gas business, coal business and
independent power production business.
Notwithstanding the foregoing, MPC or the MPC Board shall be permitted to:
(1) to the extent applicable, comply with Rule 14e-2(a) promulgated under
the Exchange Act with regard to an acquisition proposal, or
53
(2) engage in any discussions or negotiations with, or provide any
information to any person in response to an unsolicited bona fide written
acquisition proposal, by any such person, if,
(i) the special meeting shall not have occurred,
(ii) the MPC Board concludes in good faith after consultation with its
financial advisors and legal advisors, that the acquisition
proposal would reasonably be expected to constitute a superior
proposal,
(iii) prior to providing any information or data in connection with an
acquisition proposal, the MPC Board receives from such person an
executed confidentiality agreement on terms no less favorable to
MPC than those contained in the confidentiality agreement between
MPC and NorthWestern regarding the sale of the utility business to
NorthWestern, and
(iv) prior to providing any information or data or entering into
discussions or negotiations, the MPC Board notifies NorthWestern
immediately of such inquiries, proposals or offers, any information
requested, any discussions or negotiations, and indicates the name
of such person and the material terms and conditions of any
proposals or offers.
The purchase agreement states that the term "superior proposal" means a bona
fide written acquisition proposal which the MPC Board, prior to the merger and
the sale of the utility business to NorthWestern, or Touch America Holdings,
after the merger but prior to the sale of the utility business to NorthWestern,
concludes in good faith after consultation with a financial advisor of
nationally recognized reputation, taking into account, all legal, financial,
regulatory and other aspects of the proposal and the person making the proposal
including, but not limited to, any break-up fees, expense reimbursement
provisions and conditions to consummation,
(i) would, if consummated, result in a transaction that is more
favorable to all of the shareholders in their capacities as
shareholders of MPC prior to the merger and the sale of the utility
business to NorthWestern or Touch America Holdings after the merger
but prior to the sale of the utility business to NorthWestern, from
a financial point of view than the transactions contemplated by the
Purchase Agreement, and
(ii) is reasonably likely to be consummated; provided, that, for
purposes of this definition, the term "acquisition proposal" shall
have the meaning described in the second paragraph of this section.
See "--No Solicitation by MPC and Touch America Holdings" above on
page 53, except that
- the reference to "10%" in the definition of "acquisition proposal" shall
be deemed to be "51%",
- "acquisition proposal" shall only be deemed to refer to a transaction
involving, prior to the merger and the sale of the utility business to
NorthWestern, MPC, and after the merger but prior to the sale of the
utility business to NorthWestern, Touch America Holdings, and
- the reference to "assets" shall refer to the assets of, prior to the
merger and the sale of the utility business to NorthWestern, MPC and its
subsidiaries taken as a whole, and after the merger but prior to the sale
of the utility business to NorthWestern to MPC and its subsidiaries, taken
as a whole, and not the assets of any of its subsidiaries alone.
The purchase agreement, provides that, in the event that, prior to MPC
shareholders approval, the MPC Board determines, after consultation with its
financial advisors and outside counsel, that a takeover proposal constitutes a
superior proposal, the MPC Board may terminate the purchase agreement. Any such
termination must be at least three business days after written notice to
NorthWestern. The written notice must state that the MPC Board plans to accept
the superior proposal, specify the terms and conditions of the proposal and
identify the person making the proposal. Furthermore, MPC must, concurrently
with the termination, enter into an acquisition agreement with
54
respect to the superior proposal and pay to NorthWestern the applicable
termination fee and the fees and expenses incurred by NorthWestern in connection
with the transaction. See "--Termination Fees; Reimbursement of Expenses" below
on page 56.
The purchase agreement also provides that MPC will immediately advise
NorthWestern if it receives a request for information or of any takeover
proposal, the material terms and conditions of the request or proposal and the
identity of the person making the request or proposal. Under the purchase
agreement, MPC is also required to keep NorthWestern reasonably informed of the
status and details of any such request or proposal.
TERMINATION OF THE PURCHASE AGREEMENT
The purchase agreement may be terminated at any time prior to the completion
of the sale of the utility business to NorthWestern:
(1) by mutual written agreement of Touch America Holdings, MPC and
NorthWestern;
(2) by Touch America Holdings, MPC or NorthWestern if:
(a) the sale of the utility business to NorthWestern has not been
completed by March 31, 2002,
(b) MPC's shareholders do not give the required approvals,
(c) there is a permanent legal prohibition to the sale of the utility
business to NorthWestern, or
(d) there shall have been a material breach of any representation,
warranty or covenant which is not cured within 15 days written notice
or cannot be cured by March 31, 2002;
(3) by NorthWestern if
- the MPC Board shall have failed to recommend, or withdrawn, modified or
amended in any respect adverse to NorthWestern its approval or
recommendation of the purchase agreement or approved or recommended a
superior proposal, as such term is defined under "--No Solicitation By
MPC And Touch America Holdings" above on page 53, or
- MPC or Touch America Holdings breaches agreements relating to
solicitations, this proxy statement/prospectus and shareholder
approval; or
(4) prior to MPC shareholders' approval, by MPC or Touch America Holdings if
the MPC Board has determined that an acquisition proposal, as such term
is defined under "--No Solicitation By MPC And Touch America Holdings"
above on page 53, constitutes a superior proposal; provided that
- MPC has provided 3 business days' notice to NorthWestern,
- MPC has not taken any action to solicit any offers and has complied
with its contractual obligations to prepare and mail this proxy
statement and to duly call, give notice of, and hold a shareholders
meeting as soon as reasonably practicable,
- the superior proposal is pending at the time of such termination,
- the MPC Board has determined in good faith that such proposal is a
superior proposal,
- during the 3-day period specified above in (i) MPC and Touch America
Holdings have negotiated in good faith with NorthWestern with respect
to any modifications to the terms
55
of the purchase agreement proposed by NorthWestern that would enable
MPC and NorthWestern to proceed with the sale of the utility business
to NorthWestern, and
- MPC has paid the termination fee and expense fee discussed below.
TERMINATION FEES; REIMBURSEMENT OF EXPENSES
TERMINATION FEES
MPC or Touch America Holdings must pay to a termination fee of $50 million
to NorthWestern if any of the following occurs:
(1) the MPC Board
- fails to recommend, or withdraws, modifies or amends in any respect
adverse to NorthWestern its approval or recommendation of the purchase
agreement or
- approves or recommends a superior proposal, or MPC or Touch America
Holdings breaches agreements relating to solicitations, this proxy
statement/prospectus and shareholder approval and NorthWestern
terminates the purchase agreement pursuant to paragraph (3) under
"--Termination of the Purchase Agreement" above on page 55; or
(2) a superior proposal has been made with respect to MPC and the purchase
agreement is terminated by MPC or Touch America Holdings pursuant to
paragraph (4) under "--Termination of the Purchase Agreement" above on
page 55;
(3) a takeover proposal has been made with respect to MPC pursuant to
paragraph (2)(d) under "--Termination of the Purchase Agreement" above on
page 55, provided, that the termination fee is not payable if Touch
America Holdings or MPC fail to enter into an agreement to consummate, or
do not consummate, a transaction within 12 months of the termination, as
such term is defined under "--No Solicitation By MPC And Touch America
Holdings" above on page 53.
REIMBURSEMENT OF EXPENSES
MPC or Touch America Holdings must pay a reimbursement of expenses fee of up
to a maximum of $10 million to NorthWestern if any of the following occurs:
(1) MPC, Touch America Holdings or NorthWestern terminates the purchase
agreement because of the failure of MPC's shareholders to approve the
purchase agreement; or
(2) the MPC Board
- fails to recommend or withdraws, modifies or amends in any respect
adverse to NorthWestern its approval of the purchase agreement, or
- recommends a superior proposal, or MPC or Touch America Holdings breach
agreements relating to solicitations, this proxy statement/prospectus
and shareholder approval and NorthWestern terminates the purchase
agreement pursuant to paragraph (3) under "--Termination of the
Purchase Agreement" above on page 55; or
(3) a superior proposal has been made with respect to MPC and the purchase
agreement is terminated by MPC or Touch America Holdings pursuant to
paragraph (4) under "--Termination of the Purchase Agreement" above on
page 55; or
(4) NorthWestern terminates the purchase agreement under the circumstances
described in paragraph (3) above under "--Termination Fees; Reimbursement
of Expenses--Termination Fees."
56
INTERIM OPERATIONS OF MPC
Under the purchase agreement, MPC has agreed that, prior to the completion
of the sale of the utility business to NorthWestern, it will, and will cause The
Montana Power, L.L.C. and MPC's subsidiaries to, conduct business in all
material respects in the ordinary course consistent with past practice and in
compliance in all material respects with applicable laws and to seek renewal of
all licenses and permits required or necessary for the operation of the utility
business. MPC has agreed to use all commercially reasonable efforts to preserve
intact its present business organization, to preserve its reputation and the
franchises of MPC, The Montana Power, L.L.C. and MPC's subsidiaries in all
material respects, and to keep available the services of key officers and
employees of MPC and its subsidiaries. In addition, MPC has agreed to maintain
the assets and properties of MPC, The Montana Power, L.L.C. and MPC's
subsidiaries in good working order, and to maintain the good will of key
customers, suppliers and lenders and other persons with whom MPC or any of its
subsidiaries have significant business relationships. MPC has also agreed that,
subject to limited exceptions, including the merger, prior to the completion of
sale of the utility business to NorthWestern it and its subsidiaries will not,
without the prior written consent of NorthWestern, among other things:
(1) DIVIDENDS
- declare, set aside or pay any dividends on, or make any other
distributions in respect of, any capital stock of MPC or its
subsidiaries, or indirectly redeem, purchase or otherwise acquire any
capital stock or any option with respect to MPC, The Montana Power,
L.L.C. or any subsidiary, or other than:
- declaring a regular quarterly cash dividend on MPC common stock not
to exceed twenty (20) cents per share, and
- the payment of dividends required to be paid on MPC preferred
stock,
(2) CAPITAL STOCK
- authorize the issuance, sell or otherwise dispose of any other
securities in respect of any equity interest of MPC, The Montana Power,
L.L.C. or any subsidiaries or modifying or amending any right in
respect of any equity interest of MPC, The Montana Power, L.L.C. or any
subsidiary,
(3) AMENDMENTS TO GOVERNING DOCUMENTS
- amend their certificate of incorporation, by-laws or other comparable
governing documents in any material respect or take any action with
respect to any such amendment or any recapitalization, reorganization,
liquidation or dissolution of any such corporation,
(4) ACQUISITIONS AND OTHER TRANSACTIONS
- other than in connection with the restructuring engaging with any
person in any merger or other business combination,
(5) DISPOSITIONS
- acquire or dispose of, or incur any lien, other than a permitted lien,
on any assets and properties individually or in the aggregate material
to the business or condition of MPC and The Montana Power, L.L.C., and
- sell any cushion gas other than in accordance with prudent utility
practices the proceeds of which will remain with, or be used for the
benefit of MPC,
57
(6) INDEBTEDNESS
- except as set forth in MPC's budget, voluntarily incur any indebtedness
in an aggregate principal amount exceeding $5,000,000, other than
refinancings where the principal amount refinanced is no greater than
the amount repaid,
- purchase, cancel, prepay or otherwise provide for a complete or partial
discharge in advance of a scheduled payment date with respect to, or
waive any right under, any indebtedness in an aggregate principal
amount exceeding $1,000,000, in either case other than indebtedness of
MPC, The Montana Power, L.L.C. or a subsidiary owing to MPC, The
Montana Power, L.L.C. or a wholly-owned subsidiary; provided, however,
that MPC, Touch America Holdings, The Montana Power, L.L.C. and their
subsidiaries may take any and all actions necessary or appropriate to
terminate the Employee Stock Ownership Plan portion of MPC 401(k) Plan,
and to prepay any outstanding indebtedness of MPC, The Montana Power,
L.L.C. and the subsidiaries attributable to such Employee Stock
Ownership Plan, or
- except as set forth in MPC's budget, make any loans or advances by it
to, or guarantee, endorse or otherwise be or become contingently
liable, directly or indirectly, in connection with the obligations,
stocks or dividends of, or own, purchase or acquire stock, obligations
or securities of, or any other interest in, or make any capital
contributions to, any person,
(7) CAPITAL EXPENDITURES
- except as set forth in MPC's budget, make (1) capital expenditures or
commitments for additions to property, plant or equipment constituting
capital assets or (2) make expenditures with respect to operations and
maintenance or incurring general and administrative expenses, in each
case in an aggregate amount exceeding $1,000,000,
(8) EMPLOYEE MATTERS
- other than in the ordinary course of business or to the extent required
by applicable law, including without limitation, the duty to bargain in
good faith under any collective bargaining agreement, and subject in
each case to prior written notice to, and consultation with,
NorthWestern, adopt, enter into or become bound by any material benefit
plan, employment-related contract or collective bargaining agreement,
or amend, modify or terminate, partially or completely, any such
benefit plan, other than the Employee Stock Ownership Plan portion of
MPC's 401(k) Plan, employment-related contract or collective bargaining
agreement if such action will result in material additional cost to
MPC, or
- effectuate a "plant closing" or "mass layoff", as those terms are
defined in the Worker Adjustment and Retraining Act, affecting in whole
or in part any site of employment, facility, operating unit or employee
of MPC, The Montana Power, L.L.C. or any of MPC's subsidiaries,
(9) TAXES
- make or change any tax election, file any amended tax return, settle or
compromise any federal, state, local or foreign tax liability, change
any annual tax accounting period, change any method of tax accounting,
enter into any closing agreement relating to any tax, surrender any
right to claim a tax refund, or consent to any extension or waiver of
the limitations period applicable to any tax claim or assessment, in
each case in a manner which could reasonably be expected to have
material adverse effect on NorthWestern, MPC or its subsidiaries after
the sale of the utility business to NorthWestern,
58
(10) ACCOUNTING
- make any material change in any pricing, investment, accounting,
financial reporting, inventory, credit or allowance practice or tax
practice policy or any method of calculating any bad debt, contingency
or other reserve for accounting, financial reporting, or tax purposes,
except as required by applicable law or reasonably and in good faith
believed by MPC or The Montana Power, L.L.C. to be in the best
interests of MPC, The Montana Power, L.L.C. or MPC's subsidiaries, or
- change its fiscal year,
(11) AGREEMENTS AND CLAIMS
- pay, discharge or satisfy any claims, liabilities or obligations,
whether obsolete, accrued, asserted or unasserted, contingent or
otherwise, other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in the balance sheet
comprising the financial statement dated July 31, 2000,
(12) OTHER ACTIONS
- enter into any contract to do or engage in any of the foregoing, or
(13) MPC BENEFIT RESTORATION PLANS
- allow any new participant in the MPC benefit restoration plan for
senior executives or the MPC benefit restoration plan for directors or
amend or modify the terms of such plans other than to transfer
participants or obligations out of such plans to Touch America Holdings
or its affiliates in a manner that results in no liability to
NorthWestern.
GENERATION SALE PROCEEDS
In addition, MPC has agreed to maintain the net after tax cash proceeds from
its sale of MPC's generation and related assets to PPL Montana LLC, after
reduction for unrecovered regulatory assets, as cash reserves, which as of
September 29, 2000 shall not be less than $55,000,000. MPC has also agreed not
to apply these proceeds except as mandated by the Montana Public Service
Commission or the Federal Energy Regulatory Commission final order, or if such
order is appealed by the final non-appealable order of the applicable court with
jurisdiction over such appeal, on stranded cost recovery or as otherwise
consented to by NorthWestern.
INDEMNIFICATION
Under the purchase agreement, Touch America Holdings has agreed to indemnify
NorthWestern, its affiliates and their officers, directors, employees,
stockholders, representatives and agents, including after the closing date, The
Montana Power, L.L.C. and its subsidiaries, for any adverse consequences
relating to any liability of Touch America Holdings, The Montana Power, L.L.C.,
MPC and MPC's subsidiaries for:
- any taxes of Touch America Holdings, The Montana Power, L.L.C., MPC and
any member of MPC's affiliated group and MPC's subsidiaries with respect
to any tax year or portion of such tax year ending on or before the
consummation of the sale of the utility business to NorthWestern and for
the unpaid taxes of any person under Treas. Reg. Section1.1502-6,
- the restructuring and/or the sales of the oil and gas, coal and
independent power production businesses, any aspect of the business of
Touch America Holdings, other than The Montana Power, L.L.C. or MPC's
subsidiaries, or regulatory requirements with respect to the use of
proceeds of the sale of the oil and gas business,
59
- a claim for approximately $3,800,000 relating to a wholesale transmission
services agreement,
- any claim or other similar action relating to any environmental loss
sustained or required to be paid prior to the sale of the utility business
to NorthWestern by reason of, or arising out of or caused by any act or
omission occurring, or condition existing, on or prior to the consummation
of the utility business to NorthWestern provided, that the indemnity shall
be subject to the following:
- it shall not apply until the environmental loss exceeds $50,000,000;
- after the first $50,000,000 of environmental loss, Touch America
Holdings shall be liable for the next $25,000,000 of environmental
loss;
- Touch America Holdings shall be liable for 50% of all environmental
loss in excess of $75,000,000 in the aggregate; and
- in no event shall Touch America Holdings obligations for environmental
loss exceed $100,000,000; and
- litigation matters which involve incidents at generation facilities and do
not involve MPC's utility business.
Under the purchase agreement, NorthWestern has agreed to indemnify Touch
America Holdings and their officers, directors, employees, stockholders,
representatives and agents for any adverse consequences relating to any
liability of NorthWestern for:
- any taxes of NorthWestern, The Montana Power, L.L.C. and MPC's
subsidiaries with respect to any tax year or portion thereof after the
consummation of the sale of the utility business to NorthWestern, or for
any tax year beginning before and ending after the consummation of the
sale of the utility business to NorthWestern to the extent allocable, and
- the operation of the business of MPC, The Montana Power, L.L.C. and MPC's
subsidiaries from and after the consummation of the sale of the utility
business to NorthWestern.
The survival periods for the various indemnification obligations differ
depending upon the obligation. The purchase agreement sets forth such survival
periods more fully. Finally, the purchase agreement provides for certain
limitations on indemnification obligations.
AMENDMENT; EXTENSION AND WAIVER
- MPC, Touch America Holdings and NorthWestern may mutually amend the
purchase agreement by written instrument at any time, except that after
the purchase agreement has been approved by MPC's shareholders, such
shareholders must approve any later amendments to the extent required by
law, and
- prior to the completion of the sale of the utility business to
NorthWestern, a party may, in writing, extend the time for performance of
the obligations of any other party, waive inaccuracies in representations
and warranties of any other party and, except as provided in the previous
paragraph, waive compliance by any other party with any agreements or
conditions in the purchase agreement.
To the extent required by law, MPC would resolicit shareholder votes in the
event of a material amendment to the purchase agreement prior to shareholder
approval or in the event that a material condition to the sale of the utility
business to NorthWestern was waived prior to or after shareholder approval.
60
REPRESENTATIONS AND WARRANTIES
The purchase agreement contains customary representations and warranties
made by MPC, Touch America Holdings and NorthWestern to each other many of which
are substantially reciprocal. Some of the most significant of these relate to:
- capital structure,
- corporate authorization to enter into the purchase agreement,
- absence of any breach of organizational documents, law or material
agreements as a result of the contemplated transaction,
- government approvals required in connection with the purchase agreement
transactions,
- governmental filings and financial statements,
- absence of material changes or events,
- compliance with laws,
- litigation,
- benefit plans,
- employee benefit matters,
- proper filing of tax returns and other tax matters, and
- compliance with environmental laws and other environmental matters.
In addition, MPC and Touch America Holdings represent and warrant to
NorthWestern as to other matters, including labor and employee relations and the
inapplicability of MPC's shareholder rights plan to the transaction, and
NorthWestern represents and warrants to MPC and Touch America Holdings as to
certain other matters, including adequate financing for the cash portion of the
consideration for the sale of the utility business to NorthWestern.
THE REDEMPTION OF THE PREFERRED STOCK
At its meeting on October 24, 2000, at which all board members but one were
present, the MPC Board approved the redemption of all the outstanding Preferred
Stock, $4.20 Series and Preferred Stock, $6.00 Series of MPC. Pursuant to MPC's
Restated Articles of Incorporation, dated March 24, 1998, the redemption of the
preferred stock depends on an affirmative vote of at least a majority of the
holders of MPC common stock. Only holders of common shares are entitled to vote
on the redemption of the preferred shares. The redemption of this preferred
stock is a taxable transaction.
As of December 31, 2000, the amount outstanding under the Preferred Stock,
$6.00 Series was $16,000,000, and the amount outstanding under the Preferred
Stock, $4.20 Series was $6,000,000.
Pursuant to MPC's Restated Articles of Incorporation, the Preferred Stock,
$6.00 Series is redeemable at any time, and the $4.20 Series Preferred Stock is
redeemable at any time after May 1, 1969.
If the redemption of the preferred stock is not approved by at least a
majority of all of our common shareholders, each shareholder of Preferred Stock,
$4.20 Series and Preferred Stock, $6.00 Series will be deemed to receive in the
merger one share of Touch America Holdings' Preferred Stock, $4.20 Series and
Preferred Stock, $6.00 Series, for each outstanding share of Preferred Stock,
$4.20 Series and Preferred Stock, $6.00 Series, respectively. The terms of the
Touch America Holdings' Preferred Stock, $4.20 and Preferred Stock, $6.00 Series
will be identical to the terms of Preferred Stock, $4.20 Series and Preferred
Stock, $6.00 Series, respectively.
MPC will have adequate funds from operations, other energy business sales
and existing credit facilities to redeem this preferred stock.
61
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS OF TOUCH AMERICA HOLDINGS
The following unaudited pro forma consolidated financial information
illustrates the effects of the proposals solicited in this proxy
statement/prospectus on the results of operations and financial position of
Touch America Holdings. Such proposals relate to the approvals of:
- The plan of merger;
- The sale of the utility business to NorthWestern; and
- The redemption of preferred stock.
In addition, the unaudited pro forma consolidated financial information
illustrates the effects of the February 21, 2001 sale of Continental Energy
Services, Inc.; the April 30, 2001 sale of MPC's coal businesses; and, as
discussed below, the June 30, 2000 acquisition of certain divested businesses of
Qwest Communications International Inc.
Except as noted in the following sentence, the unaudited pro forma
consolidated statements of income for each of the three years in the period
ended December 31, 2000 were prepared as if the transactions described in the
preceding paragraph, occurred as of January 1, 1998, but exclude nonrecurring
items relating to these transactions, such as expected proceeds and gains from
the sales of Continental Energy Services, Inc. and the coal businesses and the
pending sale of the utility business. We have included the effects of the
redemption of preferred stock and the acquisition of Qwest Communications
International Inc.'s divested businesses in the unaudited pro forma consolidated
statement of income only for the years ended December 31, 2000 and 1999.
The unaudited pro forma consolidated balance sheet at December 31, 2000 was
prepared as if the transactions described above occurred on December 31, 2000.
The after-tax adjustments to retained earnings represent the difference between
the net pro forma cash proceeds received and the net book value of the energy
businesses to be sold. The $(39) million after-tax adjustment to retained
earnings for the sale of the utility business is subject to significant change
until the sale closes and does not represent the expected gain or loss on the
sale of the utility business.
The unaudited pro forma consolidated financial information is presented for
illustrative purposes only and does not purport to
- represent what results of operations would have been had the transactions
described above in fact occurred at the beginning of the periods or on the
date indicated, or
- project results of operations or financial position for any future period
or date. For example, and without limitation, the historical interest
expenses and selling, general and administrative expenses charged to
continuing operations may not be representative of the amounts that Touch
America Holdings may incur in the future.
The accompanying unaudited pro forma consolidated financial information
should be read in conjunction with:
- MPC's audited consolidated financial statements for the years ended
December 31, 2000 and 1999 and for each of the three years in the period
ended December 31, 2000, as retroactively reclassified to report MPC's
coal businesses and former oil and natural gas businesses as discontinued
operations; and
- MPC's Form 8-K/A filed with the SEC on September 15, 2000 containing:
- audited special-purpose statement of selected assets of Qwest
Communications International Inc.'s divested businesses as of June 30,
2000, and the related statements of revenues and direct expenses for
each of the three years ended December 31, 1999;
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- unaudited statement of revenues and direct expenses of Qwest
Communications International Inc.'s divested businesses for the six
months ended June 30, 2000; and
- unaudited pro forma consolidated financial information relating to the
effects of the acquisition of Qwest Communications International Inc.'s
divested businesses as of and for the six months ended June 30, 2000
and for the year ended December 31, 1999.
YOU SHOULD READ THE FINANCIAL INFORMATION IN THIS SECTION ALONG WITH MPC'S
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS AND ACCOMPANYING NOTES. SEE "WHERE
YOU CAN FIND MORE INFORMATION" BELOW ON PAGE 84.
63
TOUCH AMERICA HOLDINGS
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2000
PRO FORMA ADJUSTMENTS
-----------------------------------------
UTILITY
OPERATIONS CONTINENTAL
DECEMBER 31, AND PREFERRED ENERGY QWEST PRO FORMA
2000 REDEMPTION SERVICES ACQUISITION RESULTS
------------ ------------- ----------- ----------- ---------
NOTE 1 NOTE 2 NOTE 3 NOTE 5
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
REVENUES........................................ $ 1,000 $ (676) $ (1) $ 155 $ 478
EXPENSES:
Operations and maintenance.................... 613 (433) - 86 266
Selling, general, and administrative.......... 171 (91) (1) 31 110
Taxes other than income taxes................. 61 (56) - - 5
Depreciation, depletion, and amortization..... 77 (54) - 9 32
-------- -------- -------- -------- --------
922 (634) (1) 126 413
-------- -------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS............... 78 (42) - 29 65
INTEREST EXPENSE AND OTHER INCOME:
Interest...................................... 34 (31) - - 3
Distributions on company obligated mandatorily
redeemable preferred securities of
subsidiary trust............................ 5 (5) - - -
Other (income) deductions-net................. (71) 9 59 - (3)
-------- -------- -------- -------- --------
(32) (27) 59 - 0
-------- -------- -------- -------- --------
INCOME TAXES.................................... 34 1 (21) 11 25
-------- -------- -------- -------- --------
NET INCOME FROM CONTINUING OPERATIONS........... 76 (16) (38) 18 40
DIVIDENDS ON PREFERRED STOCK.................... 3 (1) - - 2
-------- -------- -------- -------- --------
NET INCOME FROM CONTINUING OPERATIONS AVAILABLE
FOR COMMON STOCK.............................. $ 73 $ (15) $ (38) $ 18 $ 38
======== ======== ======== ======== ========
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING-BASIC (000)....................... 105,451 105,451
BASIC EARNINGS PER SHARE OF COMMON STOCK........ $ 0.69 $ 0.36
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING-DILUTED (000)..................... 106,353 106,353
DILUTED EARNINGS PER SHARE OF COMMON STOCK...... $ 0.68 $ 0.36
64
TOUCH AMERICA HOLDINGS
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1999
PRO FORMA ADJUSTMENTS
---------------------------------------
UTILITY
OPERATIONS
DECEMBER 31, AND CONTINENTAL
1999 PREFERRED ENERGY QWEST
------------ REDEMPTION SERVICES ACQUISITION PRO FORMA
NOTE 1 NOTE 2 NOTE 3 NOTE 5 RESULTS
------------ ----------- ----------- ----------- ---------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
REVENUES........................................ $ 777 $ (690) $ (1) $ 291 $ 377
EXPENSES:
Operations and maintenance.................... 371 (336) - 162 197
Selling, general, and administrative.......... 117 (92) (1) 62 86
Taxes other than income taxes................. 72 (68) - 1 5
Depreciation, depletion, and amortization..... 79 (70) - 17 26
------- -------- ----- -------- --------
639 (566) (1) 242 314
------- -------- ----- -------- --------
INCOME FROM CONTINUING OPERATIONS............... 138 (124) - 49 63
INTEREST EXPENSE AND OTHER INCOME:
Interest...................................... 42 (39) - - 3
Distributions on company obligated
mandatorily redeemable preferred
securities of subsidiary trust.............. 5 (5) - - -
Other (income) deductions-net................. (38) (6) 26 - (18)
------- -------- ----- -------- --------
9 (50) 26 - (15)
------- -------- ----- -------- --------
INCOME TAXES.................................... 31 (10) (8) 18 31
------- -------- ----- -------- --------
NET INCOME FROM CONTINUING OPERATIONS........... 98 (64) (18) 31 47
DIVIDENDS ON PREFERRED STOCK.................... 3 (1) - - 2
------- -------- ----- -------- --------
NET INCOME FROM CONTINUING OPERATIONS AVAILABLE
FOR COMMON STOCK.............................. $ 95 $ (63) $ (18) $ 31 $ 45
======= ======== ===== ======== ========
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING-BASIC (000)....................... 109,795 109,795
BASIC EARNINGS PER SHARE OF COMMON STOCK........ $ 0.86 $ 0.41
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING-DILUTED (000)..................... 110,553 110,553
DILUTED EARNINGS PER SHARE OF COMMON STOCK...... $ 0.86 $ 0.41
65
TOUCH AMERICA HOLDINGS
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998
PRO FORMA ADJUSTMENTS
------------------------
CONTINENTAL
DECEMBER 31, UTILITY ENERGY PRO FORMA
1998 OPERATIONS SERVICES RESULTS
------------ ---------- ----------- ---------
NOTE 1 NOTE 2 NOTE 3
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
REVENUES.............................................. $ 771 $ (681) $ (1) $ 89
EXPENSES:
Operations and maintenance.......................... 367 (339) (1) 27
Selling, general, and administrative................ 98 (70) (1) 27
Taxes other than income taxes....................... 67 (63) - 4
Depreciation, depletion, and amortization........... 85 (72) (6) 7
-------- --------- -------- --------
617 (544) (8) 65
-------- --------- -------- --------
INCOME FROM CONTINUING OPERATIONS..................... 154 (137) 7 24
INTEREST EXPENSE AND OTHER INCOME:
Interest............................................ 60 (51) - 9
Distributions on company obligated mandatorily
redeemable preferred securities of subsidiary
trust............................................. 5 (5) - -
Other (income) deductions-net....................... (103) (2) 93 (12)
-------- --------- -------- --------
(38) (58) 93 (3)
-------- --------- -------- --------
INCOME TAXES.......................................... 67 (26) (31) 10
NET INCOME FROM CONTINUING OPERATIONS................. 125 (53) (55) 17
DIVIDENDS ON PREFERRED STOCK.......................... 3 - - 3
-------- --------- -------- --------
NET INCOME FROM CONTINUING OPERATIONS AVAILABLE FOR
COMMON STOCK........................................ $ 122 $ (53) $ (55) $ 14
======== ========= ======== ========
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC
(000)............................................... 109,962 109,962
BASIC EARNINGS PER SHARE OF COMMON STOCK.............. $ 1.11 $ 0.13
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-DILUTED
(000)............................................... 110,156 110,156
DILUTED EARNINGS PER SHARE OF COMMON STOCK............ $ 1.11 $ 0.13
66
TOUCH AMERICA HOLDINGS
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000
ASSETS
UTILITY
OPERATIONS CONTINENTAL
DECEMBER 31, AND PREFERRED ENERGY COAL PRO FORMA
2000* REDEMPTION SERVICES BUSINESSES RESULTS
------------ ------------- ----------- ---------- ---------
NOTE 1 NOTE 2 NOTE 3 NOTE 4
(MILLIONS OF DOLLARS)
CURRENT ASSETS:
Cash and cash equivalents.......... $ 104 $ 463 $ 84 $ 124 $ 775
Accounts receivable, net of
allowance for doubtful
accounts......................... 275 (135) - - 140
Materials and supplies (principally
at average cost)................. 16 (11) - - 5
Notes receivable................... 25 - (2) - 23
Prepayments and other assets....... 72 (49) (1) - 22
Prepaid income taxes............... 11 - - - 11
Deferred income taxes.............. 19 (16) (1) - 2
Investment in discontinued
operations....................... 101 - - (101) -
-------- -------- -------- -------- --------
623 252 80 23 978
PROPERTY PLANT AND EQUIPMENT:
Plant, less accumulated
depreciation, depletion, and
amortization..................... 1,697 (1,089) - - 608
-------- -------- -------- -------- --------
1,697 (1,089) - - 608
OTHER ASSETS:
Intangibles, net of amortization... 152 (8) - - 144
Telecommunications investments..... 31 - - - 31
Other investments.................. 67 (22) (34) - 11
Regulatory assets related to income
taxes............................ 60 (60) - - -
Regulatory assets-other............ 142 (142) - - -
Deferred income taxes.............. 103 - - - 103
Other.............................. 28 (7) - - 21
-------- -------- -------- -------- --------
583 (239) (34) - 310
TOTAL ASSETS......................... $ 2,903 $ (1,076) $ 46 $ 23 $ 1,896
======== ======== ======== ======== ========
- ------------------------
* We have made certain reclassifications and adjustments to the December 31,
2000 amounts as reported on MPC's Annual Report on Form 10-K, filed with the
SEC on April 10, 2001. These changes had no material effect on previously
reported consolidated financial position, results of operations or cash
flows.
67
TOUCH AMERICA HOLDINGS
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000
LIABILITIES AND SHAREHOLDERS' EQUITY
UTILITY
OPERATIONS CONTINENTAL
DECEMBER 31, AND PREFERRED ENERGY COAL
2000* REDEMPTION SERVICES BUSINESSES PRO FORMA
NOTE 1 NOTE 2 NOTE 3 NOTE 4 RESULTS
------------- ------------- ----------- ---------- ----------
(MILLIONS OF DOLLARS)
CURRENT LIABILITIES:
Accounts payable........................... $ 207 $ (72) $ - $ - $ 135
Dividends payable.......................... 1 (1) - - -
Income taxes payable....................... 118 65 15 1 199
Deferred income taxes...................... 1 - - - 1
Other taxes payable........................ 41 (31) - - 10
Regulatory liability--oil and natural gas
sale..................................... 33 (33) - - -
Short-term borrowing....................... 62 (62) - - -
Current portion of deferred revenue........ 46 (13) - - 33
Long-term debt due within one year......... 169 (64) - - 105
Interest accrued........................... 5 (5) - - -
Other current liabilities.................. 39 (18) (1) - 20
------ ------- ------ ------ ------
722 (234) 14 1 503
------ ------- ------ ------ ------
LONG-TERM LIABILITIES:
Deferred income taxes...................... 82 (81) (1) - -
Investment tax credits..................... 13 (13) - - -
Deferred revenue........................... 236 (42) - - 194
Regulatory liability--net proceeds from the
generation sale in excess of book
value.................................... 215 (215) - - -
Other deferred credits..................... 94 (68) - - 26
------ ------- ------ ------ ------
640 (419) (1) - 220
------ ------- ------ ------ ------
LONG-TERM DEBT:
Long-term debt............................. 312 (297) - - 15
Company obligated mandatorily redeemable
preferred securities of subsidiary
trust.................................... 65 (65) - - -
------ ------- ------ ------ ------
377 (362) - - 15
------ ------- ------ ------ ------
SHAREHOLDERS' EQUITY:
Preferred stock............................ 58 (22) - - 36
Common stock............................... 705 - - -- 705
Treasury stock............................. (206) - - - (206)
Unallocated stock held by trustee for
retirement savings plan.................. (17) - - - (17)
Retained earnings.......................... 624 (39) 33 22 640
Accumulated other comprehensive income..... - - - - -
------ ------- ------ ------ ------
1,164 (61) 33 22 1,158
------ ------- ------ ------ ------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY................................. $2,903 $(1,076) $46 $23 $1,896
====== ======= ====== ====== ======
- ------------------------------
* We have made certain reclassifications and adjustments to the December 31,
2000 amounts as reported on MPC's Annual Report on Form 10-K, filed with the
SEC on April 10, 2001. These reclassifications had no material effect on
previously reported consolidated financial position, results of operations
or cash flows.
68
NOTES TO THE UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--PRO FORMA INCOME STATEMENTS AND BALANCE SHEET
The unaudited pro forma consolidated statements of income for the years
ended December 31, 2000, 1999, and 1998 begin with the consolidated financial
statements from MPC's audited consolidated financial statements as of
December 31, 2000 and 1999 and for each of the three years in the period ended
December 31, 2000, as reported on MPC's Annual Report on Form 10-K filed with
the SEC on April 10, 2001. These consolidated financial statements reflect
discontinued operations accounting treatment for MPC's former oil and natural
gas operations and MPC's coal operations. The MPC Board approved a definitive
agreement to sell MPC's former oil and natural gas operations on August 22,
2000, and it approved a definitive agreement to sell MPC's coal operations on
September 14, 2000. Both agreements are subject to customary closing conditions.
MPC applied discontinued operations accounting treatment to both of these
operations effective on these dates. MPC sold the oil and natural gas operations
on October 31, 2000 and, therefore, balances related to these operations are not
reflected on the December 31, 2000 unaudited pro forma consolidated balance
sheet. In addition, the unaudited pro forma consolidated balance sheet has been
adjusted to reflect any applicable pro forma adjustments discussed in Notes 2,
3, 4, and 5 below.
NOTE 2--UTILITY OPERATIONS AND REDEMPTION OF PREFERRED STOCK
The "Utility Operations and Preferred Redemption" column of Touch America
Holdings' unaudited pro forma consolidated statements of income and balance
sheet reflects the sale and removal of the utility operations, including
Colstrip Unit 4, solicited in this proxy statement/prospectus. These adjustments
exclude indirect general corporate overhead costs associated with, but not
directly attributable to, the utility operations. In accordance with generally
accepted accounting principles, these expenses must remain with continuing
operations and, therefore, are classified as part of Touch America Holdings'
operating results. These adjustments also include an income tax provision
calculated at the statutory rate as if the utility operations were on a
stand-alone basis. In addition, in accordance with the Unit Purchase Agreement
with NorthWestern pursuant to which NorthWestern agreed to purchase the utility
operations, and as solicited in this proxy statement/prospectus, we included the
following adjustments:
CASH ADJUSTMENTS
Cash was adjusted by a total of $463 million reflecting the following:
- net pro forma cash proceeds of approximately $542 million (gross cash
proceeds of $602 million less $27 million in transaction costs and
$33 million in regulatory liabilities, representing amounts that we have
agreed to share with natural gas utility ratepayers);
- less approximately $57 million, representing the net after-tax cash
proceeds from the generation sale of $118 million reduced by the remaining
unrecovered regulatory assets of $63 million, and increased by the
$2 million cash balance of the Montana Power Natural Gas Funding Trust.
The use of the excess generation proceeds will be subject to the outcome
of the Tier II filing. The Montana Power Natural Gas Funding Trust is a
bankruptcy remote entity that is responsible for its own cash;
- less approximately $22 million of the proceeds received from the sale of
the energy businesses to redeem the Preferred Stock, $6.00 Series and
Preferred Stock, $4.20 Series, solicited in this proxy
statement/prospectus and as discussed below.
69
NOTES TO THE UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--UTILITY OPERATIONS AND REDEMPTION OF PREFERRED STOCK (CONTINUED)
DEBT ADJUSTMENTS
Debt was adjusted to approximate the $488 million amount to be assumed by
NorthWestern. This amount is comprised of the following:
(MILLIONS OF DOLLARS)
---------------------
Short-term borrowing............................... $ 62
Long-term debt due within one year................. 64
Long-term debt..................................... 297
Company obligated mandatorily redeemable preferred
securities of subsidiary trust................... 65
----
Total Debt....................................... $488
====
OTHER ADJUSTMENTS
- Touch America Holdings will assume all obligations or assets relating to
current taxes;
- Included in "Other investments" and "Other deferred credits" were
adjustments of approximately $3.9 million and $0.2 million, respectively,
to reflect the transfer of applicable employees covered by nonqualified
benefit restoration plans; and
- Various balance sheet accounts were adjusted to reflect the transfer of
the Employee Stock Ownership Plan to Touch America Holdings.
AFTER-TAX REDUCTION TO RETAINED EARNINGS
We have reflected the difference between the net pro forma cash proceeds,
approximately $542 million as discussed above, and the net book value of the
utility business to be sold to NorthWestern, based on December 31, 2000 account
balances, as an after-tax reduction of $39 million to retained earnings on the
pro forma consolidated balance sheet. This adjustment to retained earnings is
subject to significant fluctuation until the sale closes. It does not represent,
therefore, the expected gain or loss on the sale of the utility business. The
actual gain or loss is dependent on many variables, including the results of
operations of the utility business and potential distributions and equity
transactions between the utility business and affiliated companies from
January 1, 2001 through the closing of the sale.
REDEMPTION OF PREFERRED STOCK
We have reduced preferred dividends on the unaudited pro forma consolidated
statements of income and the balance of preferred stock on the unaudited pro
forma consolidated balance sheet to reflect the redemption of the Preferred
Stock, $6.00 Series and Preferred Stock, $4.20 Series, solicited in this proxy
statement/prospectus, using approximately $22 million of the proceeds received
from the sale of the energy businesses.
NOTE 3--CONTINENTAL ENERGY SERVICES, INC.
The "Continental Energy Services" column of Touch America Holdings'
unaudited pro forma consolidated statements of income and balance sheet reflects
the sale and removal of Continental Energy Services, Inc.'s operations.
Historically, both Continental Energy Services, Inc. and Colstrip Unit 4
comprised the independent power group segment. Because Colstrip Unit 4 is
included in the
70
NOTES TO THE UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--CONTINENTAL ENERGY SERVICES, INC. (CONTINUED)
sale of the utility operations, which requires shareholder approval solicited in
this proxy statement/ prospectus, the entire independent power group segment was
not previously afforded discontinued operations accounting treatment. Since this
unaudited pro forma presentation illustrates the effect of the proposed sale of
the utility business to NorthWestern, Continental Energy Services, Inc. has been
afforded discontinued operations accounting treatment. This discontinuance is
reflected by the removal of Continental Energy Services, Inc.'s operations,
excluding indirect general corporate overhead costs associated with, but not
directly attributable to, Continental Energy Services, Inc.'s operations. As
discussed above, these expenses must remain with continuing operations and,
therefore, are classified as part of Touch America Holdings' operating results.
These adjustments also include an income tax provision calculated at the
statutory rate as if Continental Energy Services, Inc. were on a stand-alone
basis. The sale of Continental Energy Services, Inc. closed on February 21,
2001, with a purchase price of $85 million, subject to post-closing adjustments.
NOTE 4--COAL BUSINESSES
The "Coal Businesses" column of Touch America Holdings' unaudited pro forma
consolidated statements of income and balance sheet reflects the sale of coal
operations to Westmoreland Coal Company. In addition, in accordance with the
Stock Purchase Agreement with Westmoreland Coal Company, we have included pro
forma adjustments to reflect the transfer of debt associated with the Employee
Stock Ownership Plan, which previously was allocated to the coal companies, to
Touch America Holdings. The sale of the coal businesses closed on April 30,
2001, with a purchase price of $138 million, subject to post-closing
adjustments.
NOTE 5--ACQUISITION OF PROPERTIES FROM QWEST
The "Qwest Acquisition" column of Touch America Holdings' unaudited pro
forma consolidated statements of income for the years ended December 31, 2000
and 1999 reflects the acquisition of Qwest Communications International Inc.'s
divested businesses accounted for under purchase accounting methodology. Because
these businesses were acquired on June 30, 2000, MPC's historical consolidated
statement of income for 2000 reflects activity related to Qwest Communications
International Inc. for July through December. To illustrate a full year of
activity related to Qwest Communications International Inc., the pro forma
adjustments for 1999 reflect twelve months of operating activity and the pro
forma adjustments for 2000 reflect operating activity for the first six months
of the year. These amounts, representing the operating results of Qwest
Communications International Inc.'s divested businesses, along with applicable
pro forma adjustments, were included in MPC's Form 8-K/A filed with the SEC on
September 15, 2000. The following is a discussion of the pro forma adjustments.
TAXES OTHER THAN INCOME TAXES
Taxes other than income taxes for 1999 and the six months ended June 30,
2000 were adjusted by $0.7 million and $0.3 million, respectively, to reflect
increased property taxes associated with the telecommunications property, plant,
and equipment acquired from Qwest Communications International Inc.
DEPRECIATION, DEPLETION, AND AMORTIZATION
Depreciation, depletion, and amortization expenses for 1999 and the six
months ended June 30, 2000 were adjusted by $0.5 million and $0.3 million,
respectively, to reflect the elimination of Qwest
71
NOTES TO THE UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--ACQUISITION OF PROPERTIES FROM QWEST (CONTINUED)
Communications International Inc.'s depreciation expenses and the addition of
depreciation expenses related to Qwest Communications International Inc.'s
divested businesses. The net effect of the acquisition on depreciation,
depletion, and amortization expenses, after adjustments, is therefore an
increase of approximately $17 million for 1999 and an increase of approximately
$9 million for the six months ended June 30, 2000.
Based on preliminary information received from the independent third party
hired to appraise the acquired properties, we are depreciating
telecommunications property over a period of five years to 20 years (20 years
for fiber, 10 years for optronics and switches, and five years for office
furniture and other equipment). We are amortizing intangibles over a period of
three years to 20 years (three years for commercial customer lists, five years
for wholesale customer lists and assembled workforce, and 20 years for services
under the Indefeasible Rights-of-Use agreement). We received the final appraisal
in February 2001, which did not differ materially from the preliminary
information.
INCOME TAXES
The $18 million and $11 million increases in income taxes for 1999 and the
six months ended June 30, 2000 result from the higher overall income
attributable to the acquisition of Qwest Communications International Inc.'s
divested businesses and the pro forma adjustments at MPC's effective income tax
rate of approximately 37.45 percent.
NET INCOME AND NET INCOME AVAILABLE FOR COMMON STOCK
The $20 million and $12 million decreases in net income and net income
available for common stock for 1999 and the six months ended June 30, 2000
reflect the net effects of the adjustments to revenues and expenses in the "pro
forma adjustments" columns. The net effect of the acquisition on net income and
net income available for common stock, after adjustments, is therefore an
increase of approximately $31 million in 1999 and an increase of approximately
$18 million for the six months ended June 30, 2000.
72
DESCRIPTION OF TOUCH AMERICA HOLDINGS' CAPITAL STOCK
The following summary of the capital stock of Touch America Holdings is
subject in all respects to the applicable provisions of Delaware General
Corporation Law and the Touch America Holdings' certificate of incorporation to
be in effect on the effective date of the merger. See "Comparison of Shareholder
Rights" below on page 75 and "Where You Can Find More Information" below on
page 84.
GENERAL
The total number of authorized shares of capital stock of Touch America
Holdings consists of 240 million shares of common stock, $.01 par value, and
5 million shares of preferred stock, $.01 par value.
COMMON STOCK
Subject to the rights of any holders of preferred stock of Touch America
Holdings, if any, each holder of common stock will be entitled to cast one vote
for each share held of record on all matters submitted to a vote of the
shareholders, including the election of directors. At this time, holders of
Touch America Holdings' authorized and issued series of preferred stock do not
have any rights that might impact the ability of the holders of the common stock
to cast their votes. Holders of common stock will be entitled to receive
dividends or other distributions as declared by the Touch America Holdings'
Board of Directors at its own discretion. The right of the Touch America
Holdings' Board of Directors to declare dividends, however, will be subject to
the rights of any holders of preferred stock, if any, of Touch America Holdings
and certain requirements of Delaware law. Pursuant to the Touch America
Holdings' Shareholder Protection Rights Plan, holders of Touch America Holdings'
common stock will be deemed to receive one Touch America Holdings preferred
share right for each outstanding common share. See "Comparison of Shareholder
Rights--Shareholder Rights Plan" below on page 82.
PREFERRED STOCK
The Touch America Holdings' Board of Directors has the full authority
permitted by law to issue the preferred stock in one or more classes or series
and, with respect to each class or series, to determine the voting powers, if
any, and the preferences and relative, participating, optional or other special
rights, if any, and any qualifications, limitations or restrictions thereof, of
the shares of any class or series of preferred stock, except that holders of
preferred stock will not be entitled to more than one vote for each share of
preferred stock held. The powers, preferences and relative, participating,
optional and other special rights of each class or series of preferred stock and
the qualifications, limitations or restrictions, if any, thereof may differ from
those of any other classes or series at any time outstanding. The Touch America
Holdings' Board of Directors shall determine the extent, if any, of which the
holders of preferred stock shall be entitled to vote as a class or otherwise
with respect to the election of directors or otherwise.
At this time, the Board of Touch America Holdings has authorized and issued
one series of preferred stock--the Touch America Holdings' Preferred Stock,
$6.875 Series, which is identical to the Preferred Stock, $6.875 Series. The
Touch America Holdings' Preferred Stock, $6.875 Series consists of 360,800
shares of which 360,800 are issued and outstanding, and has the relative rights,
preferences and limitations as set forth in Touch America Holdings' Certificate
of Incorporation.
If the redemption of the preferred stock is not approved by at least a
majority of all of our common shareholders, each shareholder of Preferred Stock,
$4.20 Series and Preferred Stock, $6.00 Series will be deemed to receive in the
merger one share of Touch America Holdings' Preferred Stock, $4.20 Series and
Preferred Stock, $6.00 Series, for each outstanding share of Preferred Stock
$4.20 Series and Preferred Stock $6.00 Series, respectively. The terms of the
Touch America Holdings'
73
Preferred Stock, $4.20 Series and Preferred Stock, $6.00 Series will be
identical to the terms of the Preferred Stock, $4.20 Series and Preferred Stock,
$6.00 Series, respectively.
TOUCH AMERICA HOLDINGS' PREFERRED STOCK, $6.875 SERIES
The dividend rate of this stock is $6.875 per share per annum. Quarterly
periods ending January 31, April 30, July 31 and October 31 of each year have
been established as the regular dividend periods with dividends for such periods
payable, in arrears, on February 1, May 1, August 1, and November 1 of each
year. Dividends on the Touch America Holdings' Preferred Stock, $6.875 Series
shall be cumulative from the date of original issue. The holders of the Touch
America Holdings' Preferred Stock, $6.875 Series are only entitled to receive
these dividends when and as declared by the Touch America Holdings' Board of
Directors. Dividends may be paid upon the common shares of Touch America
Holdings only after dividends have been paid on the Touch America Holdings'
Preferred Stock, $6.875 Series
The Touch America Holdings' Preferred Stock, $6.875 Series will not be
redeemable prior to November 1, 2003. The shares are redeemable, at the option
of Touch America Holdings, in whole or in part, at any time upon not less than
thirty (30) days' notice, on and after November 1, 2003. There is no restriction
on the repurchase or redemption of Touch America Holdings' Preferred Stock,
$6.875 Series by Touch America Holdings while there is any arrearage in the
payment of this stock's dividends. The redemption prices per share is set forth
below, plus, in each case, accumulated but unpaid dividends to the date of
redemption:
REDEMPTION PERIOD PRICE
- ----------------- --------
November 1, 2003 to October 31, 2004........................ $103.438
November 1, 2004 to October 31, 2005........................ $103.094
November 1, 2005 to October 31, 2006........................ $102.750
November 1, 2006 to October 31, 2007........................ $102.406
November 1, 2007 to October 31, 2008........................ $102.063
November 1, 2008 to October 31, 2009........................ $101.719
November 1, 2009 to October 31, 2010........................ $101.375
November 1, 2010 to October 31, 2011........................ $101.031
November 1, 2011 to October 31, 2012........................ $100.688
November 1, 2012 to October 31, 2013........................ $100.344
November 1, 2013 and thereafter............................. $100.000
The amount of $100 per share shall be paid to the holders of the Touch
America Holdings' Preferred Stock, $6.875 Series in the event of any
liquidation, dissolution or winding up of the affairs of Touch America Holdings
or any distribution of its capital, whether voluntary or involuntary, before any
distribution or payment shall be made to the holders of common stock, plus
accumulated but unpaid dividends. The holders of Touch America Holdings'
Preferred Stock, $6.875 Series are not entitled to receive any other
distributive amounts upon the liquidation, dissolution or winding up of the
affairs of Touch America Holdings.
A consolidation, merger or amalgamation of Touch America Holdings with or
into any other corporation or corporations shall not be deemed a distribution of
assets of Touch America Holdings within the meaning of any of the provisions of
the Touch America Holdings' Preferred Stock, $6.875 Series.
Except as set forth below, each holder of record of the Touch America
Holdings' Preferred Stock, $6.875 Series shall be entitled to one vote for each
share of stock held by such stockholder. The holders of the Touch America
Holdings' Preferred Stock, $6.875 Series are not entitled to notice of or to
vote at any annual or special meeting of shareholders called for the purpose of
redeeming the whole or any part of the Touch America Holdings' Preferred Stock,
$6.875 Series. At all elections for directors, each holder of the Touch America
Holdings' Preferred Stock, $6.875 Series is entitled to as
74
many votes as shall equal the number of such stockholder's Touch America
Holdings' Preferred Stock, $6.875 Series multiplied by the number of directors
to be elected, and may cast all of such votes in person or by proxy for a single
director, or may distribute them among the number to be voted for, or any two or
more of them as he or she may see fit. Even though these cumulative voting
rights exist and Touch America Holdings has a classified board, the Touch
America Holdings' Preferred Stock, $6.875 Series will only represent 0.4% of the
outstanding shares of Touch America Holdings following the restructuring and is
likely to be reduced further by the proposed tender offer. Consequently, the
holders of the Touch America Holdings' Preferred Stock, $6.875 Series will not
be able to accumulate their votes to elect any individuals to the Board of
Directors of Touch America Holdings.
COMPARISON OF SHAREHOLDER RIGHTS
Upon completion of the merger, MPC's shareholders will be deemed to receive
shares of common stock of Touch America Holdings, par value $.01 per share, in
exchange for their MPC common shares, no par value, and shares of preferred
stock of Touch America Holdings, par value $.01 per share, in exchange for their
MPC preferred shares, no par value. The following is a summary of the material
differences with respect to the rights of holders of Touch America Holdings'
common shares and preferred shares and MPC common shares and preferred shares.
These differences arise from the differences between various provisions of
Montana and Delaware law, as well as, differences between the governing
instruments of MPC and Touch America Holdings.
The following description summarizes the material differences which may
affect the rights of a MPC shareholder, but does not purport to be a complete
statement of all of the differences or a complete description of the specific
provisions referred to in this summary. The identification of specific
differences is not intended to indicate that other equal or more significant
differences do not exist.
The terms of the Touch America Holdings' Preferred Stock, $6.875 Series will
have the identical rights, title and preferences as the Preferred Stock, $6.875
Series of MPC.
If the redemption of the preferred stock is not approved by at least a
majority of all of our common shareholders, each shareholder of Preferred Stock,
$4.20 Series and Preferred Stock, $6.00 Series will be deemed to receive in the
merger one share of Touch America Holdings' Preferred Stock, $4.20 Series and
Preferred Stock, $6.00 Series, for each outstanding share of Preferred Stock
$4.20 Series and Preferred Stock $6.00 Series, respectively. The terms of the
Touch America Holdings' Preferred Stock, $4.20 Series and Preferred Stock, $6.00
Series will be identical to the terms of the Preferred Stock, $4.20 Series and
Preferred Stock, $6.00 Series, respectively.
CORPORATE GOVERNANCE
MPC: The rights of MPC's shareholders are currently governed by Montana law
and the articles of incorporation and by-laws of MPC. Upon completion of the
merger, the rights of MPC's shareholders who become Touch America Holdings'
stockholders will be governed by Delaware law, the Touch America Holdings'
certificate of incorporation and the Touch America Holdings' by-laws.
TOUCH AMERICA HOLDINGS: The rights of Touch America Holdings' stockholders
will be governed by Delaware law and the certificate of incorporation and
by-laws of Touch America Holdings.
AUTHORIZED CAPITAL STOCK
MPC: The authorized capital stock of MPC consists of 240 million common
shares and 5 million preferred shares.
TOUCH AMERICA HOLDINGS: The authorized capital stock of Touch America
Holdings consists of 240 million shares of common stock and 5 million shares of
preferred stock.
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NUMBER OF DIRECTORS
MPC: Under Montana law, a corporation may have one or more directors on its
board of directors. The articles of incorporation, by-laws or an action by the
shareholders, or an action of the Board of Directors under the specific
provisions of a by-law adopted by the shareholders, may fix the number of
directors. Further, the articles of incorporation or by-laws may establish a
variable range for the size of the Board of Directors. If a variable range is
established, the number of directors within the variable range may be
established by the shareholders or the Board of Directors.
The articles of incorporation of MPC provides that the number of directors
shall be fixed in the by-laws, but may not be more than 18 nor less than 3. The
by-laws currently fix the number of directors at 11. The articles also provide
that the shareholders may change the number of directors by a two-thirds vote.
TOUCH AMERICA HOLDINGS: Under Delaware law, a corporation may have one or
more directors on its Board of Directors. The number of directors will be fixed
by, or in the manner described in, the by-laws, unless the certificate of
incorporation fixes the number.
Under the Touch America Holdings' by-laws, the Board of Directors shall
consist of no more than 15 nor less than 5, and the Board of Directors may
increase or decrease the number of directors by a resolution adopted by a
majority of the Board of Directors. However, no such decrease in the number of
directors may shorten the term of any incumbent director. The initial directors
of Touch America Holdings will be the same as the current directors of MPC.
CLASSIFIED BOARD
MPC: Under Montana law, if a corporation has nine or more directors, then
the articles of incorporation or the by-laws may provide for the election of
directors by staggering (or classifying) their terms by dividing the total
number of directors into two or three groups, with each group containing as near
as possible to one-half or one-third of the total. In that event, the terms of
directors in the first group expire at the first annual shareholders' meeting
after their election, the terms of the second group expire at the second annual
shareholders' meeting after their election, and the terms of the third group, if
any, expire at the third annual shareholders' meeting after the election.
The by-laws of MPC provide for a classified board of directors. The articles
also provide that the shareholders can only change the staggered system by a
two-third vote.
TOUCH AMERICA HOLDINGS: Under Delaware law, a corporation may divide its
directors into one, two or three classes, with the term of office of those of
the first class to expire at the annual meeting next ensuing, the term of the
second class one year thereafter and the term of the third class two years
thereafter. At each annual election held after such classification and election,
directors shall be chosen for a full term, as the case may be, to succeed those
whose terms expire.
The articles of incorporation and by-laws of Touch America Holdings provide
for directors to be divided into three classes, with directors to be elected
from each class in 2001, 2002 and 2003, respectively.
CUMULATIVE VOTING
MPC: Under Montana law, shareholders do have cumulative voting rights for
the election of directors, unless the corporation's article of incorporation
provides otherwise.
The articles of incorporation of MPC provide that shareholders have
cumulative voting rights for the election of directors.
TOUCH AMERICA HOLDINGS: Under Delaware law, a corporation's certificate of
incorporation may provide for cumulative voting rights for the election of
directors.
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The certificate of incorporation of Touch America Holdings does not provide
for cumulative voting by holders of common stock, but the certificate of
incorporation of Touch America Holdings, through the filing of a certificate of
designation for Touch America Holdings Preferred Stock, $6.875 Series, does
grant holders of Touch America Holdings' Preferred Stock, $6.875 Series
cumulative voting rights. The Board of Directors of Touch America Holdings
authorized the filing of this certificate of designation in accordance with the
certificate of incorporation.
VACANCIES ON THE BOARD
MPC: Under Montana law, either the Board of Directors or the shareholders
may fill newly-created directorships and vacancies, including a vacancy
resulting from an increase in the number of directors. If the members of the
Board of Directors remaining in office constitute fewer than a quorum of the
Board of Directors, they may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the holders of
shares of that voting group are entitled to vote to fill the vacancy if it is
filled by the shareholders. The articles of incorporation or by-laws may provide
that newly-created directorships or vacancies will be filled by vote of the
shareholders.
The by-laws of MPC provide that only the MPC Board may fill vacancies on the
board at any meeting where a quorum is present. If the directors remaining in
office are fewer than a quorum, they may fill the vacancy by an affirmative vote
of the majority of remaining directors.
TOUCH AMERICA HOLDINGS: Under Delaware law, any vacancy occurring in any
office of the corporation by death, resignation, removal or otherwise will be
filled as set forth in the by-laws. In the absence of a provision in the by-laws
specifying how vacancies will be filled, vacancies and newly-created
directorships may be filled by a majority of the directors then in office. Any
director chosen pursuant to this provision will hold office until the next
election of the class for which the director is chosen to fill a vacancy, and
until his or her successor is elected and qualified.
The certificate of incorporation of Touch America Holdings provides that,
except as otherwise set forth in the certificate of incorporation with respect
to the rights of the holders of preferred shares, any vacancy on the Board of
Directors and any newly created directorship resulting from any increase in the
authorized number of directors will be filled only by the majority vote of the
directors then in office. A director chosen to fill a vacancy will hold office
until a successor is duly elected and qualified, or until his or her earlier
death, incapacity, resignation or removal from office.
REMOVAL OF DIRECTORS
MPC: Under Montana law, shareholders may remove directors with or without
cause unless the articles of incorporation provide that directors may be removed
only for cause. If a director is elected by a voting group of shareholders only
the shareholders of that voting group may participate in the vote to remove the
director. Any director or the entire Board of Directors may be removed only by a
vote of the holders of two-thirds of the shares entitled to vote at an election
of directors, unless otherwise provided by the articles of incorporation or
by-laws. If shareholders have the right to cumulative voting for the election of
directors and if less than the entire Board of Directors is to be removed, a
director may not be removed if the votes cast against the director's removal
would be sufficient to elect him if cumulatively voted at an election of the
entire Board of Directors. A director may be removed by shareholders only at a
meeting called for the purpose of removing the director.
The by-laws of MPC provide that the shareholders may remove a director and
fill the vacancy with a two-thirds vote of the outstanding shares entitled to
vote. If less than the entire MPC Board is to be removed, no director may be
removed if the votes cast against the director's removal would be sufficient to
elect the director if cumulatively voted at an election of the class of
directors of which the director is a part.
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TOUCH AMERICA HOLDINGS: Under Delaware law, any director may be removed,
with or without cause, by the holders of a majority of the shares entitled to
vote at an election of the directors. However, unless the certificate of
incorporation provides otherwise, in the case of a corporation whose Board of
Directors is classified, shareholders may remove directors only for cause.
The certificate of incorporation of Touch America Holdings provides that
directors may be removed only for cause and only by the affirmative vote of at
least 80 percent of shareholders entitled to vote.
VOTE REQUIRED FOR SHAREHOLDER ACTIONS
MPC: Under Montana law, directors of a corporation will be elected by a
plurality of the votes cast at a shareholder meeting by the holders of shares
entitled to vote in the election, unless otherwise set forth in the certificate
of incorporation. Except as otherwise set forth under Montana law, all other
matters brought before a shareholder meeting require the authorization of a
majority of the votes cast in favor or against those matters by the holders of
shares entitled to vote at that meeting.
The articles of incorporation of MPC provide that the holder of each share
of preferred or common stock is entitled to one vote for each share, except
(1) holders of preferred are not entitled to vote on the redemption of any
preferred shares, and (2) in elections for directors, each holder of preferred
or common shares is entitled to the number of shares multiplied by the number of
directors to be elected, and those votes may be cast among the nominees as the
holder sees fit.
TOUCH AMERICA HOLDINGS: Under Delaware law, directors of a corporation will
be elected by a plurality of the votes of the shares present in person or
represented by proxy at a shareholder meeting and entitled to vote in the
election, unless otherwise set forth in the certificate of incorporation or the
by-laws. Except as otherwise required by Delaware law or by the certificate of
incorporation or by-laws, all other matters brought before a shareholder meeting
require the affirmative vote of the majority of shares present in person or
represented by proxy at a shareholder meeting and entitled to vote at that
meeting.
The by-laws of Touch America Holdings provide that, except as otherwise
required by the certificate of incorporation or applicable law, the directors of
Touch America Holdings will be elected by a plurality vote and that all other
questions will be decided by a majority vote of the shareholders. The
certificate of incorporation of Touch America Holdings and Delaware law do not
require a vote other than a plurality vote for the election of directors and a
majority vote for all other questions decided by the shareholders. At all
elections for directors, each holder of the Touch America Holdings' Preferred
Stock, $6.875 Series is entitled to as many votes as shall equal the number of
his Touch America Holdings' Preferred Stock, $6.875 Series multiplied by the
number of directors to be elected, and may cast all of such votes in person or
by proxy for a single director, or may distribute them among the number to be
voted for, or any two or more of them as he or she may see fit.
SHAREHOLDER ACTION BY WRITTEN CONSENT
MPC: Under Montana law, shareholders may act without a meeting on any action
requiring a vote of shareholders if they have the written consent of the holders
of all shares entitled to vote on the matter. The action must be evidenced by
one or more written consents describing the action taken, signed by all
shareholders entitled to vote on the action.
The articles of incorporation and the by-laws of MPC do not address the
subject of shareholder action by written consent.
TOUCH AMERICA HOLDINGS: Under Delaware law, unless otherwise set forth in a
corporation's certificate of incorporation, holders of shares, representing the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares having a right to vote thereon were present and
voted, may act by written consent.
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The certificate of incorporation of Touch America Holdings provides that any
action taken by the stockholders must be effected at a duly called annual or
special meeting of the shareholders and may not be effected by the written
consent of the stockholders.
SPECIAL MEETINGS OF SHAREHOLDERS
MPC: Under Montana law, a corporation shall hold a special meeting of
shareholders on the call of its Board of Directors or any other person
authorized by the certificate of incorporation or by-laws or the holders of at
least 10% of all the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting.
The by-laws of MPC provide that a special meeting of the shareholders may be
held in Butte, Montana by the call of the MPC Board, chairman of the MPC Board,
vice chairman of the MPC Board, chief executive officer, president or holders of
at least ten percent of the shares outstanding and entitled to vote at the
meeting.
TOUCH AMERICA HOLDINGS: Under Delaware law, special meetings may be called
by the Board of Directors or by those persons authorized to call a special
meeting by the certificate of incorporation or by-laws of the corporation.
The by-laws of Touch America Holdings provide in pertinent part that,
subject to the rights of any series of preferred stock, and except as otherwise
expressly required by the certificate of incorporation or by applicable law, a
special meeting may be called only by the Chairman of the Board of Directors for
any purpose or by a majority vote of the entire Board of Directors.
AMENDMENTS TO GOVERNING DOCUMENTS
MPC: Under Montana law, a corporation may amend its articles of
incorporation at any time to add or change a provision that is required or
permitted in the articles of incorporation or to delete a provision not required
in the articles of incorporation. Under Montana law, unless the articles of
incorporation provide otherwise, a corporation's board of directors may adopt
amendments to the corporation's articles of incorporation. Montana law also
provides that a corporation's board of directors may propose amendments to the
articles of incorporation for submission to the shareholders. Proposed
amendments to the articles submitted to shareholders must be approved by a
majority of the votes entitled to vote on the amendment. Montana law also
provides that a corporation's Board of Directors may amend or repeal a
corporation's bylaws unless:
- the articles of incorporation reserve that right exclusively for
shareholders; or
- the shareholders in amending, adding, or repealing a particular by-law
express that the Board of Directors may not amend or repeal that by-law.
Shareholders may also amend or repeal bylaws, even though the Board of
Directors also has that power.
The articles of incorporation of MPC do not address amendment of the
articles, but do provide that the shareholders may amend the by-laws. The
by-laws also provide that the MPC Board may amend the by-laws.
TOUCH AMERICA HOLDINGS: Under Delaware law, unless the certificate of
incorporation otherwise provides, the certificate of incorporation of a
corporation may be amended upon the vote of the Board of Directors and the
affirmative vote of a majority of the outstanding stock entitled to vote thereon
and a majority of the outstanding stock of each class entitled to vote thereon
as a separate class (e.g., if the proposed amendment would adversely affect the
preferences or priorities of that class). Also, unless the certificate of
incorporation otherwise provides, the by-laws of a corporation may be amended by
the vote of a majority of the shares entitled to vote thereon that are present
in person or by proxy at a stockholders meeting. The Board of Directors of a
corporation is authorized to alter, amend, repeal or adopt the by-laws by a
majority vote of the Board of Directors if so provided in the certificate of
incorporation.
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Touch America Holdings' certificate of incorporation reserves the right to
supplement, amend or repeal any provision of the certificate of incorporation in
the manner prescribed by Delaware law and the certificate of incorporation. The
certificate of incorporation and the by-laws of Touch America Holdings provide
that the Board of Directors is authorized to alter, amend, repeal or adopt the
by-laws by a majority vote of the entire Board of Directors. The Touch America
Holdings' certificate of incorporation provides that the affirmative vote of the
holders of at least 80% of the voting power of the then outstanding stock
entitled to vote, voting together as a single class, is required to amend,
repeal or adopt the bylaws of Touch America Holdings as well as any provision
inconsistent with articles 5, 6 or 7 of Touch America Holdings' certificate of
incorporation. These articles deal with amending the by-laws, meetings of
stockholders and the election of directors, respectively.
PREEMPTIVE RIGHTS
MPC: Under Montana law, shareholders do not have the preemptive right to
acquire the corporation's unissued shares, except to the extent provided for in
the articles of incorporation.
The articles of incorporation of MPC do not provide for preemptive rights.
TOUCH AMERICA HOLDINGS: Under Delaware law, absent an express provision in a
corporation's certificate of incorporation, a stockholder does not possess
preemptive rights to subscribe to an additional issue of stock.
The certificate of incorporation of Touch America Holdings does not provide
for preemptive rights.
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
MPC: Montana law provides for mandatory indemnification of a director or
officer who has been wholly successful, on the merits or otherwise, in the
defense of any proceeding to which the director was made a party because he is
or was a director or officer of the corporation unless modified by the articles
of incorporation. Montana law also provides for discretionary indemnification by
a corporation of a director, officer or employee subject to statutory
requirements, unless the articles of incorporation provide otherwise.
The by-laws of MPC provide that MPC shall indemnify directors and officers
of MPC as provided by the Montana law described in the preceding paragraph.
TOUCH AMERICA HOLDINGS: Under Delaware law, a corporation may indemnify its
officers, directors, employees and agents against liabilities and expenses
incurred in proceedings if the person acted in good faith and in a manner he or
she reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action, had no reasonable cause to
believe that the person's conduct was unlawful. In the case of derivative
actions, indemnification is limited to expenses and no indemnification may be
made in respect of any claim as to which the person is adjudged liable to the
corporation except as otherwise authorized by a court.
The by-laws of Touch America Holdings provide that, except to the extent
indemnification is not permitted by law, Touch America Holdings will fully
indemnify its directors and officers and provide for the advancement of expenses
in connection with any proceeding.
LIMITATION ON DIRECTOR LIABILITY
MPC: Under Montana law, a corporation may include in its articles of
incorporation a provision eliminating or limiting the liability of a director to
the corporation or its shareholders for money damages for any actions taken or
any failure to act except for:
- the amount of financial benefit received by a director to which the
director is not entitled;
- an intentional infliction of harm on the corporation or the shareholders;
80
- making an unlawful distribution; or
- an intentional violation of criminal law.
The articles of incorporation of MPC include a provision eliminating
personal liability of directors to MPC or its shareholders, except in the four
cases established by Montana law as described in the preceding paragraph.
TOUCH AMERICA HOLDINGS: Under Delaware law, a corporation may include in its
certificate of incorporation a provision eliminating the liability of a director
to the corporation or its stockholders for monetary damages for a breach of the
director's fiduciary duties, except liability for any breach of the director's
duty of loyalty to the corporation's stockholders, for acts or omissions not in
good faith or that involve intentional misconduct or knowing violation of law,
under Section 174 of the Delaware Law, which deals generally with unlawful
payments of dividends, stock repurchases and redemptions, and for any
transaction from which the director derived an improper personal benefit.
The certificate of incorporation of Touch America Holdings provides that,
except to the extent limitation of liability is not permitted by law, the
directors of Touch America Holdings will not be personally liable to Touch
America Holdings or its stockholders for monetary damages due to any breach of
fiduciary duty.
BUSINESS COMBINATIONS
MPC: Under Montana law, unless a corporation's articles of incorporation
provide for a lesser vote (but not less than a majority), approval by at least
two-thirds of the outstanding shares entitled to vote or two-thirds of each
voting group is required to approve mergers, asset sales and dissolutions.
Separate voting by voting groups is required
- on a plan of share exchange, and
- on a plan of merger if it contains provisions that would require separate
voting if contained in an amendment to the articles of incorporation.
The articles of incorporation of MPC expressly provide that specified
business combinations must be approved by at least 70 percent of the outstanding
shares of MPC. The 70 percent voting requirement is not applicable if certain
conditions are satisfied, including a fair price as defined in the articles of
incorporation.
TOUCH AMERICA HOLDINGS: Under Delaware law, a merger or consolidation of a
corporation or the sale of all or substantially all of the assets of a
corporation requires authorization by a resolution adopted by the holders of a
majority of the outstanding stock of the corporation entitled to vote, unless
the certificate of incorporation requires a greater vote.
The certificate of incorporation and by-laws of Touch America Holdings do
not address business combinations.
DISSENTERS' OR APPRAISAL RIGHTS
MPC: Under Montana law, a shareholders is entitled to dissent from, and,
upon completion of various notice and demand requirements prescribed in Sections
35-1-826 through 35-1-839 of the Montana Business Corporation Act, to obtain the
fair value of his or her shares in the event of specified corporate actions,
including mergers, share exchanges, sales of substantially all assets of the
corporation, and certain amendments to the corporation's articles of
incorporation. See "The Restructuring--Dissenters' Rights" above on page 42.
TOUCH AMERICA HOLDINGS: Under Delaware law, a stockholder may dissent from,
and receive payment in cash for the fair value of its shares in the event of,
specified mergers and
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consolidations. However, under Delaware law and subject to the following
paragraph, appraisal rights are generally not available:
- for shares listed on a national securities exchange;
- for shares designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers;
- for shares which are held of record by more than 2,000 shareholders; or
- to stockholders of the surviving corporation if the merger did not require
for its approval the vote of the stockholders of the surviving
corporation.
Notwithstanding the foregoing, appraisal rights are available if
shareholders are required by the terms of the merger agreement to accept for
their shares anything other than:
- shares of stock of the surviving corporation;
- shares of stock of another corporation that are listed on a national
securities exchange, designated as a national market system security as
described above, or held of record by more than 2,000 shareholders;
- cash instead of fractional shares of stock; or
- any combination of the above.
Appraisal rights are also available under Delaware law in other
circumstances including:
- in specified parent-subsidiary corporation mergers, and
- in circumstances where the certificate of incorporation so provides.
The certificate of incorporation of Touch America Holdings does not grant
additional appraisal rights.
ANTI-TAKEOVER STATUTES
MPC: Montana law does not have an anti-takeover statute.
TOUCH AMERICA HOLDINGS: Under Delaware law, a Delaware corporation is
prohibited from engaging in mergers, dispositions of 10% or more of its assets,
and issuances of stock to and other transactions with a person or group that
owns 15% or more of the voting stock of the corporation, for a period of three
years after the interested shareholder crosses the 15% threshold. These
restrictions do not apply in certain circumstances, including when:
- prior to the person or group becoming an interested shareholder, the Board
of Directors approved the business combination in question or the
transaction that resulted in the person or group becoming an interested
stockholder;
- the interested shareholder acquired at least 85% of the voting stock of
the corporation, other than stock owned by inside directors and specified
employee stock plans, in the transaction in which the interested
stockholder crossed the 15% threshold; or
- after the person or group became an interested stockholder, the Board of
Directors and at least 66 2/3% of the voting stock other than stock owned
by the interested stockholder approved the business combination.
SHAREHOLDER RIGHTS PLAN
MPC: MPC has a Shareholder Protection Rights Plan that provides one MPC
preferred share purchase right on each outstanding MPC common share. Each
purchase right entitles the registered holder, upon the occurrence of events
described in the Shareholder Protection Rights Plan, to purchase from MPC one
one-hundredth of a share of Participating Preferred Shares, A Series, without
par value. If it should become exercisable, each purchase right would have
economic terms similar to one share of
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common stock. The purchase rights trade with the underlying shares and will,
except under the circumstances described in the Shareholder Protection Rights
Plan, expire on June 6, 2009, unless redeemed earlier or exchanged by MPC.
TOUCH AMERICA HOLDINGS: Touch America Holdings will institute a Shareholder
Protection Rights Plan between the effective date of Touch America Holdings'
registration statement on Form S-4 and the effective time of the merger which
will be identical to the MPC Shareholder Protection Rights Plan.
LEGAL MATTERS
The validity of the Touch America Holdings' stock offered by this proxy
statement/prospectus will be passed upon for Touch America Holdings by Milbank,
Tweed, Hadley & McCloy LLP, New York, New York.
In addition, tax matters in connection with the restructuring are being
passed on by Thelen Reid & Priest LLP, New York, New York.
EXPERTS
The consolidated balance sheets of MPC as of December 31, 2000 and 1999, and
the related consolidated statements of income, of cash flows, and of common
shareholders' equity for each of the three years in the period ended
December 31, 2000, incorporated in this proxy statement/prospectus by reference
to the Form 10-K of MPC for the year ended December 31, 2000 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
auditing and accounting. The report contains an explanatory paragraph relating
to a change during 1999 in MPC's method of accounting for revenues relating to
certain agreements to grant and exchange fiber-use rights.
The special purpose statement of selected assets to be sold of Qwest's
divested businesses as of June 30, 2000 and the related statements of revenues
and direct expenses for each of the three years in the period ended
December 31, 1999, incorporated in this proxy statement/prospectus by reference
to MPC's Form 8-K/A dated September 15, 2000 have been so incorporated in
reliance on the report of Arthur Andersen LLP, independent accountants, given on
the authority of that firm as experts in auditing and accounting.
Representatives of PricewaterhouseCoopers LLP, principal accountants, are
expected to be present at the special meeting. The representatives of the
principal accountants will have the opportunity to make a statement regarding
the proposed restructuring if they desire to do so, and they are expected to be
available to respond to appropriate questions from the shareholders at the
special meeting.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be included in the proxy statement and
form of proxy for the 2001 annual meeting of MPC shareholders should have been
received no later than November 26, 2000 by the Corporate Secretary at the
following address: The Montana Power Company, 40 E. Broadway Street, Butte,
Montana 59701. The proposal must also have met the other requirements of the
rules of the Securities and Exchange Commission relating to shareholder
proposals.
OTHER MATTERS
As of the date of this proxy statement/prospectus, the MPC Board does not
know of any matter that will be presented for consideration at the special
meeting other than as described in this proxy statement/prospectus.
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WHERE YOU CAN FIND MORE INFORMATION
Touch America Holdings filed a registration statement on Form S-4 on
May , 2001, to register with the Securities and Exchange Commission the Touch
America Holdings' common stock and preferred stock to be issued to MPC's
shareholders in the merger. This proxy statement/prospectus is a part of that
registration statement and constitutes a prospectus of Touch America Holdings in
addition to being a proxy statement/prospectus of MPC. As allowed by Securities
and Exchange Commission rules, this proxy statement/prospectus does not contain
all the information you can find in Touch America Holdings' registration
statement or the exhibits to the registration statement. MPC files annual,
quarterly and special reports, proxy statements and other information with the
Securities and Exchange Commission. You may read and copy any reports,
statements or other information that MPC files with the Securities and Exchange
Commission at the Securities and Exchange Commission's public reference rooms at
the following locations:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. These Securities and Exchange
Commission filings are also available to the public from commercial document
retrieval services and at the Internet worldwide web site maintained by the
Securities and Exchange Commission at "http://www.sec.gov." Reports, proxy
statements and other information concerning MPC may also be inspected at the
offices of the New York Stock Exchange, which is located at 20 Broad Street, New
York, New York 10005.
The Securities and Exchange Commission allows MPC and Touch America Holdings
to "incorporate by reference" information into this proxy statement/prospectus,
which means that the companies can disclose important information to you by
referring you to other documents filed separately with the Securities and
Exchange Commission. The information incorporated by reference is considered
part of this proxy statement/prospectus, except for any information superseded
by information contained directly in this proxy statement/prospectus or in later
filed documents incorporated by reference in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that MPC has previously filed with the Securities and Exchange
Commission. These documents contain important business and financial information
about MPC and Touch America Holdings that is not included in or delivered with
this proxy statement/prospectus.
MPC FILINGS (FILE NO. 1-4566) PERIOD
Annual Report on Form 10-K Year ended December 31, 2000
Current Reports on Form 8-K and 8-K/A Filed September 15, 2000 and May 1, 2001
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This proxy statement/prospectus also incorporates by reference all
additional documents that may be filed by MPC with the Securities and Exchange
Commission under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act between
the date of this proxy statement/prospectus and the date of MPC special meeting,
as applicable. These include periodic reports, such as Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
MPC has supplied all information contained or incorporated by reference in
this proxy statement/ prospectus relating to MPC and Touch America Holdings.
If you are an MPC shareholder, we may have sent you some of the documents
incorporated by reference, but you can also obtain any of them through MPC, the
Securities and Exchange Commission or the Securities and Exchange Commission's
Internet web site as described above. Documents incorporated by reference are
available from MPC without charge, excluding all exhibits, except that if MPC
has specifically incorporated by reference an exhibit in this proxy
statement/prospectus, the exhibit will also be provided without charge. You may
obtain documents incorporated by reference in this proxy statement/prospectus by
requesting them in writing or by telephone from the MPC at the following
addresses:
The Montana Power Company
c/o Corporate Investor Communication, Inc.
111 Commerce Road
Cerlstadt, NJ 07072
Individual Shareholders Should Call:
1-800-793-1283
Banks and Brokers Should Call:
(201) 896-2633
If you would like to request documents, please do so by July 16, 2001 in
order to receive them before your special meeting.
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus. We have not authorized anyone to
provide you with information that is different from what is contained in this
proxy statement/prospectus. Therefore, if anyone does give you information of
this sort, you should not rely on it. If you are in a jurisdiction where offers
to exchange or sell, or solicitations of offers to exchange or purchase, the
securities offered by this document or the solicitation of proxies is unlawful,
or if you are a person to whom it is unlawful to direct these types of
activities, then the offer presented in this document does not extend to you.
This proxy statement/ prospectus is dated May 2001. You should not assume that
the information contained in this proxy statement/prospectus is accurate as of
any date other than that date. Neither the mailing of this proxy
statement/prospectus to MPC's shareholders nor the issuance of Touch America
Holdings' common stock or preferred stock in the merger creates any implication
to the contrary.
85
ANNEX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of February 20,
2001 by and between The Montana Power Company, a Montana corporation ("Montana
Power"), The Montana Power, L.L.C., a Montana limited liability company
("Subsidiary"), and Touch America Holdings, Inc., a Delaware corporation
("Holding Company").
W I T N E S S E T H:
WHEREAS, Montana Power has an authorized capitalization consisting of
(i) 240,000,000 shares of Common Stock, without par value ("Montana Power Common
Stock"), of which 110,355,429 shares are issued whether or not outstanding as of
December 8, 2000, and (ii) 5,000,000 shares of Cumulative Preferred Stock,
without par value ("Montana Power Preferred Stock"), of which 580,389 shares
(consisting of shares of three separate series) are issued and outstanding as of
December 8, 2000; and
WHEREAS, Subsidiary has an authorized capitalization consisting of 10 units
("Subsidiary Units"), all of which units have been issued and are outstanding
and owned beneficially and of record by Holding Company; and
WHEREAS, Holding Company has an authorized capitalization consisting of
(i) 240,000,000 shares of Common Stock, par value $.01 per share ("Holding
Company Common Stock"), of which 1,000 shares have been issued and are
outstanding and owned beneficially and of record by Montana Power; and
(ii) 5,000,000 shares of Preferred Stock, par value $.01 per share, none of
which shares are issued or outstanding; and
WHEREAS, the Boards of Directors and Manager of the respective parties
hereto deem it advisable to merge Montana Power into Subsidiary (the "Merger")
in accordance with the Montana Business Corporation Act and the Montana Limited
Liability Company Act, this Agreement and the Articles of Merger attached hereto
as Exhibit A (the "Articles"), whereby the holders of shares of Montana Power
Common Stock will receive shares of Holding Company Common Stock; and
WHEREAS, the parties hereto intend that this Agreement and the actions
contemplated herein shall constitute a "plan of reorganization" within the
meaning of sections 354 and 368 of the Internal Revenue Code of 1986, as
amended.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties hereto agree that
Montana Power shall be merged into Subsidiary, which shall be the entity
surviving such merger, and that the terms and conditions of such merger, the
mode of carrying it into effect, and the manner of converting and exchanging
shares shall be as follows:
ARTICLE I
THE MERGER
(a) Subject to and in accordance with the provisions of this Agreement, the
Articles shall be executed and verified by each of Montana Power and Subsidiary
and thereafter delivered to the Secretary of State of the State of Montana for
filing, as provided in Section 35-1-816 of the Montana Business Corporation Act
and Section 35-8-1201 of the Montana Limited Liability Company Act. The Merger
shall become effective upon the filing of the Articles with the Montana
Secretary of State (the "Effective Time"). At the Effective Time, the separate
existence of Montana Power shall cease and Montana Power shall be merged with
and into Subsidiary (Subsidiary and Montana Power being sometimes referred to
herein as the "Constituent Entities" and Subsidiary, the entity designated in
the Articles as the surviving entity, being sometimes referred to herein as the
"Surviving Entity").
A-1
(b) Prior to and after the Effective Time, Holding Company, Montana Power
and Subsidiary, respectively, shall take all such action as may be necessary or
appropriate in order to effectuate the Merger. In this connection, Holding
Company shall issue the shares of Holding Company Common Stock which the holders
of Montana Power Common Stock shall be entitled to receive as provided in
Article II hereof. If at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Entity with full title to all properties, assets, rights,
approvals, immunities and franchises of either of the Constituent Entities, then
the officers and directors of each of the Constituent Entities as of the
Effective Time shall take all such further action.
ARTICLE II
TERMS OF CONVERSION AND EXCHANGE OF SHARES
At the Effective Time:
(a) Each share of Montana Power Common Stock (along with one preferred share
purchase right pursuant to The Montana Power Shareholder Protection Rights Plan)
issued, whether or not outstanding, immediately prior to the Merger, shall be
changed and converted into one share of Holding Company Common Stock (along with
one preferred share purchase right pursuant to Holding Company Shareholder
Protection Rights Plan), which shall thereupon be issued, fully paid and
nonassessable.
(b) Each outstanding option to purchase Montana Power Common Stock (a
"Montana Power Stock Option") issued pursuant to the 1982 Montana Power Key
Employees' Incentive Stock Ownership Plan and Montana Power 1998 Long-Term
Incentive Plan (which at the Effective Time of the Merger will become the
Holding Company Key Employees' Incentive Stock Ownership Plan and Holding
Company Long-Term Incentive Plan), whether vested or not vested or exercisable,
shall be deemed to constitute an option (a "Holding Company Stock Option") to
acquire, on the same terms and conditions as were applicable under such Montana
Power Stock Option (including the price per share), the same number of shares of
Holding Company Common Stock as the holder of such Montana Power Stock Option
would have been entitled to receive upon the exercise of such Montana Power
Stock Option.
(c) Each share of Montana Power Preferred Stock issued and outstanding
immediately prior to the Merger, shall be changed and converted into one share
of Holding Company Preferred Stock.
(d) Each share of Holding Company Common Stock issued, whether or not
outstanding, shall be cancelled.
ARTICLE III
ARTICLES OF ORGANIZATION AND AGREEMENT OF OPERATION
From and after the Effective Time, and until thereafter amended as provided
by law, the Articles of Organization of Subsidiary as in effect immediately
prior to the Merger shall be and continue to be the Articles of Organization of
the Surviving Entity.
From and after the Effective Time, the Agreement of Operation of Subsidiary
shall be and continue to be the Agreement of Operation of the Surviving Entity.
ARTICLE IV
MANAGERS AND OFFICERS
The persons who are the Manager and Officers of Subsidiary immediately prior
to the Merger shall continue as Manager and Officers, of the Surviving Entity
and shall continue to be Manager as provided in the Agreement of Operation of
the Surviving Entity.
A-2
ARTICLE V
TRANSFER OF ASSETS
Immediately following the Effective Time, Subsidiary and Holding Company
shall take such action as may be necessary or appropriate to transfer to Holding
Company these assets and liabilities that Holding Company intends to hold in its
own name.
ARTICLE VI
STOCK CERTIFICATES
Following the Effective Time, each holder of an outstanding certificate or
certificates theretofore representing shares of Montana Power Common Stock may,
but shall not be required to, surrender the same to Holding Company for
cancellation or transfer, and each such holder or transferee will be entitled to
receive certificates (or book entry shares) representing the same number of
shares of Holding Company Common Stock as the shares of Montana Power Common
Stock previously represented by the stock certificates (or Dividend Reinvestment
and Stock Purchase Plan shares) surrendered. Until so surrendered or presented
for transfer, each outstanding certificate which, prior to the Effective Time,
represented Montana Power Common Stock shall be deemed and treated for all
corporate purposes to represent the ownership of the same number of shares of
Holding Company Common Stock as though such surrender or transfer and exchange
had taken place. The stock transfer books for the Montana Power Common Stock
shall be deemed to be closed at the Effective Time and no transfer of
outstanding shares of Montana Power Common Stock shall thereafter be made on
such books.
ARTICLE VII
CONDITIONS OF THE MERGER
Consummation of the Merger is subject to the satisfaction of the following
conditions:
(a) The Merger shall have received the approval of the holders of capital
stock or units of each of the Constituent Entities as required by the Montana
Business Corporation Act and The Montana Limited Liability Company Act.
(b) There shall have been obtained a ruling of the Internal Revenue Service
or an opinion of outside counsel satisfactory to the Board of Directors of
Montana Power and its counsel with respect to the tax consequences of the Merger
and other transactions incident thereto.
(c) The Holding Company Common Stock to be issued pursuant to the Merger
shall have been approved for listing, upon official notice of issuance, by the
New York and Pacific Stock Exchanges.
(d) Federal Energy Regulatory Commission approval for the disposition or
transfer of control over jurisdictional facilities and for the transfer of the
Milltown Hydroelectric License from Montana Power to Subsidiary.
ARTICLE VIII
AMENDMENT AND TERMINATION
The parties hereto by mutual consent of their respective Boards of Directors
and Managers may amend, modify or supplement this Agreement in such manner as
may be agreed upon by them in writing, at any time before or after approval of
this Agreement by the shareholders of Montana Power; provided, however, that no
such amendment, modification or supplement shall, in the sole judgment of the
Board of Directors of Montana Power, materially and adversely affect the rights
of the shareholders of Montana Power.
A-3
This Agreement may be terminated and the Merger and other transactions
herein provided for abandoned at any time, whether before or after approval of
this Agreement by the shareholders of Montana Power, by action of the Board of
Directors of Montana Power if said Board of Directors determines for any reason
that the consummation of the transactions provided for herein would for any
reason be inadvisable or not in the best interests of Montana Power or its
shareholders.
ARTICLE IX
EFFECTIVE TIME OF THE MERGER
Subject to the prior satisfaction of the conditions of the Merger set forth
in Article VII hereof and the authority to terminate this Agreement as set forth
in Article VIII hereof, the Constituent Entities and Holding Company shall do
all such acts and things as shall be necessary or desirable in order to make the
Effective Time occur as of the close of business on the date of filing with the
Montana Secretary of State but not later than the day of the closing of the sale
of Subsidiary.
ARTICLE X
MISCELLANEOUS
This Agreement may be executed in counterparts, each of which when so
executed shall be deemed to be an original, and such counterparts shall together
constitute but one and the same instrument.
A-4
IN WITNESS WHEREOF, Montana Power, Subsidiary and Holding Company, pursuant
to approval and authorization duly given by resolutions adopted by their
respective Boards of Directors and Managers, have each caused this Agreement and
Plan of Merger to be executed by its Chairman, Vice Chairman, President, one of
its Vice Presidents or Managers.
THE MONTANA POWER COMPANY
By: /s/ ROBERT P. GANNON
-----------------------------------------
Name: Robert P. Gannon
Title: Chief Executive Officer
THE MONTANA POWER, L.L.C.
By: /s/ MICHAEL E. ZIMMERMAN
-----------------------------------------
Name: Michael E. Zimmerman
Title: Vice President & General Counsel
TOUCH AMERICA HOLDINGS, INC.
By: /s/ J.P. PEDERSON
-----------------------------------------
Name: J.P. Pederson
Title: Vice President, Chief Financial
Officer and Treasurer
A-5
EXHIBIT A
TO
AGREEMENT AND PLAN OF MERGER
ARTICLES OF MERGER
OF
THE MONTANA POWER COMPANY
(A MONTANA CORPORATION)
AND
THE MONTANA POWER, L.L.C..
(A MONTANA LIMITED LIABILITY COMPANY)
Pursuant to the provisions of Section 35-8-1201 of the Montana Limited
Liability Act and Section 35-1-816 of the Montana Business Corporations Act, the
undersigned corporation adopts the following Articles of Merger for the purpose
of merging The Montana Power Company with and into Montana Power, L.L.C. which
shall be the Surviving Entity.
1. The Agreement and Plan of Merger, dated as of February 20, 2001 a copy
of which is attached and incorporated herein by reference, was approved by the
shareholders and member of the undersigned corporations and limited liability
company in the manner prescribed by the Montana Business Corporation Act and
Montana Limited Liability Act.
2. The number of shares of capital stock of the corporation and units of
the limited liability company which, at the respective dates of the
aforementioned shareholder and member actions, (a) were outstanding and entitled
to vote and (b) did vote on the Agreement and Plan of Merger, is as follows:
NUMBER OF SHARES/UNITS
---------------------------------
VOTED VOTED
NAME OF CORPORATION OUTSTANDING FOR AGAINST
- ------------------- ----------- -------- --------
The Montana Power Company Common Stock......................
------ ------ ------
The Montana Power Company Cumulative Preferred Stock........
------ ------ ------
Total Shares of Stock of The Montana Power Company..........
------ ------ ------
The Montana Power, L.L.C....................................
------ ------ ------
A-6
3. The number of shares and units voting in favor of the Plan of Merger was
sufficient approval by that voting group.
DATED: , 2000 THE MONTANA POWER COMPANY
By:
-----------------------------------------
CHIEF EXECUTIVE OFFICER
By:
-----------------------------------------
SECRETARY
THE MONTANA POWER, L.L.C.
By:
-----------------------------------------
MANAGER
By:
-----------------------------------------
SECRETARY
STATE OF MONTANA )
: ss.
County of Silver Bow )
VERIFICATION
------------------------------------------------
VERIFICATION
------------------------------------------------
A-7
ANNEX B
UNIT PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 29, 2000
BY AND BETWEEN
NORTHWESTERN CORPORATION,
TOUCH AMERICA HOLDINGS, INC.
AND
THE MONTANA POWER COMPANY
WITH RESPECT TO ALL
OUTSTANDING MEMBERSHIP INTERESTS IN
THE MONTANA POWER LLC
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached
but is inserted for convenience only.
ARTICLE I SALE OF SHARES AND CLOSING................................................ B-1
1.01 Purchase and Sale........................................... B-1
1.02 Purchase Price.............................................. B-1
1.03 Closing..................................................... B-1
1.04 Further Assurances; Post-Closing Cooperation................ B-1
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER AND MPC......................... B-2
2.01 Corporate Existence of Seller and MPC....................... B-2
2.02 Authority................................................... B-2
2.03 Existence of the Company.................................... B-2
2.04 Capitalization.............................................. B-3
2.05 Subsidiaries................................................ B-3
2.06 No Conflicts................................................ B-3
2.07 Governmental Approvals and Filings.......................... B-4
2.08 Books and Records........................................... B-4
2.09 Financial Statements and Condition.......................... B-4
2.10 Taxes....................................................... B-5
2.11 Legal Proceedings........................................... B-6
2.12 Compliance With Laws and Orders............................. B-7
2.13 Benefit Plans; ERISA........................................ B-7
2.14 Property.................................................... B-8
2.15 Intellectual Property Rights................................ B-8
2.16 Contracts................................................... B-8
2.17 Licenses.................................................... B-10
2.18 Insurance................................................... B-10
2.19 Affiliate Transactions...................................... B-11
2.20 Labor and Employment Matters................................ B-11
2.21 Environmental Matters....................................... B-11
2.22 Information Supplied........................................ B-11
2.23 Vote Required............................................... B-12
2.24 Brokers..................................................... B-12
2.25 Public Utility Holding Company Act.......................... B-12
2.26 Regulatory Filings.......................................... B-12
2.27 Rights Agreement............................................ B-12
2.28 Effect of Restructuring..................................... B-12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER............................. B-13
3.01 Corporate Existence......................................... B-13
3.02 Authority................................................... B-13
3.03 No Conflicts................................................ B-13
3.04 Governmental Approvals and Filings.......................... B-13
3.05 Legal Proceedings........................................... B-13
3.06 Purchase for Investment..................................... B-13
3.07 Brokers..................................................... B-14
3.08 Financing................................................... B-14
3.09 Ownership of the Capital Stock.............................. B-14
3.10 Exon-Florio................................................. B-14
3.11 Independent Evaluation...................................... B-14
B-i
ARTICLE IV COVENANTS OF SELLER AND MPC.............................................. B-14
4.01 Regulatory and Other Approvals.............................. B-15
4.02 HSR Filings................................................. B-15
4.03 Investigation by Purchaser.................................. B-15
4.04 No Solicitations............................................ B-15
4.05 Conduct of Business......................................... B-16
4.06 Financial Statements and Reports............................ B-16
4.07 Certain Restrictions........................................ B-17
4.08 Affiliate Transactions...................................... B-18
4.09 Fulfillment of Conditions................................... B-19
4.10 Completion of Restructuring................................. B-19
4.11 Preparation and Mailing of Proxy Statement.................. B-19
4.12 Approval of MPC Stockholders................................ B-19
4.13 Completion of the Divestiture............................... B-19
4.14 Regulatory Proceedings...................................... B-19
4.15 Sale of Colstrip 1, 2, and 3 Transmission System............ B-19
4.16 QF Contracts................................................ B-20
4.17 MPC Benefit Restoration Plans............................... B-20
4.18 Power Supply................................................ B-20
4.19 Generation Sale Proceeds.................................... B-20
4.20 Regional Transmission Organization and Independent
Transmission Company........................................ B-20
4.21 Notification of Certain Matters............................. B-20
4.22 Confidentiality and Standstill Agreements................... B-20
ARTICLE V COVENANTS OF PURCHASER.................................................... B-21
5.01 Regulatory and Other Approvals.............................. B-21
5.02 HSR......................................................... B-21
5.03 [INTENTIONALLY OMITTED...................................... B-21
5.04 Employee Matters............................................ B-21
5.05 Fulfillment of Conditions................................... B-24
5.06 Communication Between the Parties........................... B-24
5.07 Charitable Contributions.................................... B-24
5.08 Transaction Structure....................................... B-24
ARTICLE VI CONDITIONS TO OBLIGATIONS OF PURCHASER................................... B-25
6.01 Representations and Warranties.............................. B-25
6.02 Performance................................................. B-25
6.03 Officers' Certificates...................................... B-25
6.04 Orders and Laws............................................. B-25
6.05 Regulatory Consents and Approvals........................... B-25
6.06 Third Party Consents........................................ B-25
6.07 Completion of the Restructuring............................. B-25
6.08 Assignment of Contracts..................................... B-25
6.09 Benefits Plans.............................................. B-25
6.10 Resignation of Seller as Manager of the Company............. B-25
ARTICLE VII CONDITIONS TO OBLIGATIONS OF SELLER..................................... B-26
7.01 Representations and Warranties.............................. B-26
7.02 Performance................................................. B-26
7.03 Officers' Certificates...................................... B-26
7.04 Orders and Laws............................................. B-26
7.05 Regulatory Consents and Approvals........................... B-26
7.06 Third Party Consents........................................ B-26
B-ii
ARTICLE VIII TAX MATTERS AND POST-CLOSING TAXES..................................... B-26
8.01 Tax Returns................................................. B-26
8.02 Notice of Audit............................................. B-27
8.03 Tax Adjustments............................................. B-27
8.04 Tax Sharing Agreements...................................... B-28
8.05 Transfer Taxes.............................................. B-28
8.06 Post-Closing Elections...................................... B-28
8.07 Post-Closing Transactions not in the Ordinary Course........ B-28
8.08 Allocation of Purchase Price................................ B-28
8.09 Section 338(h)(10) Election................................. B-29
8.10 Section 338(g) Election..................................... B-29
8.11 Nonforeign Affidavit........................................ B-29
8.12 Code Section 754 Election................................... B-29
ARTICLE IX SURVIVAL; NO OTHER REPRESENTATIONS....................................... B-29
9.01 Survival of Representations, Warranties, Covenants and
Agreements.................................................. B-29
9.02 No Other Representations.................................... B-29
ARTICLE X INDEMNIFICATION........................................................... B-29
10.01 Tax Indemnification......................................... B-29
10.02 Indemnification for Restructuring; Divestiture; Oil and Gas
Sale........................................................ B-30
10.03 Other Indemnification....................................... B-30
10.04 Special Environmental Indemnity............................. B-30
10.05 Special Litigation Indemnity................................ B-31
10.06 Method of Asserting Claims.................................. B-31
10.07 Requirements for Indemnity.................................. B-33
10.08 Exclusivity................................................. B-33
ARTICLE XI TERMINATION.............................................................. B-33
11.01 Termination................................................. B-33
11.02 Effect of Termination....................................... B-34
11.03 Fees and Expenses........................................... B-35
ARTICLE XII DEFINITIONS............................................................. B-35
12.01 Definitions................................................. B-35
ARTICLE XIII MISCELLANEOUS.......................................................... B-43
13.01 Notices..................................................... B-43
13.02 Entire Agreement............................................ B-44
13.03 Expenses.................................................... B-44
13.04 Public Announcements........................................ B-44
13.05 Confidentiality............................................. B-44
13.06 Waiver...................................................... B-45
13.07 Amendment................................................... B-45
13.08 No Third Party Beneficiary.................................. B-45
13.09 No Assignment; Binding Effect............................... B-45
13.10 Headings.................................................... B-45
13.11 Invalid Provisions.......................................... B-45
13.12 Governing Law............................................... B-46
13.13 Counterparts................................................ B-46
13.14 Insurance Coverage After Closing............................ B-46
B-iii
EXHIBITS
--------
EXHIBIT A Officer's Certificate of Seller
EXHIBIT B Secretary's Certificate of Seller
EXHIBIT C Officer's Certificate of Purchaser
EXHIBIT D Secretary's Certificate of Purchaser
ANNEXES
------------------------------------
Annex I Financial Statement
Annex II Budget Principles
B-iv
This UNIT PURCHASE AGREEMENT dated as of September 29, 2000 is made and
entered into by and between NorthWestern Corporation, a Delaware corporation
("PURCHASER"), Touch America Holdings, Inc., a Delaware corporation ("SELLER")
and The Montana Power Company, a Montana corporation ("MPC"). Capitalized terms
not otherwise defined herein have the meanings set forth in SECTION 12.01.
WHEREAS, prior to the closing of the transactions contemplated by this
Agreement and as a condition to Purchaser's obligation to effect such closing,
Seller will cause the Restructuring (pursuant to which, among other things, the
Company (as defined below) shall become the owner of all assets and securities
currently owned by MPC, other than Entech and its subsidiaries) to become
effective; and
WHEREAS, prior to the closing of the transactions contemplated by this
Agreement, Seller will own all of the outstanding membership interests in The
Montana Power LLC, a Montana limited liability company (the "COMPANY"), such
membership interests being referred to herein as the "UNITS"; and
WHEREAS, Seller desires to sell, and Purchaser desires to purchase, the
Units on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
SALE OF SHARES AND CLOSING
1.01 PURCHASE AND SALE. Seller agrees to sell to Purchaser, and Purchaser
agrees to purchase from Seller, all of the right, title and interest of Seller
in and to the Units at the Closing on the terms and subject to the conditions
set forth in this Agreement.
1.02 PURCHASE PRICE. The aggregate purchase price for the Units is
$602 million (the "PURCHASE PRICE"), payable in immediately available United
States funds at the Closing in the manner provided in SECTION 1.03.
1.03 CLOSING. The Closing will take place at the offices of Milbank,
Tweed, Hadley & McCloy LLP, 1 Chase Manhattan Plaza, New York, New York 10005,
or at such other place as Purchaser and Seller mutually agree, at 10:00 A.M.
local time, on the Closing Date. At the Closing, Purchaser will pay the Purchase
Price by wire transfer of immediately available funds to such account as Seller
may reasonably direct by written notice delivered to Purchaser by Seller at
least two (2) Business Days before the Closing Date. Simultaneously, Seller will
assign and transfer to Purchaser all of Seller's right, title and interest in
and to the Units. At the Closing, there shall also be delivered to Seller and
Purchaser the certificates to be delivered under ARTICLES VI and VII.
1.04 FURTHER ASSURANCES; POST-CLOSING COOPERATION. (a) Subject to the
terms and conditions of this Agreement, at any time or from time to time after
the Closing, each of the parties hereto shall execute and deliver such other
documents and instruments, provide such materials and information and take such
other actions as may reasonably be necessary, proper or advisable, to the extent
permitted by Law, to fulfill its obligations under this Agreement.
(b) Following the Closing, each party will provide the other party, its
counsel and its accountants with copies of information or other data relating to
the Business or Condition of MPC and the Company in its possession with respect
to periods prior to the Closing, to the extent that such information or data may
be reasonably required by the requesting party in connection with (i) the
preparation of Tax Returns, (ii) compliance with the requirements of any
Governmental or Regulatory
B-1
Authority, or (iii) any third party actual or threatened Action or Proceeding.
Further, each party agrees for a period extending six (6) years after the
Closing Date not to destroy or otherwise dispose of any such books, records and
other data (excluding copies of materials previously supplied to the other
party) unless such party shall first offer in writing to surrender such books,
records and other data to the other party and such other party shall not agree
in writing to take possession thereof during the thirty (30) day period after
such offer is made.
(c) If, in order properly to prepare its Tax Returns, other documents or
reports required to be filed with Governmental or Regulatory Authorities or its
financial statements or to fulfill its obligations hereunder, it is necessary
that a party be furnished with additional information, documents or records
relating to the Business or Condition of MPC and the Company not referred to in
paragraph (b) above, and such information, documents or records are in the
possession or control of the other party, such other party agrees to use its
reasonable best efforts to furnish or make available such information, documents
or records (or copies thereof) at the recipient's request, cost and expense. Any
information obtained by a party hereto in accordance with this paragraph shall
be held confidential by such party in accordance with SECTION 13.05.
(d) In addition to furnishing information pursuant to paragraph (b) and
(c) of this SECTION 1.04, in order to close the books of MPC, the Company and
the Subsidiaries for accounting purposes, each party agrees to direct its
accounting personnel to provide reasonable cooperation and assistance to any
other party's accounting personnel to accomplish the work necessary to close
such books. Seller and Purchaser also agree to direct their human resources and
payroll personnel to cooperate with, and provide reasonable cooperation and
assistance to each other in connection with, preparing W-2's and other
associated payroll tax or related documents.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER AND MPC
Seller and MPC, jointly and severally, hereby represent and warrant to
Purchaser as follows:
2.01 CORPORATE EXISTENCE OF SELLER AND MPC. Seller is a corporation duly
incorporated, validly existing and in good standing under the Laws of the State
of Delaware and MPC is a corporation duly incorporated, validly existing and in
good standing under the Laws of the State of Montana. Each of Seller and MPC has
full corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby, including, as to Seller, without limitation, to own, hold,
sell and transfer (pursuant to this Agreement) the Units.
2.02 AUTHORITY. The execution and delivery by Seller and MPC of this
Agreement, and the performance by Seller of its obligations hereunder, have been
duly and validly authorized by the Boards of Directors of Seller and MPC, and,
with the exception of the vote referred to in SECTION 2.23, no other corporate
action on the part of Seller or MPC is necessary. This Agreement has been duly
and validly executed and delivered by Seller and MPC and constitutes a legal,
valid and binding obligation of Seller and MPC enforceable against Seller and
MPC in accordance with its terms.
2.03 EXISTENCE OF THE COMPANY. The Company is a limited liability company
duly organized, validly existing and in good standing under the Laws of the
State of Montana, and has full corporate power and authority to conduct its
business as and to the extent now conducted and to own, use and lease its Assets
and Properties. MPC is, and prior to and as of the Closing Date, MPC and the
Company will be, duly qualified, licensed or admitted to do business and each is
in good standing in those jurisdictions specified in SECTION 2.03 OF THE
DISCLOSURE SCHEDULE, which are the only jurisdictions in which the ownership,
use or leasing of its Assets and Properties, or the conduct or nature of its
business, makes such qualification, licensing or admission necessary, except for
those jurisdictions in which the adverse effects of all such failures to be
qualified, licensed or admitted and in good standing could not in the aggregate
reasonably be expected to have a material adverse effect on the Business or
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Condition of MPC and the Company. Seller has prior to the execution of this
Agreement made available to Purchaser true and complete copies of the
certificate of formation of the Company as in effect on the date hereof.
2.04 CAPITALIZATION. The authorized capitalization of the Company consists
of the Units. The Units are duly authorized, validly issued, outstanding, fully
paid and nonassessable. On and as of the Closing Date, Seller will own the
Units, beneficially and of record, free and clear of all Liens. Except for this
Agreement and as disclosed in SECTION 2.04 OF THE DISCLOSURE SCHEDULE, as of the
date of this Agreement there are, and on and as of the Closing Date there will
be, no outstanding Options with respect to the Company. The delivery of a
certificate or certificates at the Closing representing the Units in the manner
provided in SECTION 1.03 will transfer to Purchaser good and valid title to the
Units, free and clear of all Liens other than Liens created or suffered to exist
by Purchaser.
2.05 SUBSIDIARIES. (a) Each Subsidiary is a corporation validly existing
and in good standing under the Laws of its jurisdiction of incorporation
disclosed in SECTION 2.05(a) OF THE DISCLOSURE SCHEDULE, and has full corporate
power and authority to conduct its business as and to the extent now conducted
and to own, use and lease its Assets and Properties. Each Subsidiary is duly
qualified, licensed or admitted to do business and is in good standing in those
jurisdictions disclosed in SECTION 2.05(a) OF THE DISCLOSURE SCHEDULE, which are
the only jurisdictions in which the ownership, use or leasing of such
Subsidiary's Assets and Properties, or the conduct or nature of its business,
makes such qualification, licensing or admission necessary, except for those
jurisdictions in which the adverse effects of all such failures by MPC or the
Company and the Subsidiaries to be qualified, licensed or admitted and in good
standing could not in the aggregate reasonably be expected to have a material
adverse effect on the Business or Condition of MPC and the Company.
SECTION 2.05(a) OF THE DISCLOSURE SCHEDULE lists for each Subsidiary the amount
of its authorized capital stock, the amount of its outstanding capital stock and
the record owners of such outstanding capital stock. Except as disclosed in
SECTION 2.05(a) OF THE DISCLOSURE SCHEDULE, all of the outstanding shares of
capital stock of each Subsidiary have been duly authorized and validly issued,
are fully paid and nonassessable, and are owned, directly or indirectly by MPC
and, immediately prior to the Closing will be owned, directly or indirectly, by
the Company, beneficially and of record, free and clear of all Liens. Except as
set forth in SECTION 2.05(a) OF THE DISCLOSURE SCHEDULE, there exists no
restriction on the payment of cash dividends by any Subsidiary. Except as
disclosed in SECTION 2.05(a) OF THE DISCLOSURE SCHEDULE, there are, and on and
as of the Closing Date there will be, no outstanding Options with respect to any
Subsidiary. Seller has prior to the execution of this Agreement made available
to Purchaser true and complete copies of the certificate or articles of
incorporation and by-laws (or other comparable corporate charter documents) of
each of the Subsidiaries as in effect on the date hereof.
(b) Except as set forth on SECTION 2.05(b) OF THE DISCLOSURE SCHEDULE, as of
the Closing Date, the Company will not directly or indirectly beneficially own
more than five percent (5%) of either the equity interests in, or the voting
control of, any Person, other than the Subsidiaries.
2.06 NO CONFLICTS. The execution and delivery by Seller and MPC of this
Agreement do not, and the performance by Seller and MPC of their respective
obligations under this Agreement and the consummation of the transactions
contemplated hereby will not:
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate or articles of incorporation or
by-laws (or other comparable corporate charter documents) of Seller, MPC, the
Company or any Subsidiary;
(b) subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in SECTION 2.07 OF THE DISCLOSURE
SCHEDULE, conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to Seller, MPC, the Company or any
Subsidiary or any of their respective Assets and Properties (other than such
conflicts, violations or breaches (i) which could not in the aggregate
reasonably be expected to adversely affect the validity or
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enforceability of this Agreement or to have a material adverse effect on the
Business or Condition of MPC and the Company or (ii) as would occur solely as a
result of the identity or the legal or regulatory status of Purchaser or any of
its Affiliates); or
(c) except as disclosed in SECTION 2.06 OF THE DISCLOSURE SCHEDULE or as
could not, individually or in the aggregate, reasonably be expected to be
materially adverse to the Business or Condition of MPC and the Company or to
adversely affect the ability of Seller or MPC to consummate the transactions
contemplated hereby or to perform their obligations hereunder, (i) conflict with
or result in a violation or breach of, (ii) constitute (with or without notice
or lapse of time or both) a default under, (iii) require Seller, MPC, the
Company or any Subsidiary to obtain any consent, approval or action of, make any
filing with or give any notice to any Person as a result or under the terms of,
(iv) result in or give to any Person any right of termination, cancellation,
acceleration, non-performance or modification in or with respect to, or
(v) result in the creation or imposition of any Lien upon Seller, MPC, the
Company or any Subsidiary or any of their respective Assets and Properties
under, any Contract or License to which Seller, MPC, the Company or any
Subsidiary is a party or by which any of their respective Assets and Properties
is bound.
2.07 GOVERNMENTAL APPROVALS AND FILINGS. Except as disclosed in
SECTION 2.07 OF THE DISCLOSURE SCHEDULE, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority on the part of
Seller, MPC, the Company or any Subsidiary is required in connection with the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby, except (i) where the failure to obtain any
such consent, approval or action, to make any such filing or to give any such
notice could not reasonably be expected to adversely affect the ability of
Seller or MPC to consummate the transactions contemplated by this Agreement or
to perform its obligations hereunder, or to have a material adverse effect on
the Business or Condition of MPC and the Company, or (ii) those as would be
required solely as a result of the identity or the legal or regulatory status of
Purchaser or any of its Affiliates.
2.08 BOOKS AND RECORDS. The minute books and other similar records of MPC,
the Company and the Subsidiaries as made available to Purchaser prior to the
execution of this Agreement contain a true and complete record, in all material
respects, of all action taken at all meetings and by all written consents in
lieu of meetings of the stockholders, members, the boards of directors and
committees of the boards of directors of MPC, the Company and the Subsidiaries.
The stock transfer ledgers and other similar records of MPC, the Company and the
Subsidiaries as made available to Purchaser prior to the execution of this
Agreement accurately reflect all record transfers prior to the execution of this
Agreement in the capital stock or membership interests of MPC, the Company and
the Subsidiaries.
2.09 FINANCIAL STATEMENTS AND CONDITION. (a) Prior to the execution of
this Agreement, Seller has made available to Purchaser true and complete copies
of the following financial statements:
(i) the unaudited balance sheet of MPC and the Subsidiaries as of
December 31, 1999 and the related unaudited consolidated statement of
operations for fiscal years of 1997, 1998 and 1999; and
(ii) the unaudited balance sheet of MPC and the Subsidiaries as of
July 31, 2000 (attached as ANNEX I hereto).
Except as set forth in the notes thereto and as disclosed in SECTION 2.09(a) OF
THE DISCLOSURE SCHEDULE, all such financial statements were prepared in
accordance with GAAP and fairly present in all material respects the
consolidated financial condition and statement of operations of MPC and its
consolidated Subsidiaries as of the respective dates thereof and for the
respective periods covered thereby. Except for those Subsidiaries disclosed in
SECTION 2.09(a) OF THE DISCLOSURE SCHEDULE, the financial condition and
statement of operations of each Subsidiary are, and for all periods referred to
in this SECTION 2.09 have been, consolidated with those of MPC. Except as
disclosed in SECTION 2.09(a) OF THE DISCLOSURE SCHEDULE,
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and except for matters reflected or reserved against in the financial statements
referred to in clauses (i) and (ii) above (or the notes thereto), as of the date
of this Agreement, neither MPC, the Company, nor any Subsidiary has any
liabilities or obligations (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due) of any nature that would be required
by GAAP to be reflected on a consolidated balance sheet of MPC or the Company
and Subsidiaries (including the notes thereto), except liabilities or
obligations (i) that were incurred in the ordinary course of business consistent
with past practice since July 31, 2000, or (ii) that, individually or in the
aggregate, have not had and could not reasonably be expected to have a material
adverse effect on the Business or Condition of MPC and the Company. At and as of
the Closing Date, the total of Indebtedness of the Company, the Subsidiaries and
MPC Natural Gas Funding Trust and the face amount of the outstanding preferred
trust securities of the Montana Power Capital I (Trust) shall not exceed
$488 million.
(b) Except for the execution and delivery of this Agreement and the
transactions to take place pursuant hereto on or prior to the Closing Date and
as disclosed in SECTION 2.09(b) OF THE DISCLOSURE SCHEDULE, since the Interim
Financial Statement Date the business of MPC and the Subsidiaries has been
operated in all material respects in the ordinary course of business consistent
with past practice and there has not been any material adverse change in the
Business or Condition of MPC, other than those occurring as a result of general
economic or financial conditions or other developments which are not unique to
MPC and the Subsidiaries but also affect to a similar extent other Persons who
participate or are engaged in the lines of business in which MPC and the
Subsidiaries participate or are engaged.
2.10 TAXES. (a) Seller, the Company, its Subsidiaries, and all members of
the MPC Affiliated Group, each have filed all material Income Tax Returns
(including, but not limited to, any consolidated federal Tax Return of Seller,
the Company, its Subsidiaries and all members of the MPC Affiliated Group, and
any state or local Income Tax Return that includes Seller, the Company, the
Subsidiaries and all members of the MPC Affiliated Group on a consolidated,
combined or unitary basis) that they were required to file. All such Income Tax
Returns were complete and correct in all material respects. All Income Taxes
owed by Seller, the Company, its Subsidiaries and all members of the MPC
Affiliated Group have been paid. MPC, Seller, the Company and its Subsidiaries
each have filed all material Tax Returns (including, but not limited to, any
federal Tax Return of MPC, Seller, the Company and the Subsidiaries, and any
state or local Tax Return that includes MPC, Seller, the Company, and the
Subsidiaries on a consolidated, combined or unitary basis) that they were
required to file. All such Tax Returns were complete and correct in all material
respects. All Taxes owed by MPC, Seller, the Company and each Subsidiary have
been paid. Except as disclosed in Section 2.10(a) of the Disclosure Schedule,
there are no Liens on any of the Assets or Properties of any of MPC, the Company
or the Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax.
(b) (i) Except as disclosed in Section 2.10(b) of the Disclosure Schedule,
there is no dispute or claim concerning any Income Tax liability of any of
Seller, the Company, any Subsidiary, or any member of the MPC Affiliated Group
either (A) claimed or raised by any Governmental or Regulatory Authority in
writing or (B) as to which any of Seller, the Company, the Subsidiaries, or any
member of the MPC Affiliated Group and the directors and officers thereof has
any Knowledge. Section 2.10(b) of the Disclosure Schedule lists all Income Tax
Returns filed by the Company, its Subsidiaries or any member of the MPC
Affiliated Group for Tax periods ending on or after December 31, 1990, (and for
any prior Tax periods to the extent that the statute of limitations for that Tax
period has not lapsed), indicates those Income Tax Returns that have been
audited, and indicates those Income Tax Returns that currently are the subject
of audit. All Income Taxes due with respect to such audits (as described in
Section 2.10(b) of the Disclosure Schedule) have been paid or have been reserved
for in the Financial Statements. Furthermore, all such Income Taxes being
contested are being contested in good faith by appropriate proceedings (as
described in Section 2.10(b) of the Disclosure Schedule).
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(ii) Except as disclosed in Section 2.10(b) of the Disclosure Schedule,
there is no dispute or claim concerning any Tax liability of any of MPC, Seller,
the Company, or any Subsidiary either (A) claimed or raised by any Governmental
or Regulatory Authority in writing or (B) as to which any of MPC, Seller, the
Company, or the Subsidiaries, and the directors and officers thereof has any
Knowledge. Section 2.10(b) of the Disclosure Schedule lists all Tax Returns
filed by MPC, the Company and its Subsidiaries for Tax periods ending on or
after December 31, 1990, (and for any prior Tax periods to the extent that the
statute of limitations for that Tax period has not lapsed), indicates those Tax
Returns that have been audited, and indicates those Tax Returns that currently
are the subject of audit. All Taxes due with respect to such audits (as
described in Section 2.10(b) of the Disclosure Schedule) have been paid or have
been reserved for in the Financial Statements. Furthermore, all such Taxes being
contested are being contested in good faith by appropriate proceedings (as
described in SECTION 2.10(b) OF THE DISCLOSURE SCHEDULE).
(c) Except as disclosed in SECTION 2.10(c) OF THE DISCLOSURE SCHEDULE,
neither MPC, Seller, the Company, any of the Subsidiaries (other than CMPL), nor
any member of the MPC Affiliated Group has waived any statute of limitations in
respect of Income Taxes or agreed to any extension of time with respect to an
Income Tax assessment or deficiency for any Tax period. Except as disclosed in
SECTION 2.10(c) OF THE DISCLOSURE SCHEDULE, CMPL has not waived any statute of
limitations in respect of Income Taxes or agreed to any extension of time with
respect to an Income Tax assessment or deficiency for any Tax period.
(d) Except as disclosed in SECTION 2.10(d) OF THE DISCLOSURE SCHEDULE, none
of MPC, the Company and its Subsidiaries is or was a party to or liable under
any Income Tax allocation or sharing agreement.
(e) Except as disclosed in SECTION 2.10(e) OF THE DISCLOSURE SCHEDULE,
neither the Company, any of its Subsidiaries, nor any member of the MPC
Affiliated Group has been a member of an Affiliated Group, filing a consolidated
federal Income Tax Return other than a group the common parent of which is MPC.
(f) Seller, the Company, the Subsidiaries, and the members of MPC Affiliated
Group have withheld and paid all material Taxes required to have been withheld
and paid and complied in all material respects with all information reporting
and backup withholding requirements, including maintenance of records thereto,
in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other Person.
(g) None of Seller, the Company, the Subsidiaries, or any member of the MPC
Affiliated Group have filed a consent under Code section 341(f) concerning
collapsible corporations.
(h) MPC, Seller, the Company, and the Subsidiaries have complied with the
normalization rules of accounting in accordance with Code section 168(i)(9).
(i) For federal Income Tax purposes, the Company is or will be disregarded
as an entity separate from its owners under Treas. Reg. section 301.7701-3(b).
No election with respect to the Company has been or will be made to treat the
Company as anything other than a disregarded entity.
2.11 LEGAL PROCEEDINGS.
(a) There are no Actions or Proceedings pending or, to the Knowledge of
Seller and MPC, threatened against, relating to or affecting Seller, MPC, the
Company or any Subsidiary in relation to any of their respective Assets and
Properties which could reasonably be expected (i) to result in the issuance of
an Order restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or
(ii) except as disclosed in SECTION 2.11(a) OF THE DISCLOSURE SCHEDULE or in
SECTIONS 2.10(b), 2.13(e), 2.20 or 2.21(b), individually or in the aggregate
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with other such Actions or Proceedings, to have a material adverse effect on the
Business or Condition of MPC and the Company.
(b) There are no Orders outstanding against MPC, the Company or any
Subsidiary which, individually or in the aggregate with other such Orders, have
had, or could have, a material adverse effect on the Business or Condition of
MPC and the Company.
2.12 COMPLIANCE WITH LAWS AND ORDERS. Except as disclosed in SECTION 2.12
OF THE DISCLOSURE SCHEDULE or as described in SECTION 2.21, neither Seller, MPC,
the Company nor any Subsidiary is in violation of or in default under any Law or
Order applicable to Seller, MPC, the Company or any Subsidiary or any of their
respective Assets and Properties the effect of which, individually or in the
aggregate with other such violations and defaults, could reasonably be expected
to be materially adverse to the Business or Condition of MPC and the Company.
2.13 BENEFIT PLANS; ERISA. (a) SECTION 2.13(a) OF THE DISCLOSURE SCHEDULE
contains a true and complete list and description of each of the Benefit Plans,
and identifies each of the Benefit Plans that is a Qualified Plan.
(b) Except as disclosed in SECTION 2.13(b) OF THE DISCLOSURE SCHEDULE,
neither MPC, the Company, any Subsidiary, nor any other corporation or
organization controlled by or under common control with any of the foregoing
within the meaning of Section 4001 of ERISA has at any time contributed to any
"multiemployer plan", as that term is defined in Section 4001 of ERISA and
incurred any withdrawal liability, as that term is defined in Section 4201 of
ERISA, for any plan of the type described in Sections 4063 and 4064 of ERISA or
in Section 413 of the Code (and regulations promulgated thereunder).
(c) Each of the Benefit Plans is, and its administration is and has been
since inception, in compliance with its terms and, where applicable, with ERISA
and the Code in all respects, except for such failures to comply which,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on the Business or Condition of MPC and the Company.
(d) All contributions and other payments required to be made by Seller, MPC,
the Company or any Subsidiary or any ERISA Affiliate as defined in
SECTION 12.01 hereof to any Benefit Plan with respect to any period ending
before or at or including the Closing Date have been or will be made. Except as
disclosed in SECTION 2.13(d) OF THE DISCLOSURE SCHEDULE all benefit obligations
and liabilities under any Benefit Plan have been or will be reflected in
Financial Statements in accordance with GAAP.
(e) Except as disclosed in SECTION 2.13(e) OF THE DISCLOSURE SCHEDULE, to
the Knowledge of Seller and MPC, there are no pending claims by or on behalf of
any Benefit Plan, by any employee, director, contractor or consultant of MPC (or
a beneficiary of such an employee, director, contractor or consultant), which
allege violations of Law which, individually or in the aggregate, could
reasonably be expected to result in liability on the part of Purchaser, MPC, the
Company, any Subsidiary or any ERISA Affiliate as defined in SECTION 12.01
hereof or any fiduciary of any such Benefit Plan material to the Business or
Condition of MPC and the Company.
(f) Except as set forth in SECTION 2.13(f) OF THE DISCLOSURE SCHEDULE,
complete and correct copies of the following documents have been made available
to the Purchaser prior to the execution of this Agreement:
(i) the Benefit Plans and any related trust agreements and insurance
contracts;
(ii) current summary Plan descriptions of each Benefit Plan subject to
ERISA;
(iii) the most recent Form 5500 and Schedules thereto for each Benefit
Plan subject to ERISA reporting requirements;
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(iv) the most recent determination of the IRS with respect to the
qualified status of each Qualified Plan;
(v) the most recent actuarial report of the qualified actuary of any
Defined Benefit Plan or any other Benefit Plan with respect to which
actuarial valuations are conducted; and
(vi) all Governmental or Regulatory Authority filings with respect to
any reportable event, excise tax, or other extraordinary event that occurred
within the past three years and was related to a Benefit Plan.
(g) Except as set forth in SECTION 2.13(g) OF THE DISCLOSURE SCHEDULE,
(i) neither MPC, the Company nor any Subsidiary is obligated to pay any benefit
under any Benefit Plan solely as a result of a "change in control" as defined in
280G of the Code, (ii) neither MPC, the Company, nor any Subsidiary is obligated
to make any payment that would be disallowed as a deduction under 280G or 162(m)
of the Code, and (iii) neither this transaction, the Restructuring or the
Divestiture shall increase the obligation of MPC, the Company or any Subsidiary
to fund benefits accrued or benefits payable under any Benefit Plan.
2.14 PROPERTY. MPC, the Company or a Subsidiary is in possession of and
has good title to, or has valid leasehold interests in or valid rights under
Contract to use, all property used in and individually or in the aggregate with
other such property material to the Business or Condition of MPC and the
Company. All such property is free and clear of all Liens, other than Permitted
Liens and Liens disclosed in SECTION 2.14 OF THE DISCLOSURE SCHEDULE, and is in
all material respects in good working order and condition, ordinary wear and
tear excepted.
2.15 INTELLECTUAL PROPERTY RIGHTS. MPC, the Company and the Subsidiaries
currently own, or have license to use, all Intellectual Property material to the
Business or Condition of MPC and the Company without any material restrictions
as to use or enjoyment. As soon as possible after the execution hereof, Seller
will furnish to Purchaser a list of all such Intellectual Property. Neither MPC,
the Company nor any of the Subsidiaries has granted, nor is obligated to grant,
any material license, sub-license or assignment in respect of any of the
Intellectual Property. Neither MPC, the Company nor any of the Subsidiaries is
in breach of any license, sub-license or assignment granted to it in respect of
any Intellectual Property, and to the Knowledge of Seller and MPC, the operation
of the business of MPC, the Company and each Subsidiary does not infringe upon
the intellectual property rights of any other Person, except for such breaches
or infringements that, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on the Business or Condition of MPC
and the Company.
2.16 CONTRACTS. (a) SECTION 2.16(a) OF THE DISCLOSURE SCHEDULE (with
paragraph references corresponding to those set forth below) contains a true and
complete list of each of the following Contracts to which MPC, the Company or
any Subsidiary is a party or by which any of their respective Assets and
Properties is bound:
(i) all Contracts (excluding Benefit Plans) providing for a commitment
of employment for a specified or unspecified term or otherwise relating to
employment or the termination of employment;
(ii) all Contracts with any Person containing any provision or covenant
prohibiting or materially limiting the ability of MPC, the Company or any
Subsidiary to engage in any business activity or compete with any Person or
prohibiting or materially limiting the ability of any Person to compete with
MPC, the Company or any Subsidiary;
(iii) all material partnership, joint venture, shareholders' or other
similar Contracts with any Person other than Contracts listed pursuant to
(vii) through (xvi) below;
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(iv) all Contracts relating to Indebtedness of MPC, the Company or any
Subsidiary in excess of $1,000,000 or to preferred stock issued by MPC, the
Company or any Subsidiary (other than Indebtedness owing to or preferred
stock owned by MPC, the Company or any wholly-owned Subsidiary);
(v) all Contracts (other than Contracts listed pursuant to
(vii) through (xvi) below) relating to (A) the future disposition or
acquisition by MPC, the Company or any Subsidiary of any Assets and
Properties individually or in the aggregate in excess of $1,000,000, and
(B) any merger or other business combination;
(vi) all collective bargaining or similar labor Contracts;
(vii) all Contracts active as of June 30, 2000, relating to MPC's
purchase of natural gas in its capacity as the natural gas supplier to MPC's
utility customers calling for annual payments in excess of, or potentially
in excess of $1,000,000 or having a term in excess of one year;
(viii) all Contracts active as of June 30, 2000, relating to MPC's
purchase of electrical power in its capacity as the electrical power
supplier to MPC's utility customers calling for annual payments in excess
of, or potentially in excess of, $1,000,000 or having a term in excess of
one year;
(ix) all Contracts active as of June 30, 2000, relating to MPC's sale of
electric power as a commodity to third party customers calling for annual
payments in excess of, or potentially in excess of, $1,000,000 or having a
term in excess of one year;
(x) all Contracts active as of June 30, 2000, relating to MPC's electric
transmission system or the Colstrip Transmission System calling for annual
payments in excess of, or potentially in excess of, $1,000,000 or having a
term in excess of one year;
(xi) all Contracts active as of June 30, 2000, relating to MPC's natural
gas transmission and storage system calling for annual payments in excess
of, or potentially in excess of, $1,000,000 or having a term in excess of
one year;
(xii) all material Contracts active as of June 30, 2000, relating to
MPC's interest in Milltown Dam;
(xiii) all material Contracts active as of June 30, 2000, relating to
MPC's interest in Colstrip Unit 4;
(xiv) all material Contracts between MPC and PPL Montana, LLC relating to
the generation assets sale transaction between MPC and PPL Montana, LLC
which closed on December 17, 1999;
(xv) all material Contracts active as of June 30, 2000, to which One Call
Locators, Ltd. is a party;
(xvi) all material Contracts active as of June 30, 2000, to which DES is
a party;
(xvii) all Contracts, correspondence and other documents relating to the
buy-out negotiations regarding MPC's contracts to purchase power from QFs,
including, without limitation, signed letters of intent, whether or not
binding on either or both parties thereto, offers and counteroffers;
(xviii) all Contracts relating to MPC's electric and gas transmission and
distribution business, not included in (i) through (xvi) above, under which
MPC made payments to the other party in excess of $1,000,000 in 1999 or
under which, as of the date of this Agreement, MPC expects to make payments
to the other party in excess of $1,000,000 in 2000;
(xix) all Contracts relating to MPC's electric and gas transmission and
distribution business, not included in (i) through (xvi) above, under which
MPC received payments from the other party
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in excess of $1,000,000 in 1999 or under which, as of the date of this
Agreement, MPC expects to receive payments from the other party in excess of
$1,000,000 in 2000; and
(xx) all Contracts (other than this Agreement) that (A) limit or contain
restrictions on the ability of MPC, the Company or any Subsidiary to declare
or pay dividends on, to make any other distribution in respect of or to
issue or purchase, redeem or otherwise acquire its capital stock, to incur
Indebtedness, to incur or suffer to exist any Lien, to purchase or sell any
Assets and Properties, to change the lines of business in which it
participates or engages or to engage in any merger or other business
combination or (B) require MPC, the Company or any Subsidiary to maintain
specified financial ratios or levels of net worth or other indicia of
financial condition.
(b) Each Contract required to be disclosed in SECTION 2.16(a) OF THE
DISCLOSURE SCHEDULE is in full force and effect and constitutes a legal, valid
and binding agreement, enforceable in accordance with its terms, of MPC, the
Company or a Subsidiary and, to the Knowledge of Seller and MPC, of each other
party thereto; and except as disclosed in SECTION 2.16(b) OF THE DISCLOSURE
SCHEDULE neither MPC, the Company, any Subsidiary nor, to the Knowledge of
Seller and MPC, any other party to such Contract is in violation or breach of or
default under any such Contract (or with notice or lapse of time or both, would
be in violation or breach of or default under any such Contract), the effect of
which, individually or in the aggregate, could reasonably be expected to be
materially adverse to the Business or Condition of MPC and the Company.
(c) Prior to the Closing Date, Seller and MPC have furnished or made
available to Purchaser a copy of each Contract or other document required to be
disclosed in SECTION 2.16(a) OF THE DISCLOSURE SCHEDULE.
2.17 LICENSES. Each of MPC, the Company and the Subsidiaries has obtained
all Licenses used in and, individually or in the aggregate, with other such
Licenses material to the Business or Condition of MPC and the Company. Except as
disclosed in SECTION 2.17 OF THE DISCLOSURE SCHEDULE:
(i) MPC or the Company and each Subsidiary owns or validly holds all
such Licenses;
(ii) each such License is valid, binding and in full force and effect;
and
(iii) to the Knowledge of Seller and MPC neither MPC, the Company nor any
Subsidiary is in default (or with the giving of notice or lapse of time or
both, would be in default) under any such License in any material respect.
2.18 INSURANCE. SECTION 2.18 OF THE DISCLOSURE SCHEDULE contains a true
and complete list of all material insurance policies currently in effect that
insure the business, operations or employees of MPC, the Company or any
Subsidiary or affect or relate to the ownership, use or operation of any of the
Assets and Properties of MPC, the Company or any Subsidiary. Except as set forth
in SECTION 2.18 OF THE DISCLOSURE SCHEDULE and except for failures to maintain
insurance that, individually or in the aggregate, have not had and could not
reasonably be expected to have a material adverse effect on the Business or
Condition of MPC and the Company, each of MPC, the Company, and the Subsidiaries
has been continuously insured with financially responsible insurers, in each
case in such amounts and with respect to such risks and losses as are customary
for companies in the United States conducting the business conducted by MPC, the
Company, and the Subsidiaries. Except as set forth in SECTION 2.18 OF THE
DISCLOSURE SCHEDULE, neither Seller, MPC, the Company nor any of the
Subsidiaries has received any notice of cancellation, termination or suspension
with respect to any of their respective insurance policies, except with respect
to any cancellation, termination or suspension that, individually or in the
aggregate, has not had and could not reasonably be expected to have a material
adverse effect on the Business or Condition of MPC and the Company.
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2.19 AFFILIATE TRANSACTIONS. Except as disclosed in SECTION 2.19 OF THE
DISCLOSURE SCHEDULE, as of Closing, neither MPC, the Company nor the
Subsidiaries will have any Contractual obligations with respect to Seller or its
Affiliates (other than MPC, the Company or the Subsidiaries).
2.20 LABOR AND EMPLOYMENT MATTERS. Except as disclosed in SECTION 2.20 OF
THE DISCLOSURE SCHEDULE, no employee of MPC, the Company or any Subsidiary is
presently a member of a collective bargaining unit and, to the Knowledge of
Seller and MPC, there are no threatened or contemplated attempts to organize for
collective bargaining purposes any of the employees of MPC, the Company or any
Subsidiary, and, to the Knowledge of Seller and MPC, there are no threatened or
pending actions or proceedings before any Governmental or Regulatory Authority
relating to such attempts to organize. Since January 1, 1998, there has been no
work stoppage, strike or other concerted action by employees of MPC, the Company
or any Subsidiary which materially adversely affected the Business or Condition
of MPC and the Company. Except as disclosed in SECTION 2.20 OF THE DISCLOSURE
SCHEDULE, there are no unfair labor practice charges or other matters pending
before the National Labor Relations Board to which either MPC or any of the
Subsidiaries is a party.
2.21 ENVIRONMENTAL MATTERS. (a) Each of MPC, the Company and the
Subsidiaries has obtained all Licenses which are required under applicable
Environmental Laws in connection with the conduct of the business or operations
of MPC, the Company or such Subsidiary, except where the failure to obtain any
such License could not reasonably be expected to be, individually or in the
aggregate with other such failures, materially adverse to the Business or
Condition of MPC and the Company. Each of such Licenses is in full force and
effect and each of MPC, the Company and the Subsidiaries is in compliance with
the terms and conditions of all such Licenses and with any applicable
Environmental Law, except where the failure to be in compliance could not
reasonably be expected to be, individually or in the aggregate with other such
failures, materially adverse to the Business or Condition of MPC and the
Company.
(b) Except as noted in the Pilko Environmental Reports and as set forth in
SECTION 2.21 OF THE DISCLOSURE SCHEDULE, (i) neither MPC, the Company, nor any
Subsidiary has received written notice of violation of an Environmental Law with
respect to any of the Assets and Properties of MPC, the Company, or any
Subsidiary, which individually, or in the aggregate with other violations of
Environmental Laws, would materially adversely affect the Business or Condition
of MPC and the Company; (ii) no site or facility now or previously owned,
operated, or leased by MPC, the Company, or any Subsidiary is listed or proposed
for listing on the NPL, CERCLIS or any similar state or local list of sites
requiring investigation or clean-up, or would require remediation or response
under applicable Environmental Laws that would result in expenditures in excess
of $500,000 individually, or $1,000,000 in the aggregate; and (iii) to the
Knowledge of MPC and Seller, no facts, events or conditions relating to the past
or present facilities, properties or operations of MPC, the Company, or any of
the Subsidiaries will prevent continued compliance with Environmental Laws or
can reasonably be expected to give rise to any investigatory, remedial or
corrective obligations pursuant to Environmental Laws, including without
limitation any such liabilities or noncompliance relating to onsite or offsite
releases or threatened releases of hazardous materials, substances or wastes,
which individually or in the aggregate with other such facts, events or
conditions, would materially adversely affect the Business or Condition of MPC
and the Company.
2.22 INFORMATION SUPPLIED. The proxy statement relating to the MPC
Stockholders' Meeting (as defined in SECTION 4.11), as amended or supplemented
from time to time (as so amended and supplemented, the "PROXY STATEMENT"), and
any other documents to be filed by MPC with the SEC or any other Governmental or
Regulatory Authority in connection with the Restructuring and the other
transactions contemplated hereby will (in the case of the Proxy Statement and
any such other documents filed with the SEC under the Exchange Act or the
Securities Act) comply as to form in all material respects with the requirements
of the Exchange Act and the Securities Act, respectively, and will not, on the
date of its filing or, in the case of the Proxy Statement, at the date it is
mailed to
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stockholders of MPC and at the time of the MPC Stockholders' meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
2.23 VOTE REQUIRED. Assuming the accuracy of the representation and
warranty contained in SECTION 3.09, the affirmative vote of the holders of
record of at least two-thirds of the issued and outstanding common stock of MPC
with respect to the adoption of this Agreement and the Restructuring is the only
vote of the holders of any class or series of the capital stock of MPC required
to adopt this Agreement and approve the Restructuring and the other transactions
contemplated hereby.
2.24 BROKERS. Except for Goldman, Sachs & Co., whose fees, commissions and
expenses are the sole responsibility of Seller, all negotiations relative to
this Agreement and the transactions contemplated hereby have been carried out by
Seller and MPC directly with Purchaser without the intervention of any Person on
behalf of Seller and MPC in such manner as to give rise to any valid claim by
any Person against Purchaser, MPC, the Company or any Subsidiary for a finder's
fee, brokerage commission or similar payment.
2.25 PUBLIC UTILITY HOLDING COMPANY ACT. As of the date of this Agreement,
none of the Subsidiaries is a "public utility company," a "holding company," a
"subsidiary company" or an "affiliate" of any public utility company within the
meaning of SECTION 2(a)(5), 2(a)(8) or 2(a)(11) of the Public Utility Holding
Company Act of 1935, as amended (the "1935 ACT"), respectively. Neither MPC, the
Company nor any Subsidiary is currently regulated under the 1935 Act.
2.26 REGULATORY FILINGS. All filings (other than immaterial filings)
required to be made by MPC or any of the Subsidiaries since January 1, 1997
under the 1935 Act, the Federal Power Act, the Federal Communications Act of
1934 and applicable state Laws, have been timely filed with the SEC, the FERC,
the Department of Energy, the FCC or any applicable state public utility
commissions (including, to the extent required, the Montana Public Service
Commission), as the case may be, including all forms, statements, reports,
agreements (oral or written) and all documents, exhibits, amendments and
supplements appertaining thereto, including all rates, tariffs, franchises,
service agreements and related documents and all such filings complied in all
material respects, as of their respective dates, with all applicable
requirements of the applicable statute and the rules and regulations thereunder,
except for filings the failure of which to make, individually or in the
aggregate, have not had and could not reasonably be expected to have a material
adverse effect on the Business or Condition of MPC and the Company.
2.27 RIGHTS AGREEMENT. As of the date of this Agreement, MPC, or the Board
of Directors of MPC, as the case may be, has taken all necessary actions so as
to render the Rights Agreement dated March 2, 1999, as amended, inapplicable to
the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, the Restructuring, the Divestiture and any
other transactions contemplated hereby.
2.28 EFFECT OF RESTRUCTURING. Except as disclosed in Section 2.28 of the
Disclosure Schedule, as a consequence of the Restructuring, as of the Closing
Date, by operation of law pursuant to Section 35-1-817 and 35-8-1203 of the
Montana Code Annotated (1999), the Company will have succeeded to all of MPC's
right, title and interest in the Assets and Properties of MPC and constituting
the utility business of MPC (the "UTILITY BUSINESS"), as described in that
certain Confidential Offering Memorandum dated May 2000 prepared by Goldman,
Sachs & Co., except for Assets or Properties acquired or disposed of in
compliance with this Agreement, including SECTION 4.07.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller and MPC as follows:
3.01 CORPORATE EXISTENCE. Purchaser is a corporation duly incorporated,
validly existing and in good standing under the Laws of the state of its
incorporation. Purchaser has full corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby.
3.02 AUTHORITY. The execution and delivery by Purchaser of this Agreement,
and the performance by Purchaser of its obligations hereunder, have been duly
and validly authorized by the Board of Directors of Purchaser, no other
corporate action on the part of Purchaser or its stockholders being necessary.
This Agreement has been duly and validly executed and delivered by Purchaser and
constitutes a legal, valid and binding obligation of Purchaser enforceable
against Purchaser in accordance with its terms.
3.03 NO CONFLICTS. The execution and delivery by Purchaser of this
Agreement do not, the performance by Purchaser of its obligations under this
Agreement and the consummation of the transactions contemplated hereby will not:
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or by-laws of
Purchaser;
(b) subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in SCHEDULE 3.04 hereto, conflict with
or result in a violation or breach of any term or provision of any Law or Order
applicable to Purchaser or any of its Assets and Properties (other than such
conflicts, violations or breaches which could not in the aggregate reasonably be
expected to adversely affect the validity or enforceability of this Agreement);
or
(c) except as disclosed in SCHEDULE 3.03 hereto or as could not,
individually or in the aggregate, reasonably be expected to adversely affect the
ability of Purchaser to consummate the transactions contemplated hereby or to
perform its obligations hereunder, (i) conflict with or result in a violation or
breach of, (ii) constitute (with or without notice or lapse of time or both) a
default under, (iii) require Purchaser to obtain any consent, approval or action
of, make any filing with or give any notice to any Person as a result or under
the terms of, or (iv) result in the creation or imposition of any Lien upon
Purchaser or any of its Assets or Properties under, any Contract or License to
which Purchaser is a party or by which any of its Assets and Properties is
bound.
3.04 GOVERNMENTAL APPROVALS AND FILINGS. Except as disclosed in
SCHEDULE 3.04 hereto, no consent, approval or action of, filing with or notice
to any Governmental or Regulatory Authority on the part of Purchaser is required
in connection with the execution, delivery and performance of this Agreement or
the consummation of the transactions contemplated hereby, except where the
failure to obtain any such consent, approval or action, to make any such filing
or to give any such notice could not reasonably be expected to adversely affect
the ability of Purchaser to consummate the transactions contemplated by this
Agreement or to perform its obligations hereunder.
3.05 LEGAL PROCEEDINGS. There are no Actions or Proceedings pending or, to
the knowledge of Purchaser, threatened against, relating to or affecting
Purchaser or any of its Assets and Properties which could reasonably be expected
to result in the issuance of any Order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement.
3.06 PURCHASE FOR INVESTMENT. The Units will be acquired by Purchaser (or,
if applicable, its assignee pursuant to SECTION 13.09(b)) for its own account
for the purpose of investment, it being understood that the right to dispose of
such Units shall be entirely within the discretion of Purchaser
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(or such assignee, as the case may be). Purchaser (or such assignee, as the case
may be) will refrain from transferring or otherwise disposing of any of the
Units, or any interest therein, in such manner as to cause Seller to be in
violation of the registration requirements of the Securities Act or applicable
state securities or blue sky laws.
3.07 BROKERS. Except for Credit Suisse First Boston, whose fees,
commissions and expenses are the sole responsibility of Purchaser, all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried out by Purchaser directly with Seller without the intervention
of any Person on behalf of Purchaser in such manner as to give rise to any valid
claim by any Person against Seller, the Company or any Subsidiary for a finder's
fee, brokerage commission or similar payment.
3.08 FINANCING. Purchaser has sufficient cash and/or available credit
facilities or written commitments for credit facilities (and has provided Seller
and MPC with evidence thereof) to pay the Purchase Price and to make all other
necessary payments of fees and expenses in connection with the transactions
contemplated by this Agreement.
3.09 OWNERSHIP OF THE CAPITAL STOCK. Purchaser does not beneficially own
any of the capital stock of MPC.
3.10 EXON-FLORIO. Purchaser is not a "foreign person" for purposes of the
Exon-Florio Amendment.
3.11 INDEPENDENT EVALUATION. Purchaser is experienced and knowledgeable in
the utility business, and is aware of its risks. Purchaser has been afforded the
opportunity to examine the materials made available to it by Seller in Seller's
offices in Butte, Montana (the "Data Room") with respect to MPC, the Company,
its Subsidiaries and their business (the "Background Materials"). The Background
Materials include files, or copies thereof, that MPC, the Company and its
Subsidiaries have used in their normal course of business and other information
about MPC, the Company and its Subsidiaries and their business that MPC, the
Company and its Subsidiaries have compiled or generated; however, Purchaser
acknowledges and agrees that neither MPC, the Seller nor the Company, the
Subsidiaries or other Person has made any representations or warranties, express
or implied, written or oral, as to the accuracy or completeness of the
Background Materials or, except for the representations and warranties of Seller
contained in this Agreement, as to any other information relating to MPC, the
Company, the Subsidiaries or their business furnished or to be furnished to
Purchaser or its representatives by or on behalf of Seller. In entering into
this Agreement, Purchaser acknowledges and affirms that it has relied and will
rely solely on the terms of this Agreement and upon its independent analysis,
evaluation and investigation of, and judgment with respect to, the business,
economic, legal, tax or other consequences of this transaction including its own
estimate and appraisal of the extent and value of and the risks associated with
the utility business. Purchaser's representatives have visited the offices of
Seller and have been given opportunities to examine the Books and Records Seller
has made available relating to MPC, the Company, the Subsidiaries and their
business. Except as expressly provided in this Agreement, neither Seller nor
MPC, the Company nor the Subsidiaries shall have any liability to Purchaser or
its Affiliates, agents, representatives or employees resulting from any use,
authorized or unauthorized, by Purchaser or its Affiliates, agents,
representatives or employees of the Background Materials or other information
relating to MPC, the Company, the Subsidiaries or their business provided by or
on behalf of MPC, any Seller, the Company or its Subsidiaries.
ARTICLE IV
COVENANTS OF SELLER AND MPC
Each of Seller and MPC covenants and agrees with Purchaser that, at all
times from and after the date hereof until the Closing, Seller and MPC will
comply with all covenants and provisions of this ARTICLE IV, except to the
extent Purchaser may otherwise consent in writing.
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4.01 REGULATORY AND OTHER APPROVALS. Seller and MPC will, and will cause
the Company and the Subsidiaries to, as promptly as practicable (a) take all
commercially reasonable steps necessary or desirable to obtain all consents,
approvals or actions of, make all filings with and give all notices to
Governmental or Regulatory Authorities or any other Person required of Seller,
MPC, the Company or any Subsidiary to consummate the transactions contemplated
hereby, including without limitation those described in SECTIONS 2.06 AND 2.07
OF THE DISCLOSURE SCHEDULE, (b) provide such other information and
communications to such Governmental or Regulatory Authorities or other Persons
as such Governmental or Regulatory Authorities or other Persons may reasonably
request in connection therewith and (c) provide reasonable cooperation to
Purchaser in connection with the performance of its obligations under SECTIONS
5.01 and 5.02. Seller and MPC will provide prompt notification to Purchaser when
any such consent, approval, action, filing or notice referred to in clause (a)
above is obtained, taken, made or given, as applicable, and will advise
Purchaser of any communications (and, unless precluded by Law, provide copies of
any such communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by this
Agreement.
4.02 HSR FILINGS. In addition to and not in limitation of Seller's and
MPC's covenants contained in SECTION 4.01, Seller and MPC will (a) take promptly
all actions necessary to make the filings required of Seller, MPC or their
Affiliates under the HSR Act, (b) comply at the earliest practicable date with
any request for additional information received by Seller, MPC or their
Affiliates from the Federal Trade Commission or the Antitrust Division of the
Department of Justice pursuant to the HSR Act and (c) cooperate with Purchaser
in connection with Purchaser's filing under the HSR Act and in connection with
resolving any investigation or other inquiry concerning the transactions
contemplated by this Agreement commenced by either the Federal Trade Commission
or the Antitrust Division of the Department of Justice or state attorneys
general. In the event that a suit or objection is instituted by any Person
challenging this Agreement and the transactions contemplated hereby as violative
of applicable competition and antitrust laws, each of Purchaser and Seller, MPC
and the Company shall use commercially reasonable efforts to resist or resolve
such suit or objection.
4.03 INVESTIGATION BY PURCHASER. Seller and MPC will, and will cause the
Company and the Subsidiaries to, (a) provide Purchaser and its officers,
employees, counsel, accountants, financial advisors, consultants and other
representatives (together, "REPRESENTATIVES") with full access, upon reasonable
prior notice and during normal business hours, to all officers, employees,
agents and accountants of MPC, the Company and the Subsidiaries and their Assets
and Properties and Books and Records, but only to the extent that such access
does not unreasonably interfere with the business and operations of MPC, the
Company and the Subsidiaries, and (b) furnish Purchaser and such other Persons
with all such information and data (including without limitation copies of
Contracts, Benefit Plans and other Books and Records) concerning the business
and operations of MPC, the Company and the Subsidiaries as Purchaser or any of
such other Persons reasonably may request in connection with such investigation
(and permit the copying thereof), except to the extent that furnishing any such
information or data would violate any Law, Order, Contract or License applicable
to Seller, MPC, the Company or any Subsidiary or by which any of their
respective Assets and Properties is bound.
4.04 NO SOLICITATIONS. Seller and MPC will not take, nor will they permit
the Company, the Subsidiaries or any Affiliate of Seller or MPC (or authorize or
permit any investment banker, financial advisor, attorney, accountant or other
Person retained by or acting for or on behalf of Seller, MPC, the Company, the
Subsidiaries or any such Affiliate) to take, directly or indirectly, any action
to solicit, encourage, receive, negotiate, assist or otherwise facilitate
(including by furnishing confidential information with respect to MPC, the
Company or any Subsidiary or permitting access to the Assets and Properties and
Books and Records of MPC, the Company or any Subsidiary) or accept any offer or
inquiry from any Person concerning an Acquisition Proposal. Notwithstanding the
foregoing, MPC or its Board of Directors shall be permitted to (A) to the extent
applicable, comply with Rule 14e-2(a)
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promulgated under the Exchange Act with regard to an Acquisition Proposal, or
(B) engage in any discussions or negotiations with, or provide any information
to any Person in response to an unsolicited bona fide written Acquisition
Proposal, by any such Person, if and only to the extent that, in the case of the
actions referred to in clause (B), (i) the MPC Stockholders' Meeting shall not
have occurred, (ii) the Board of Directors of MPC, concludes in good faith after
consultation with its financial advisors and legal advisors, that such
Acquisition Proposal would reasonably be expected to constitute a Superior
Proposal, (iii) prior to providing any information or data to any Person in
connection with an Acquisition Proposal by any such Person, the Board of
Directors of MPC receives from such Person an executed confidentiality agreement
on terms no less favorable to the Company than those contained in the
Confidentiality Agreement between MPC and Purchaser regarding the sale of the
Utility Business and (iv) prior to providing any information or data to any
Person or entering into discussions or negotiations with any Person, the Board
of Directors of MPC notifies Purchaser immediately of such inquiries, proposals
or offers received by, any such information requested from, or any such
discussions or negotiations sought to be initiated or continued with, any of its
representatives indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers. Seller
and MPC agree immediately to cease and cause to be terminated any existing
activities, discussions, or negotiations with any parties heretofore conducted
with respect to any Acquisition Proposal. Seller and MPC agree to take the
necessary steps promptly to inform all such Persons of its obligations
hereunder. Nothing in this Section 4.04 shall (x) permit Seller or MPC to
terminate this Agreement (except as specifically provided in Article XI), or
(y) affect any other obligation of Seller or MPC under this Agreement.
4.05 CONDUCT OF BUSINESS. MPC will, and will cause the Company and the
Subsidiaries to, conduct business only in the ordinary course consistent with
past practice and in compliance with applicable Law and will timely seek renewal
of all Licenses and permits required or necessary for the operation of the
Utility Business. Without limiting the generality of the foregoing, and other
than with respect to, and in connection with, the Restructuring and the
Divestiture, MPC will, and will cause the Company and the Subsidiaries to, use
commercially reasonable efforts, to the extent the officers of MPC believe such
action to be in the best interests of MPC and the Subsidiaries, to (a) preserve
intact the present business organization, reputation and franchises of MPC, the
Company and the Subsidiaries in all material respects, (b) keep available
(subject to dismissals and retirements (including retirements pursuant to MPC's
"Special Retirement Program") in the ordinary course of business and consistent
with past practice and transfers to any Affiliate of MPC) the services of the
key officers and employees of MPC and the Subsidiaries, (c) maintain the Assets
and Properties of MPC, the Company and the Subsidiaries in good working order
and condition, ordinary wear and tear excepted, and (d) maintain the good will
of key customers, suppliers and lenders and other Persons with whom MPC or any
Subsidiary otherwise has significant business relationships.
4.06 FINANCIAL STATEMENTS AND REPORTS. (a) As promptly as practicable and
in any event no later than forty five (45) days after the end of each fiscal
quarter ending after the date hereof and before the Closing Date (other than the
fourth quarter) or ninety (90) days after the end of each fiscal year ending
after the date hereof and before the Closing Date, as the case may be, MPC will
deliver to Purchaser true and complete copies of the unaudited consolidated
balance sheet and the related unaudited consolidated statement of operations of
MPC and the Subsidiaries, in each case as of and for the fiscal year then ended
or as of and for each such fiscal quarter and the portion of the fiscal year
then ended, as the case may be, together with the notes, if any, relating
thereto, which financial statements shall be prepared on a basis consistent with
the Financial Statements.
(b) As promptly as practicable, MPC will deliver to Purchaser true and
complete copies of such other regularly-prepared financial statements, reports
and analyses as may be prepared or received by MPC, the Company or any
Subsidiary relating to the business or operations of MPC, the Company or any
Subsidiary.
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4.07 CERTAIN RESTRICTIONS. MPC will, and will cause the Subsidiaries to
refrain from:
(a) except as disclosed in SECTION 4.07(a) OF THE DISCLOSURE SCHEDULE, and
except as may be necessary or desirable in connection with the Restructuring,
amending their certificates or articles of incorporation or by-laws (or other
comparable corporate charter documents) in any material respect or taking any
action with respect to any such amendment or any recapitalization,
reorganization, liquidation or dissolution of any such corporation;
(b) except as disclosed in SECTION 4.07(b) OF THE DISCLOSURE SCHEDULE, and
except as may be necessary or desirable in connection with the Restructuring,
authorizing, issuing, selling or otherwise disposing of any shares of capital
stock of or any Option with respect to MPC, the Company or any Subsidiary, or
modifying or amending any right of any holder of outstanding shares of capital
stock of or Option with respect to MPC, the Company or any Subsidiary;
(c) except for (i) the declaration of regular quarterly cash dividends on
the MPC common stock not to exceed twenty (20) cents per share, and (ii) the
payment of dividends required to be paid in respect of MPC outstanding preferred
stock, declaring, setting aside or paying any dividend or other distribution in
respect of the capital stock of MPC, the Company or any Subsidiary or directly
or indirectly redeeming, purchasing or otherwise acquiring any capital stock of
or any Option with respect to MPC, the Company or any Subsidiary;
(d) except as disclosed in SECTION 4.07(d) OF THE DISCLOSURE SCHEDULE and as
specified in the Budget, acquiring or disposing of, or incurring any Lien (other
than a Permitted Lien) on, any Assets and Properties individually or in the
aggregate material to the Business or Condition of MPC and the Company;
(e) except (i) as disclosed in SECTION 4.07(e) OF THE DISCLOSURE SCHEDULE,
and (ii) in the ordinary course of business consistent with past practices, the
Budget and the terms and provisions of this Agreement, entering into, or in any
material respect amending, modifying, terminating (partially or completely),
granting any waiver under or giving any consent with respect to any Contract to
which MPC, the Company or any Subsidiary is a party which is material to the
Business or Condition of MPC and the Company;
(f) other than as specified in the Budget, (i) voluntarily incurring
Indebtedness in an aggregate principal amount exceeding $5,000,000 (other than
refinancings where the principal amount refinanced is no greater than the amount
repaid), or (ii) purchasing, canceling, prepaying or otherwise providing for a
complete or partial discharge in advance of a scheduled payment date with
respect to, or waiving any right under, any Indebtedness in an aggregate
principal amount exceeding $1,000,000 (in either case other than Indebtedness of
MPC, the Company or a Subsidiary owing to MPC, the Company or a wholly-owned
Subsidiary); PROVIDED, HOWEVER, that MPC, Seller, the Company and the
Subsidiaries may take any and all actions necessary or appropriate to terminate
the Employee Stock Ownership Plan portion of the MPC 401(k) Plan, and to prepay
any outstanding Indebtedness of MPC, the Company and the Subsidiaries
attributable to such Employee Stock Ownership Plan;
(g) other than in connection with the Restructuring, engaging with any
Person in any merger or other business combination;
(h) except as set forth in the Budget, making (1) capital expenditures or
commitments for additions to property, plant or equipment constituting capital
assets or (2) making expenditures with respect to operations and maintenance or
incurring general and administrative expenses, in each case in an aggregate
amount exceeding $1,000,000;
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(i) except to the extent required by applicable Law or reasonably and in
good faith believed by the officers of MPC or the Company to be in the best
interests of MPC, the Company and the Subsidiaries (and subject in each case to
prior written notice to, and consultation with, Purchaser), making any material
change in (A) any pricing, investment, accounting, financial reporting,
inventory, credit, allowance or Tax practice or policy, or (B) any method of
calculating any bad debt, contingency or other reserve for accounting, financial
reporting or Tax purposes;
(j) other than in the ordinary course of business or to the extent required
by applicable Law (including without limitation, the duty to bargain in good
faith under any collective bargaining agreement) (and subject in each case to
prior written notice to, and consultation with, Purchaser), adopting, entering
into or becoming bound by any material Benefit Plan, employment-related Contract
or collective bargaining agreement, or amending, modifying or terminating
(partially or completely) any such Benefit Plan (other than the Employee Stock
Ownership Plan portion of the MPC 401(k) Plan), employment-related Contract or
collective bargaining agreement if such action will result in material
additional cost to MPC;
(k) making any change in its fiscal year;
(l) except as set forth in the Budget, making any loans or advances by it
to, or guarantee, endorse or otherwise be or become contingently liable,
directly or indirectly, in connection with the obligations, stocks or dividends
of, or owning, purchasing or acquiring stock, obligations or securities of, or
any other interest in, or make any capital contributions to, any Person;
(m) effectuating a "plant closing" or "mass layoff", as those terms are
defined in the Worker Adjustment and Retraining Act, affecting in whole or in
part any site of employment, facility, operating unit or employee of MPC, the
Company or any Subsidiary;
(n) paying, discharging or satisfying any claims, liabilities or obligations
(obsolete, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against in
the balance sheet comprising the Interim Financial Statements;
(o) making or changing any Tax election, filing any amended Tax Return,
settling or compromising any federal, state, local or foreign Tax liability,
changing any annual Tax accounting period, changing any method of Tax
accounting, entering into any closing agreement relating to any Tax,
surrendering any right to claim a Tax refund, or consenting to any extension or
waiver of the limitations period applicable to any Tax claim or assessment, in
each case in a manner which could reasonably be expected to have material
adverse effect on Purchaser, the Company or the Subsidiaries for any post
Closing period; or
(p) selling any cushion gas other than sales in accordance with prudent
utility practices, the proceeds of which will remain with, or be used for the
benefit of, MPC; or
(q) entering into any Contract to do or engage in any of the foregoing.
Notwithstanding any provision to the contrary, nothing in this SECTION 4.07
or SECTION 4.05 shall require MPC, Seller or the Company to revise, dishonor or
delay performance of any obligation under agreements in existence prior to the
date hereof.
4.08 AFFILIATE TRANSACTIONS. Except as disclosed in SECTION 4.08 OF THE
DISCLOSURE SCHEDULE, immediately prior to the Closing, all Indebtedness and
other amounts owing under Contracts between Seller, any officer, director or
Affiliate (other than MPC, the Company or any Subsidiary) of Seller, on the one
hand, and MPC, the Company or any of the Subsidiaries, on the other (each an
"AFFILIATE CONTRACT"), including the policy among the members of the MPC
Affiliated Group as described in SECTION 2.10(d) OF THE DISCLOSURE SCHEDULE,
will be paid in full. With respect to any Affiliate Contract disclosed in
SECTION 4.08 OF THE DISCLOSURE SCHEDULE or entered into after the date hereof,
which provides
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for the provision of services to MPC, the Company or any Subsidiary, Seller and
MPC will, at Purchaser's election prior to the Closing Date, either
(i) terminate such Contract or cause it to be terminated, effective as of the
Closing Date, or (ii) cause such Contract to provide, effective as of the
Closing Date, that the same is terminable at the option of MPC, the Company or
the Subsidiary, as applicable, upon not more than 30 days prior notice or such
shorter period as may be provided for under the existing provisions of such
Contract.
4.09 FULFILLMENT OF CONDITIONS. Seller and MPC will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each condition to the obligations of Purchaser contained in this
Agreement and will not, and will not permit the Company or any Subsidiary to,
take or fail to take any action that could reasonably be expected to result in
the nonfulfillment of any such condition.
4.10 COMPLETION OF RESTRUCTURING. Seller and MPC will use their best
efforts to cause the Restructuring to become effective prior to the Closing.
4.11 PREPARATION AND MAILING OF PROXY STATEMENT. As soon as practicable
after the date of this Agreement, MPC shall prepare and mail the Proxy Statement
to the holders of MPC capital stock entitled to vote at the meeting of the
stockholders of MPC to be called by MPC for the purpose of obtaining the MPC
Stockholders Approval (the "MPC STOCKHOLDERS' MEETING") at the earliest
practicable time following the date hereof.
4.12 APPROVAL OF MPC STOCKHOLDERS. MPC shall, through its Board of
Directors, duly call, give notice of, convene and hold the MPC Stockholders
Meeting for the purpose of voting on the approval and adoption of this Agreement
and the Restructuring (the "MPC STOCKHOLDERS' APPROVAL") as soon as reasonably
practicable after the date hereof. Subject to the following sentence MPC shall,
through its Board of Directors, include in the Proxy Statement the
recommendation of the Board of Directors of MPC that the stockholders of MPC
approve and adopt this Agreement and the Restructuring, and shall use its best
efforts to obtain such approval and adoption. The Board of Directors of MPC
shall not withdraw, amend or modify in a manner adverse to Purchaser its
recommendation referred to in the preceding sentence (or announce publicly its
intention to do so), except that such Board of Directors shall be permitted to
withdraw, amend or modify its recommendation (or publicly announce its intention
to do so) if: (i) Seller and MPC have complied with SECTION 4.04; (ii) an
unsolicited Superior Proposal shall have been proposed by any Person other than
Purchaser and such proposal is pending at the time of such withdrawal, amendment
or modification; and (iii) MPC shall have notified Purchaser in writing of such
Superior Proposal at least three (3) Business Days in advance of such
withdrawal, amendment or modification.
4.13 COMPLETION OF THE DIVESTITURE. Seller and MPC will use their
commercially reasonable efforts to cause the Divestiture to be completed prior
to the Closing.
4.14 REGULATORY PROCEEDINGS. Seller, MPC and the Company will take
commercially reasonable steps to enable Purchaser to participate as a party in
interest in all current and future FERC proceedings and PSC proceedings,
including but not limited to, stranded costs, default supplier rules, regional
transmission organizations and electric and gas rate increase requests. In the
event that applicable rules will not allow Purchaser to so participate in such
proceedings, Seller, MPC and the Company agree to furnish Purchaser with all
documentation filed in connection therewith and to consult and cooperate with
Purchaser on an ongoing basis regarding the conduct thereof.
4.15 SALE OF COLSTRIP 1, 2, AND 3 TRANSMISSION SYSTEM. Seller and MPC will
use their commercially reasonable efforts to consummate the sale of the interest
in the Colstrip 1, 2, and 3 Transmission System to PPL Montana LLC for the
agreed consideration of $97 million cash and the proceeds of which will remain
with, or be used for the benefit of, MPC.
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4.16 QF CONTRACTS. Seller and MPC agree to advise, consult and cooperate
with Purchaser regarding all negotiations for the buyout or buydown of QF
contracts and promptly furnish copies to Purchaser of all new letters of intent
and definitive agreement for the buyout or buydown of QF contracts.
4.17 MPC BENEFIT RESTORATION PLANS. Seller and MPC agree that, from and
after the date of this Agreement, Seller and MPC will not allow any new
participant in the MPC Benefit Restoration Plan for Senior Executives or the MPC
Benefit Restoration Plan for Directors nor amend or modify the terms of such
plans other than to transfer participants or obligations out of such plans to
Seller or its Affiliates in a manner that results in no liability to Purchaser.
4.18 POWER SUPPLY. Seller and MPC agree to advise, consult and cooperate
with Purchaser regarding steps to be taken to manage power supply risks,
including (i) securing power to replace that currently supplied under the
wholesale buyback agreement with PPL Montana LLC that expires on June 30, 2001,
(ii) supplying MPC's residual customer load in full in the event the PSC
proceeding on default supplier rules is not resolved by June 30, 2001, or if
MPC's default supplier role is extended beyond July 1, 2002, and (iii) securing
power to serve MPC's power supply obligations to Advanced Silicon
Materials, Inc. Seller and MPC agree to take reasonable and prudent steps to
mitigate such risk, including contracting for additional power supply, and to
consult and cooperate with Purchaser in the taking of such steps.
4.19 GENERATION SALE PROCEEDS. Seller and MPC agree to maintain the net
after tax cash proceeds from the sale of generation and related assets to PPL
Montana LLC, after reduction for unrecovered regulatory assets, as cash reserves
(which as of the date hereof, shall not be less than $55,000,000) and not to
apply the same except as mandated by the PSC or FERC final order (or if such
order is appealed by the final non-appealable order of the applicable court with
jurisdiction over such appeal) on stranded cost recovery or as otherwise
consented to by Purchaser.
4.20 REGIONAL TRANSMISSION ORGANIZATION AND INDEPENDENT TRANSMISSION
COMPANY. Seller and MPC agree to advise, consult and cooperate with Purchaser
regarding all negotiations and agreements for the potential inclusion of MPC or
the Company in any Independent Transmission Company or Regional Transmission
Company or Regional Transmission Organization. Seller and MPC agree to promptly
furnish Purchaser copies of all agreements regarding the Independent
Transmission Company or Regional Transmission Organization.
4.21 NOTIFICATION OF CERTAIN MATTERS. Seller and MPC shall give prompt
notice to Purchaser, and Purchaser shall give prompt notice to Seller and MPC,
of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
Seller, MPC, the Company, or any Subsidiary or Purchaser, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be completed with
or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice
pursuant to this SECTION 4.21 shall not limit or otherwise affect the remedies
available hereunder to the party entitled to receive such notice.
4.22 CONFIDENTIALITY AND STANDSTILL AGREEMENTS. From the date hereof to
the Closing Date, neither Seller, MPC, nor the Company shall terminate, amend,
modify or waive any provisions of any confidentiality or standstill agreement
relating to the Utility Business to which it is a party or by which it is bound.
During such period, Seller, MPC and the Company each shall enforce, to the
fullest extent permitted under applicable law, the provisions of any such
agreement, including but not limited to, by obtaining injunctive relief to
prevent any breaches of such agreements and to enforce specifically the terms
and provisions thereof in any court having jurisdiction.
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ARTICLE V
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Seller and MPC that, at all times from
and after the date hereof until the Closing and, in the case of SECTION 5.04 and
SECTION 5.07, thereafter, Purchaser will comply with all covenants and
provisions of this ARTICLE V, except to the extent Seller and MPC may otherwise
consent in writing.
5.01 REGULATORY AND OTHER APPROVALS. Purchaser will as promptly as
practicable (a) take all commercially reasonable steps necessary or desirable to
obtain all consents, approvals or actions of, make all filings with and give all
notices to Governmental or Regulatory Authorities or any other Person required
of Purchaser to consummate the transactions contemplated hereby, including
without limitation those disclosed in SCHEDULES 3.03 and 3.04 hereto, and those
that may be required in connection with the transaction structure contemplated
by SECTION 5.08, (b) provide such other information and communications to such
Governmental or Regulatory Authorities or other Persons as such Governmental or
Regulatory Authorities or other Persons may reasonably request in connection
therewith and (c) provide reasonable cooperation to Seller, the Company and the
Subsidiaries in connection with the performance of their obligations under
SECTIONS 4.01 and 4.02. Purchaser will provide prompt notification to Seller
when any such consent, approval, action, filing or notice referred to in
clause (a) above is obtained, taken, made or given, as applicable, and will
advise Seller of any communications (and, unless precluded by Law, provide
copies of any such communications that are in writing) with any Governmental or
Regulatory Authority or other Person regarding any of the transactions
contemplated by this Agreement.
5.02 HSR. In addition to and without limiting Purchaser's covenants
contained in SECTION 5.01, Purchaser will (i) take promptly all actions
necessary to make the filings required of Purchaser or its Affiliates under the
HSR Act, (ii) comply at the earliest practicable date with any request for
additional information received by Purchaser or its Affiliates from the Federal
Trade Commission or the Antitrust Division of the Department of Justice pursuant
to the HSR Act and (iii) cooperate with Seller in connection with Seller's
filing under the HSR Act and in connection with resolving any investigation or
other inquiry concerning the transactions contemplated by this Agreement
commenced by either the Federal Trade Commission or the Antitrust Division of
the Department of Justice or state attorneys general.
5.03 [INTENTIONALLY OMITTED.]
5.04 EMPLOYEE MATTERS.
(a) CONTINUATION OF COMPENSATION AND BENEFITS. Except as otherwise
provided in this SECTION 5.04, during the period from the Closing Date until
twenty-four months following the Closing Date, the Purchaser will maintain, or
shall cause the Company and the Subsidiaries to maintain, base salary, wages,
compensation levels (including, without limitation, incentive compensation or
comparable cash equivalent plan) and employee pension and welfare benefit plans
and programs for the benefit of the employees of MPC, the Company and the
Subsidiaries, which, in the aggregate, are at least equal to, or equivalent in
value to, the base salary, wages, compensation levels, and Benefit Plans listed
in SECTION 2.13(a) OF THE DISCLOSURE SCHEDULE provided to the employees of MPC,
the Company and the Subsidiaries on the date of this Agreement, plus any base
salary and wage adjustments made in the ordinary course of business between the
date of this Agreement and the Closing Date.
(b) SERVICE CREDIT. The Purchaser shall provide, or shall cause the
Company and the Subsidiaries to provide, each employee of MPC, the Company and
the Subsidiaries with credit for all service with MPC, the Company and the
Subsidiaries for all purposes under each employee benefit plan, program, or
arrangement of the Purchaser or its Affiliates in which such employee is
eligible to participate,
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except to the extent that such service credit would result in a duplication of
benefits with respect to the same period of service.
(c) BONUSES; INCENTIVE COMPENSATION. The Purchaser shall maintain, or
shall cause the Company and the Subsidiaries to maintain, the bonus plans and
other incentive compensation plans and programs maintained by Seller and/or any
of its Affiliates or comparable cash equivalent plans in which the employees of
MPC, the Company and the Subsidiaries are eligible to participate (including
terminated or retired employees) who remain eligible to participate under the
terms of such plans, as in effect on the date of this Agreement, through the end
of the calendar year in which the Closing Date occurs, with the bonuses and
incentive compensation to be paid thereunder by Purchaser and/or its Affiliates
determined (i) in accordance with calculation methods directed by Seller, such
methods to be consistent with the terms of such incentive compensation plans in
effect on the date of this Agreement and MPC's, the Company's and the
Subsidiaries' past practices, as appropriate, and (ii) in such a manner so that
the effects of the transaction contemplated by this Agreement will not unduly
burden or benefit the employees of MPC, the Company and the Subsidiaries.
(d) SEVERANCE POLICY; OTHER AGREEMENTS. Except as disclosed in
SECTION 5.04(d) OF THE DISCLOSURE SCHEDULE, if the employment of any employee of
the Company or a Subsidiary, is terminated within twenty-four months after the
Closing Date by (i) action of the Purchaser or any of its Affiliates other than
for Cause or (ii) action of an employee following (A) a reduction in such
employee's base salary equal to or greater than fifteen percent (15%) or
(B) such employee's decision not to relocate more than fifty (50) miles from his
or her then current job location, then Purchaser shall pay, or shall cause the
Company or the affected Subsidiary to pay, each such employee a lump sum
severance benefit (less required tax withholding and other withholding
obligations required by Law) in an amount equal to the sum of (x) ten percent
(10%) of such employee's base salary multiplied by such employee's "years of
service" up to a maximum of one hundred percent (100%) of such base salary, plus
(y) six thousand dollars ($6,000). For purposes of the foregoing, "years of
service" shall mean the employee's aggregate total years of service (pro-rated
to the date of termination) with MPC, the Purchaser and any of their respective
Affiliates. Notwithstanding the foregoing, for those employees disclosed in
SECTION 5.04(d) OF THE DISCLOSURE SCHEDULE who are parties to an individual
change in control severance agreement with MPC, the terms of such agreement
shall apply with respect to any termination of such employee, and the
consummation of the transaction contemplated by this Agreement will be deemed to
constitute a "Change in Control" for purposes of each such agreement. The
Purchaser shall honor, or shall cause the Company and the Subsidiaries to honor,
all such individual change in control severance agreements with such employees,
and the Purchaser shall be liable for any amount(s) or benefit(s) due
thereunder.
(e) BENEFIT PLAN OBLIGATIONS. The Purchaser shall be, or shall cause the
Company and the Subsidiaries to be, responsible for all obligations existing on
the Closing Date (including, without limitation, any such obligations that have
been incurred but not yet paid) under any Benefit Plan (including, without
limitation, all health and welfare, life insurance and disability plans and
programs) applicable to the employees and former employees of MPC, the Company
and the Subsidiaries and to certain former employees of Affiliates of MPC, as
disclosed in SECTION 5.04(e) OF THE DISCLOSURE SCHEDULE (collectively, the
"COVERED PARTICIPANTS") and their covered dependents. Effective as of the
Closing Date, Seller and its Affiliates (other than MPC, the Company or any
Subsidiary) shall have no liability or responsibility for any obligation under
any Benefit Plan applicable to the Covered Participants and their covered
dependents with respect to claims incurred by the Covered Participants or their
covered dependents prior to the Closing Date under each Benefit Plan. Expenses
and benefits with respect to claims incurred by the Covered Participants or
their covered dependents on or after the Closing Date shall be the
responsibility of Purchaser. For purposes of this paragraph, a claim is deemed
incurred when the services that are the subject of the claim are performed; in
the case of life insurance, when the death occurs, and, in the case of
short-term or long-term disability benefits, when the disability occurs. The
Purchaser shall, or shall cause the Company and the Subsidiaries to (i) waive
all limitations
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as to preexisting conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Covered Participants
and their covered dependents under any Benefit Plan, in which such Covered
Participants and their covered dependents may be eligible to participate after
the Closing Date and (ii) provide each Covered Participant and their covered
dependents with credit for any co-payments and deductibles paid prior to the
Closing Date in satisfying any applicable deductible or out-of-pocket
requirements under any Benefit Plan in which such Covered Participants and their
covered dependents are eligible to participate after the Closing Date.
(f) MPC 401(k) PLAN. Effective as of the Closing Date, Purchaser shall
sponsor and maintain, or shall cause the Company to sponsor and maintain, the
MPC 401(k) Plan, or a comparable Qualified Plan (with the employer contribution
being made in cash not shares), for the eligible participants and beneficiaries
(including continuing the Seller stock investment fund for the exclusive benefit
of the eligible participants and beneficiaries who had balances in such fund on
the Closing Date) for at least twenty-four months after the Closing Date.
Effective as of the Closing Date, employees of the Seller and its Affiliates
(other than MPC, the Company and the Subsidiaries) shall cease to accrue
benefits and service credits under the MPC 401(k) Plan. To the extent Purchaser
sponsors or maintains a comparable plan rather than the MPC 401(k) Plan, such
comparable plan shall provide for the acceptance of a trust to trust transfer
and rollover distributions from MPC Qualified Plans and/or conduit individual
retirement accounts established by such participants and beneficiaries.
(g) MPC PENSION PLAN. Effective as of the Closing Date, Purchaser shall
sponsor and maintain, or shall cause the Company to sponsor and maintain, the
Montana Power Company Pension Plan (the "MPC PENSION PLAN"), or a comparable
plan, for eligible participants and beneficiaries for at least twenty-four
months after the Closing Date. Effective as of the Closing Date, employees of
the Seller and its Affiliates (other than MPC, the Company and the Subsidiaries)
shall cease to accrue benefits under the MPC Pension Plan.
(h) SUPPLEMENTAL RETIREMENT PLANS. Except as disclosed in SECTION 5.04(h)
OF THE DISCLOSURE SCHEDULE, effective as of the Closing Date the Purchaser shall
maintain and shall be responsible for, or shall cause the Company and the
Subsidiaries to maintain and be responsible for, all current and future
obligations of MPC, the Company and the Subsidiaries under any supplemental
pension benefit or benefit replacement or restoration plan, program or
individual arrangement maintained by MPC, the Company and the Subsidiaries as in
effect on the Closing Date.
(i) STOCK OPTION OBLIGATION. On the Closing Date, each unvested stock
option on MPC common stock issued under any plan or program of MPC or its
Affiliates under which the employees of MPC, the Company and the Subsidiaries
have previously been awarded stock options on MPC common stock (an "MPC STOCK
OPTION") shall be cancelled, and the holder thereof shall be entitled to receive
on the Closing Date or as soon as practicable thereafter, from the Purchaser as
consideration for such cancellation, either (i) stock options of substantially
equivalent value ("SUBSTITUTE STOCK OPTIONS") to such holder's MPC Stock Options
(with Seller reserving reasonable discretion to determine whether such
Substitute Stock Options are of "substantially equivalent value"), or (ii) an
amount in cash (less required tax withholding and other withholding obligations
required by Law) equal to the product of (x) the number of shares previously
subject to such MPC Stock Option and (y) the excess, if any, of the market price
per share (the average of the high and low prices of the underlying MPC common
stock as reported on the New York Stock Exchange Composite Tape on the Closing
Date) over the exercise price per share of the cancelled MPC Stock Option;
PROVIDED, HOWEVER, that if the Purchaser provides Substitute Stock Options in
accordance with (i) of this paragraph, then the Purchaser shall pay, or shall
cause the Company or the Subsidiaries to pay, in cash to any employee of MPC,
the Company and the Subsidiaries who receives Substitute Stock Options, but
whose employment terminates before such Substitute Stock Options vest under
circumstances that would entitle the employee to the benefit described in
SECTION 5.04(d), the amount computed under (ii) above as of the Closing Date.
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(j) RETIREE BENEFITS. Except as disclosed in SECTION 5.04(j) OF THE
DISCLOSURE SCHEDULE, effective as of the Closing Date, the Purchaser shall
maintain and shall be responsible for, or shall cause the Company and the
Subsidiaries to maintain and be responsible for, all current and future
obligations of MPC, the Company and the Subsidiaries with respect to (i) any
post-retirement health or welfare benefit plan, program or arrangement
maintained by MPC, the Company and the Subsidiaries as in effect on the Closing
Date and (ii) the utility discount provided to certain retired employees and
certain other employees, as disclosed in SECTION 5.04(j) OF THE DISCLOSURE
SCHEDULE, of MPC, the Company and the Subsidiaries. The post retirement health
and welfare benefits described in (i) above shall be continued for their full
terms as provided in the applicable plan, program or arrangement as in effect on
the Closing Date, and the utility discount described in (ii) above shall be
continued at least until residential customer choice for electric and natural
gas utility service is fully implemented in Montana.
(k) COLLECTIVE BARGAINING AGREEMENTS. The wages, compensation levels and
employee pension and welfare benefit plans and programs for the benefit of
employees of MPC, the Company and the Subsidiaries who are covered by a
collective bargaining agreement shall be governed by the terms of such
collective bargaining agreement, except (i) to the extent that an employee is
eligible for the benefits provided under SECTION 5.04(c) and/or
SECTION 5.04(d)and (ii) SECTION 5.04(b) shall apply with respect to all such
employees. To the extent that the terms or provisions of any such collective
bargaining agreement conflict with any of the terms or provisions of this
Agreement, the terms or provisions of the collective bargaining agreement shall
govern.
(l) CONTINUING OBLIGATION. If the Purchaser sells or otherwise disposes of
all or substantially all of the stock or assets of the Company within
twenty-four months of the Closing Date, or such other longer time period as may
be applicable to any individual change in control severance agreement, the
Purchaser shall, in connection with such disposition cause the transferee of
such stock or assets to honor the provisions of this SECTION 5.04 until
twenty-four months after the Closing Date, or such other longer time period as
may be applicable under any individual change in control severance agreement.
5.05 FULFILLMENT OF CONDITIONS. Purchaser will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each condition to the obligations of Seller contained in this
Agreement and will not take or fail to take any action that could reasonably be
expected to result in the nonfulfillment of any such condition.
5.06 COMMUNICATION BETWEEN THE PARTIES. If Purchaser develops information
prior to the Closing Date that leads Purchaser to believe that Seller has
breached a representation or warranty under this Agreement, Purchaser shall
inform Seller of such potential breach as soon as possible, but in any event, at
or prior to Closing.
5.07 CHARITABLE CONTRIBUTIONS. During the period from the Closing Date
until twenty-four months following the Closing Date, Purchaser shall, or shall
cause the Company and the Subsidiaries to, continue to provide charitable
contributions or other financial support for non-profit organizations and
educational institutions as disclosed in SECTION 5.07 OF THE DISCLOSURE
SCHEDULE, in amounts substantially comparable to MPC's past practices as set
forth in SECTION 5.07 OF THE DISCLOSURE SCHEDULE taking into account the
Restructuring and the Divestiture.
5.08 TRANSACTION STRUCTURE. Purchaser may determine, in its discretion, to
obtain the approval of the SEC under the 1935 Act, or to make the requisite
filing within the SEC under Rule 2 of the 1935 Act, to consummate the
transactions contemplated by this Agreement pursuant to an exempt holding
company structure under the 1935 Act.
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ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder to purchase the Units are subject to
the fulfillment, at or before the Closing, of each of the following conditions
(all or any of which may be waived in whole or in part by Purchaser in its sole
discretion):
6.01 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by Seller and MPC in this Agreement shall be true and correct on and as of
the Closing Date as though made on and as of the Closing Date or, in the case of
representations and warranties made as of a specified date earlier than the
Closing Date, on and as of such earlier date; except for such failures of
representations and warranties to be true and correct (without regard to any
materiality qualifier therein) that, individually or in the aggregate, could not
result in a material adverse effect to the Business or Condition of MPC and the
Company.
6.02 PERFORMANCE. Seller and MPC shall have performed and complied with,
in all material respects, the agreements, covenants and obligations required by
this Agreement to be so performed or complied with by Seller and MPC at or
before the Closing.
6.03 OFFICERS' CERTIFICATES. Seller shall have delivered to Purchaser a
certificate, dated the Closing Date and executed in the name and on behalf of
Seller by the Chairman of the Board, the President or any Executive or Senior
Vice President of Seller, substantially in the form and to the effect of
EXHIBIT A hereto, and a certificate, dated the Closing Date and executed by the
Secretary or any Assistant Secretary of Seller, substantially in the form and to
the effect of EXHIBIT B hereto.
6.04 ORDERS AND LAWS. There shall not be in effect on the Closing Date any
Order or Law restraining, enjoining or otherwise prohibiting or making illegal
the consummation of any of the transactions contemplated by this Agreement.
6.05 REGULATORY CONSENTS AND APPROVALS. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
set forth in SCHEDULES 3.03 and 3.04 necessary to permit Purchaser and Seller to
perform their obligations under this Agreement and to consummate the
transactions contemplated hereby, other than those referred to in SECTION 5.08,
shall have been duly obtained, made or given and shall be in full force and
effect, and all terminations or expirations of waiting periods imposed by any
Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement, including under the HSR Act, shall
have occurred.
6.06 THIRD PARTY CONSENTS. The consents (or in lieu thereof waivers)
listed in SECTION 6.06 OF THE DISCLOSURE SCHEDULE shall have been obtained and
shall be in full force and effect.
6.07 COMPLETION OF THE RESTRUCTURING. The Restructuring shall have been
completed.
6.08 ASSIGNMENT OF CONTRACTS. All rights and obligations under those
Contracts listed on SCHEDULE 6.08 hereto shall have been duly and validly
assigned to the Company or the Subsidiaries by MPC and any required third party
consents shall have been obtained.
6.09 BENEFITS PLANS. All Benefits Plans listed on SCHEDULE 6.09 OF THE
DISCLOSURE SCHEDULE hereto shall either have been terminated to the satisfaction
of Purchaser or transferred to Seller in a manner that results in no liability
to Purchaser.
6.10 RESIGNATION OF SELLER AS MANAGER OF THE COMPANY. Immediately prior to
Closing, Seller shall have resigned as manager of the Company.
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ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller hereunder to sell the Units are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by Seller in its sole
discretion):
7.01 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by Purchaser in this Agreement, taken as a whole, shall be true and correct
in all material respects on and as of the Closing Date as though made on and as
of the Closing Date.
7.02 PERFORMANCE. Purchaser shall have performed and complied with, in all
material respects, the agreements, covenants and obligations required by this
Agreement to be so performed or complied with by Purchaser at or before the
Closing.
7.03 OFFICERS' CERTIFICATES. Purchaser shall have delivered to Seller a
certificate, dated the Closing Date and executed in the name and on behalf of
Purchaser by the Chairman of the Board, the President or any Executive or Senior
Vice President of Purchaser, substantially in the form and to the effect of
EXHIBIT C hereto, and a certificate, dated the Closing Date and executed by the
Secretary or any Assistant Secretary of Purchaser, substantially in the form and
to the effect of EXHIBIT D hereto.
7.04 ORDERS AND LAWS. There shall not be in effect on the Closing Date any
Order or Law restraining, enjoining or otherwise prohibiting or making illegal
the consummation of any of the transactions contemplated by this Agreement.
7.05 REGULATORY CONSENTS AND APPROVALS. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
set forth in SECTIONS 2.06 AND 2.07 OF THE DISCLOSURE SCHEDULE necessary to
permit Seller and Purchaser to perform their obligations under this Agreement
and to consummate the transactions contemplated hereby shall have been duly
obtained, made or given and shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental or
Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement, including under the HSR Act, shall have
occurred.
7.06 THIRD PARTY CONSENTS. The consents (or in lieu thereof waivers)
listed in SECTION 7.06 OF THE DISCLOSURE SCHEDULE shall have been obtained and
shall be in full force and effect.
ARTICLE VIII
TAX MATTERS AND POST-CLOSING TAXES
8.01 TAX RETURNS. (a) Seller and MPC will include the income of the
Company and the Subsidiaries (including any deferred income triggered into
income by Treas. Reg. section 1.1502-13 and any excess loss accounts taken into
account under Treas. Reg. section 1.1502-19) on Seller's or MPC's consolidated,
combined or unitary federal or state or local Tax Returns for all periods
through the Closing Date. Seller shall prepare or cause to be prepared and file
or caused to be filed all Tax Returns for MPC, the Company and the Subsidiaries
for all periods ending on or prior to the Closing Date which are filed after the
Closing Date in accordance with past custom and practice. The Company and the
Subsidiaries will furnish Tax information to Seller for inclusion in the
relevant Tax Returns in accordance with the past custom and practice of MPC, the
Company and the Subsidiaries. Seller shall pay all amounts shown as owing on
such Tax Returns, and shall be liable for all such Taxes for periods ending on
or prior to the Closing Date.
(b) Purchaser shall prepare or cause to be prepared and Purchaser shall file
or cause to be filed any Tax Returns of MPC, the Company and the Subsidiaries
for Tax periods which begin before the Closing Date and end after the Closing
Date in accordance with past custom and practice. Purchaser will allow Seller an
opportunity to review and comment upon such Tax Returns (including any amended
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returns) to the extent that they relate to MPC, the Company and the
Subsidiaries. Purchaser will take no position on such Tax Returns that relate to
MPC, the Company and the Subsidiaries that would materially adversely affect
Seller after the Closing Date without the prior written consent of Seller.
Seller will furnish Tax information to Purchaser for inclusion in the relevant
Tax Returns in accordance with the past custom and practice of MPC, the Company
and the Subsidiaries. Seller shall pay to Purchaser within fifteen Business Days
after the date on which Taxes are paid with respect to such periods an amount
equal to the portion of the amounts shown as owing on such Tax Returns which
relates to the portion of such Tax period ending on the Closing Date to the
extent such amounts are not reflected in a reserve (other than any reserve for
deferred Taxes established to reflect timing differences between book and Tax)
for tax liability on MPC's, the Company's or the Subsidiaries' financial
statements made available to the Purchaser pursuant to SECTION 2.09(ii) or
SECTION 4.06 hereof. For purposes of this Section, in the case of any Taxes that
are imposed on a periodic basis and are payable for a Tax period that includes
(but does not end on) the Closing Date, the portion of such Tax which relates to
the portion of such Tax period ending on the Closing Date shall (x) in the case
of any Taxes other than Income Taxes, be deemed to be the amount of such Tax for
the entire Tax period multiplied by a fraction, the numerator of which is the
number of days in the Tax period ending on the Closing Date and the denominator
of which is the number of days in the entire Tax period, and (y) in the case of
any Income Tax, be deemed to be equal to the amount which would be payable if
the relevant Tax period ended on the Closing Date. Any credits relating to a Tax
period that begins before and ends after the Closing Date shall be taken into
account as though the relevant Tax period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations shall be
made by Purchaser in a manner consistent with prior practice of MPC, the Company
and the Subsidiaries. Seller shall be liable for Taxes of MPC, the Company and
the Subsidiaries which are attributable to periods ending on or prior to the
Closing Date pursuant to this SECTION 8.01(b) to the extent such Taxes are not
reflected in a reserve (other than any reserve for deferred Taxes established to
reflect timing differences between book and Tax) for tax liability on MPC's, the
Company's or the Subsidiaries' financial statements made available to the
Purchaser pursuant to SECTION 2.09(ii) or SECTION 4.06 hereof. Purchaser shall
be liable for Taxes of the Company and the Subsidiaries which are attributable
to periods after the Closing Date pursuant to this SECTION 8.01(b).
(c) As soon as reasonably practicable after the signing of this Agreement,
Seller will deliver to Purchaser true and correct copies of the federal Income
Tax workpapers of the Subsidiaries, Income Tax Returns of the Subsidiaries filed
on a stand alone basis within any State, and the Canadian Income Tax Returns of
CMPL, each with respect to the Tax periods from 1997 through 1999.
8.02 NOTICE OF AUDIT. Seller and Purchaser agree that if any of them
receives any notice of an audit or examination from any Governmental or
Regulatory Authority with respect to Taxes of MPC, the Company, or the
Subsidiaries for any taxable period or portion thereof ending on or prior to the
Closing Date, then the recipient of such notice shall, within ten days of the
receipt thereof, notify and provide copies of such notice to the other party, as
the case may be, in accordance with the notice provisions of SECTION 13.01.
8.03 TAX ADJUSTMENTS. (a) Any Tax refunds that are received by Purchaser
or MPC, Seller, the Company or any Subsidiary, and any amounts credited against
Tax to which Purchaser or MPC, Seller, the Company or any Subsidiary become
entitled, that relate to Tax periods or portions thereof ending on or before the
Closing Date shall be for the account of Seller, and Purchaser shall pay over to
Seller any such refund or the amount of any such credit within fifteen days
after receipt or entitlement thereto. In addition, to the extent that a claim
for refund or a proceeding results in a payment or credit against Tax by a
taxing authority to Purchaser or MPC, Seller, the Company or any Subsidiary of
any amount accrued on MPC's, Seller's, the Company's or any Subsidiary's
financial statements made available to Purchaser pursuant to
SECTION 2.09(a)(ii) or SECTION 4.06 hereof, Purchaser shall pay such amount to
Seller within fifteen days after receipt or entitlement thereto.
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(b) Any increase in Tax liability of MPC, the Company or any Subsidiary
which is the responsibility of Seller under the provisions of SECTION 8.01(a) or
SECTION 8.01(b) shall be paid by Seller to Purchaser or the relevant
Governmental or Regulatory Authority as appropriate. Seller has the right to
control the handling and disposition of the audit and any related administrative
or court proceeding which might give rise to such increase in Tax liability of
MPC, the Company or any Subsidiary; PROVIDED, HOWEVER, that the Seller will not
enter into any compromise or agreement to settle any Tax claim pursuant to a Tax
audit or proceeding which could reasonably be expected to have a material
adverse effect on Purchaser, the Company, MPC, or the Subsidiaries for any post
Closing period without the prior written consent of Purchaser (which shall not
be unreasonably withheld). Purchaser shall, and shall cause the Company and the
Subsidiaries to, cooperate fully with Seller with respect to the handling and
disposition of any such audit or related administrative or court proceeding.
(c) Any increase or decrease in Taxes of MPC, the Company or any Subsidiary
resulting from adjustments made for periods after the Closing Date shall be for
the account of Purchaser.
8.04 TAX SHARING AGREEMENTS. All tax sharing agreements or similar
agreements with respect to or involving MPC, the Company or the Subsidiaries
shall be terminated as of the Closing Date and, after the Closing Date, MPC, the
Company and the Subsidiaries shall not be bound thereby or have any liability
thereunder.
8.05 TRANSFER TAXES. All transfer, documentary, sales, use, stamp,
registration, and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by Purchaser
when due, and Purchaser will, at its own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, Seller will, if
necessary, join in the execution of any such Tax Returns and other
documentation.
8.06 POST-CLOSING ELECTIONS. At Seller's request, the Purchaser will cause
the Company and its Subsidiaries to make and/or join with Seller in making any
tax election if the making of such election does not have a material adverse
impact on the Purchaser, the Company or the Subsidiaries for any
post-acquisition period.
8.07 POST-CLOSING TRANSACTIONS NOT IN THE ORDINARY COURSE. Purchaser and
Seller agree to report all transactions not in the ordinary course of business
occurring on the Closing Date after Purchaser's purchase of the Units of the
Company on Purchaser's federal income tax return to the extent permitted by
Treas. Reg. section 1.1502-76(b)(1)(B).
8.08 ALLOCATION OF PURCHASE PRICE. (a) To the extent that Purchaser and
Seller make a Code section 338(h)(10) election (and any corresponding elections
under state, local or foreign Tax Law) as provided in SECTION 8.09 of this
Agreement, Purchaser and Seller shall cooperate fully with each other in the
making of such election. In particular, and not by way of limitation, Purchaser
shall, within 150 days of the Closing Date, prepare for Seller's review Internal
Revenue Service Form 8023, any attachments to be filed therewith, and an
allocation of the purchase price attributable thereto, all in accordance with
applicable Laws. Upon Seller's approval (which shall not be unreasonably
withheld or delayed), Purchaser and Seller shall jointly execute such form.
Purchaser, Seller, MPC, the Company and the Subsidiaries will file all Tax
Returns (including all amended returns and claims for refund) and information
reports in a manner consistent with such form.
(b) Purchaser shall, within 150 days of the Closing Date, prepare for
Seller's review Internal Revenue Service Form 8594, and any attachments to be
filed therewith, in accordance with applicable Laws. Upon Seller's approval
(which shall not be unreasonably withheld), Purchaser and Seller shall each file
such Form 8594 with their Income Tax Returns for the year in which Closing
occurs. Purchaser, Seller, MPC, the Company and the Subsidiaries will file all
Tax Returns (including all
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amended returns and claims for refund) and information reports in a manner
consistent with the allocation contained on such Form 8594.
8.09 SECTION 338(H)(10) ELECTION. At Purchaser's option (which must be
exercised by written notice to Seller on or before the Closing Date) Seller will
join with Purchaser in making an election under Code Section 338(h)(10) (and any
corresponding elections under state, local, or foreign tax law) with respect to
the purchase and sale of the stock of any of the Subsidiaries hereunder (other
than CMPL).
8.10 SECTION 338(G) ELECTION. At Purchaser's option, Purchaser shall make
an election under Code Section 338(g) (and any corresponding election under
state, local, or foreign tax law) with respect to the purchase of the stock of
CMPL hereunder.
8.11 NONFOREIGN AFFIDAVIT. Seller shall furnish Purchaser an affidavit,
stating under penalty of perjury, the transferor's United States taxpayer
identification number and that the transferor is not a foreign person pursuant
to Code Section 1445(b)(2).
8.12 CODE SECTION 754 ELECTION. At Purchaser's request, with respect to
any interest in a Person that is taxed as a partnership for federal Income Tax
purposes (a "Partnership") that Purchaser acquires hereunder, Seller agrees to
cause any such Partnership (if Seller has control over such Partnership) to make
a Code section 754 election for the Tax period in which the purchase of the
Units occurs.
ARTICLE IX
SURVIVAL; NO OTHER REPRESENTATIONS
9.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. Except as otherwise set forth herein, the representations,
warranties, covenants and agreements contained in this Agreement shall not
survive Closing and there shall be no liability in respect thereof, whether such
liability has accrued prior to the Closing Date or after the Closing Date, on
the part of either party or its officers, directors, employees, agents and
Affiliates. This Section shall not limit in any way the survival and
enforceability of any covenant or agreement of the parties hereto which by its
terms contemplates performance after the Closing Date, which shall survive for
the respective periods set forth herein.
9.02 NO OTHER REPRESENTATIONS. Notwithstanding anything to the contrary
contained in this Agreement, it is the explicit intent of each party hereto that
neither Seller, MPC nor anyone on their behalf, including its advisor Goldman,
Sachs & Co. is making any representation or warranty whatsoever, express or
implied, except any representation or warranty contained in ARTICLE II and in
any certificate delivered pursuant to SECTION 6.03. In particular, neither
Seller nor MPC makes any representation or warranty to Purchaser with respect to
(i) the information set forth in the Confidential Offering Memorandum dated
May 2000 prepared by Goldman, Sachs & Co. or (ii) any financial projection or
forecast relating to the Business or Condition of MPC and the Company. With
respect to any projection or forecast delivered by or on behalf of Seller or MPC
to Purchaser, Purchaser acknowledges that (i) there are uncertainties inherent
in attempting to make such projections and forecasts, (ii) it is familiar with
such uncertainties, (iii) it is taking full responsibility for making its own
evaluation of the adequacy and accuracy of all such projections and forecasts
furnished to it and (iv) it shall have no claim against Seller with respect
thereto.
ARTICLE X
INDEMNIFICATION
10.01 TAX INDEMNIFICATION.
(a) Seller agrees to indemnify, defend and hold harmless, Purchaser, any
Affiliate of Purchaser and their officers, directors, employees, stockholders,
representatives and agents, including after the
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Closing Date, the Company, and the Subsidiaries (collectively "PURCHASER
INDEMNITEES") from and against any Adverse Consequences the Purchaser
Indemnitees may suffer resulting from, arising out of, or relating to any
liability of Seller, the Company, MPC, and the Subsidiaries (x) for any Taxes of
the Seller, the Company, MPC and any member of the MPC Affiliated Group (other
than the Subsidiaries) and for any Taxes of the Subsidiaries, with respect to
any Tax year or portion thereof ending on or before the Closing Date (or for any
Tax year beginning before and ending after the Closing Date to the extent
allocable (determined in a manner consistent with SECTION 8.01(b)) to the
portion of such period beginning before and ending on the Closing Date), and
(y) for the unpaid Taxes of any Person under Treas. Reg. Section 1.1502-6.
(b) Purchaser agrees to indemnify Seller, and their officers, directors,
employees, stockholders, representatives and agents (the "SELLER INDEMNITEES"),
from and against any Adverse Consequences Seller Indemnitees may suffer
resulting from, arising out of, or relating to, any liability of Seller for any
Taxes of Purchaser, the Company and the Subsidiaries with respect to any Tax
year or portion thereof after the Closing Date (or for any Tax year beginning
before and ending after the Closing Date to the extent allocable (determined in
a manner consistent with SECTION 8.01(b)), to the portion of such period ending
after the Closing Date.
(c) The obligations of Seller and Purchaser under this SECTION 10.01 shall
survive until the expiration of the applicable statute of limitations.
10.02 INDEMNIFICATION FOR RESTRUCTURING; DIVESTITURE; OIL AND GAS
SALE. (a) Seller agrees to indemnify Purchaser Indemnitees in respect of and
hold each of them harmless from and against any Adverse Consequences suffered,
incurred or sustained by any of them and resulting from, arising out of or
relating to (i) the Restructuring and/or the Divestiture, (ii) any aspect of the
business of Seller (other than the Company and the Subsidiaries) or
(iii) regulatory requirements with respect to the use of the proceeds of the Oil
and Gas Sale. Seller's obligations under this SECTION 10.02 shall survive
indefinitely.
(b) To the extent such amount is not paid prior to Closing, Seller agrees to
indemnify Purchaser Indemnitees in respect of and hold each of them harmless
with respect to the amount of $3,894,823 set forth on PP&L Montana, LLC's
Invoice Number 82200, dated September 25, 2000 relating to the Wholesale
Transmission Services Agreement.
10.03 OTHER INDEMNIFICATION. Subject to the other Sections of this
ARTICLE X, Purchaser shall indemnify the Seller and its directors, officers,
employees and agents in respect of, and hold each of them harmless from and
against, any and all Adverse Consequences suffered, incurred or sustained by any
of them or of or relating to MPC, the Company and the Subsidiaries resulting
from or arising out of the operation of the business of MPC, the Company and the
Subsidiaries from and after Closing (including, without limitation, Adverse
Consequences arising out of or relating to any Environmental Law); PROVIDED,
HOWEVER, that such indemnity shall not apply until the total amount of such
Adverse Consequences shall exceed $1,000,000 at which time the entire amount of
all such Adverse Consequences shall be indemnified hereunder.
10.04 SPECIAL ENVIRONMENTAL INDEMNITY. Seller shall indemnify, defend and
hold harmless Purchaser Indemnitees against any Adverse Consequences which
Purchaser Indemnitees may suffer, sustain, or become subject to, resulting from
or arising out of: any claims, damages, liabilities, taxes, injuries to Persons,
property or natural resources, fines, penalties, costs and expenses, including
without limitation, settlement costs and reasonable legal, accounting or other
expert fees and costs, incurred in connection with investigating or defending
any action (an "ENVIRONMENTAL LOSS") sustained or required to be paid by reason
of, or arising out of or caused by any act or omission occurring, or condition
existing, on or prior to the Closing Date which related directly or indirectly
to the business or operations or facilities (past or present) of MPC, the
Company or its Subsidiaries, and which relate to a violation of or liability to
pay costs, penalties, fines or damages under Environmental Laws; PROVIDED,
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HOWEVER, that such indemnity shall be subject to the following: (i) it shall not
apply until the total amount of such Environmental Loss exceeds $50,000,000;
(ii) after the first $50,000,000 of Environmental Loss, Seller shall be liable
for the next $25,000,000 of Environmental Loss; (iii) Seller shall be liable for
50% of all Environmental Loss in excess of $75,000,000 in the aggregate; and
(iv) in no event shall Seller's obligations under this SECTION 10.04 exceed
$100,000,000. Seller's obligations under this SECTION 10.04 shall survive for a
period of five years from the Closing Date.
10.05 SPECIAL LITIGATION INDEMNITY. Seller shall indemnify, defend and
hold harmless Purchaser Indemnitees against and pay on behalf of or reimburse
Purchaser Indemnitees as and when incurred for any Adverse Consequences which
Purchaser Indemnitees may suffer, sustain or become subject to, resulting from
or arising out of those matters set forth on SCHEDULE 10.05 hereto. Seller's
obligations under this SECTION 10.05 shall survive indefinitely. Purchaser
agrees that it will make any employees of the Company or the Subsidiaries
connected to the matters set forth in SCHEDULE 10.05 reasonably available to
Seller, upon Seller's reasonable request and at Seller's sole expense, for the
purposes of defending the matters set forth in this SECTION 10.05.
10.06 METHOD OF ASSERTING CLAIMS. All claims for indemnification by any
Indemnified Party under this ARTICLE X will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which an Indemnified
Party might seek indemnity under this ARTICLE X is asserted against or sought to
be collected from such Indemnified Party by a Person other than Seller or any
Affiliate of Seller or of Purchaser (a "THIRD PARTY CLAIM"), the Indemnified
Party shall deliver a Claim Notice with reasonable promptness to the
Indemnifying Party. The Indemnifying Party will notify the Indemnified Party as
soon as practicable within the Dispute Period whether the Indemnifying Party
disputes its liability to the Indemnified Party under this ARTICLE X and whether
the Indemnifying Party desires, at its sole cost and expense, to defend the
Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the Indemnified
Party with respect to the Third Party Claim pursuant to this
SECTION 10.06(A), then the Indemnifying Party will have the right to defend,
at the sole cost and expense of the Indemnifying Party, such Third Party
Claim by all appropriate proceedings, which proceedings will be vigorously
and diligently prosecuted by the Indemnifying Party to a final conclusion or
will be settled at the discretion of the Indemnifying Party (but only with
the consent of the Indemnified Party, which consent will not be unreasonably
withheld, in the case of any settlement that provides for any relief other
than the payment of monetary damages as to which the Indemnified Party will
be indemnified in full). The Indemnifying Party will have full control of
such defense and proceedings, including (except as provided in the
immediately preceding sentence) any settlement thereof and shall keep the
Indemnified Party informed of all material developments relating to such
proceedings; PROVIDED, HOWEVER, that if requested by the Indemnifying Party,
the Indemnified Party will, at the sole cost and expense of the Indemnifying
Party, cooperate with the Indemnifying Party and its counsel in contesting
any Third Party Claim that the Indemnifying Party elects to contest, or, if
appropriate and related to the Third Party Claim in question, in making any
counterclaim against the Person asserting the Third Party Claim, or any
cross-complaint against any Person (other than the Indemnified Party or any
of its Affiliates). The Indemnified Party may retain separate counsel to
represent it in, but not control, any defense or settlement of any Third
Party Claim controlled by the Indemnifying Party pursuant to this
clause (i), and the Indemnified Party will bear its own costs and expenses
with respect to such separate counsel except as provided in the preceding
sentence and except that the Indemnifying Party will pay the costs and
expenses of such separate counsel if (x) in the Indemnified Party's good
faith judgment, it is advisable, based on advice of counsel, for the
Indemnified Party to be represented by separate counsel because a conflict
or potential conflict exists between the Indemnifying Party and the
Indemnified Party or (y) the named parties to such
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Third Party Claim include both the Indemnifying Party and the Indemnified
Party and the Indemnified Party determines in good faith, based on advice of
counsel, that defenses are available to it that are unavailable to the
Indemnifying Party. Notwithstanding the foregoing, the Indemnified Party may
retain or take over the control of the defense or settlement of any Third
Party Claim the defense of which the Indemnifying Party has elected to
control if the Indemnified Party irrevocably waives its right to indemnity
under this ARTICLE X with respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend the
Third Party Claim pursuant to SECTION 10.06(a), then the Indemnified Party
will have the right to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate proceedings,
which proceedings will be vigorously and diligently prosecuted by the
Indemnified Party to a final conclusion or will be settled at the discretion
of the Indemnified Party (with the consent of the Indemnifying Party, which
consent will not be unreasonably withheld). The Indemnified Party will have
full control of such defense and proceedings, including (except as provided
in the immediately preceding sentence) any settlement thereof; PROVIDED,
HOWEVER, that if requested by the Indemnified Party, the Indemnifying Party
will, at the sole cost and expense of the Indemnifying Party, cooperate with
the Indemnified Party and its counsel in contesting any Third Party Claim
which the Indemnified Party is contesting, or, if appropriate and related to
the Third Party Claim in question, in making any counterclaim against the
Person asserting the Third Party Claim, or any cross-complaint against any
Person (other than the Indemnifying Party or any of its Affiliates).
Notwithstanding the foregoing provisions of this clause (ii), if the
Indemnifying Party has notified the Indemnified Party within the Dispute
Period that the Indemnifying Party disputes its liability hereunder to the
Indemnified Party with respect to such Third Party Claim and if such dispute
is resolved in favor of the Indemnifying Party in the manner provided in
clause (iii) below, the Indemnifying Party will not be required to bear the
costs and expenses of the Indemnified Party's defense pursuant to this
clause (ii) or of the Indemnifying Party's participation therein at the
Indemnified Party's request, and the Indemnified Party will reimburse the
Indemnifying Party in full for all reasonable costs and expenses incurred by
the Indemnifying Party in connection with such litigation. The Indemnifying
Party may retain separate counsel to represent it in, but not control, any
defense or settlement controlled by the Indemnified Party pursuant to this
clause (ii), and the Indemnifying Party will bear its own costs and expenses
with respect to such participation.
(iii) If the Indemnifying Party notifies the Indemnified Party that it
does not dispute its liability to the Indemnified Party with respect to the
Third Party Claim under this ARTICLE X or fails to notify the Indemnified
Party within the Dispute Period whether the Indemnifying Party disputes its
liability to the Indemnified Party with respect to such Third Party Claim,
the Adverse Consequences arising from such Third Party Claim will be
conclusively deemed a liability of the Indemnifying Party under this
Article X and the Indemnifying Party shall pay the amount of such Adverse
Consequences to the Indemnified Party on demand following the final
determination thereof. If the Indemnifying Party has timely disputed its
liability with respect to such claim, the Indemnifying Party and the
Indemnified Party will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations within the Resolution
Period, such dispute shall be resolved by litigation in a court of competent
jurisdiction.
(iv) Notwithstanding any other provision of this SECTION 10.06(a) to the
contrary, Purchaser shall have the right to defend all Third Party Claims
covered by SECTION 10.04, by all appropriate proceedings, which proceedings
will be vigorously and diligently prosecuted by Purchaser to a final
conclusion or will be settled at the discretion of Purchaser (but only with
the consent of Seller, which consent will not be unreasonably withheld, in
the case of any settlement that provides for any relief involving Seller
other than the payment of monetary damages). Purchaser will have full
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control of such defense and proceedings, including (except as provided in
the immediately preceding sentence) any settlement thereof, and shall keep
Seller informed of all material developments relating to such proceedings.
Seller may retain separate counsel to represent it in, but not control, any
defense or settlement of any Third Party Claim controlled by Purchaser
pursuant to this SECTION 10.06(a)(iv) and Seller will bear its own costs and
expenses with respect to such counsel.
(b) In the event any Indemnified Party should have a claim under this
ARTICLE X against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable
promptness to the Indemnifying Party. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in such Indemnity
Notice, the Adverse Consequences arising from the claim specified in such
Indemnity Notice will be conclusively deemed a liability of the Indemnifying
Party under this ARTICLE X and the Indemnifying Party shall pay the amount of
such Adverse Consequences to the Indemnified Party on demand following the final
determination thereof. If the Indemnifying Party has timely disputed its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party will proceed in good faith to negotiate a resolution of such dispute, and
if not resolved through negotiations within the Resolution Period, such dispute
shall be resolved by litigation in a court of competent jurisdiction.
(c) In the event of any claim for indemnity under this ARTICLE X, each party
agrees to give reasonable access to its Books and Records and employees in
connection with the matters for which indemnification is sought to the extent a
party reasonably deems necessary in connection with its rights and obligations
under this ARTICLE X.
10.07 REQUIREMENTS FOR INDEMNITY. Notwithstanding anything to the contrary
contained in this Agreement, no amounts of indemnity shall be payable as a
result of any claim in respect of any and all Adverse Consequences arising under
this ARTICLE X, (a) unless the Indemnified Party has given the Indemnifying
Party a Claim Notice or Indemnity Notice, as applicable, with respect to such
claim, setting forth in reasonable detail the specific facts and circumstances
pertaining thereto, (i) as soon as practical following the time at which an
officer of the Indemnified Party discovered or reasonably should have discovered
such claim and (ii) in any event prior to the applicable Cut-off Date, and
(b) to the extent that the Indemnified Party had a reasonable opportunity, but
failed, in good faith to mitigate the Adverse Consequences, including but not
limited to the failure to use commercially reasonable efforts to recover under a
policy of insurance or under a contractual right of set-off or indemnity.
10.08 EXCLUSIVITY. After the Closing, to the extent permitted by Law, the
indemnities set forth in this ARTICLE X shall be the exclusive remedies of
Purchaser and Seller and their respective officers, directors, employees, agents
and Affiliates for any misrepresentation, breach of warranty or nonfulfillment
or failure to be performed of any covenant or agreement contained in this
Agreement, and the parties shall not be entitled to a rescission of this
Agreement or to any further indemnification rights or claims of any nature
whatsoever in respect thereof, all of which the parties hereto hereby waive.
ARTICLE XI
TERMINATION
11.01 TERMINATION. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, at any time prior to the Closing, whether
prior to or after the MPC Stockholders' Approval:
(a) by mutual written agreement of Seller, MPC and Purchaser;
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(b) by Seller, MPC or Purchaser, in the event that any Order or Law becomes
effective, and is non-appealable, restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement, upon notification of the non-terminating party
by the terminating party;
(c) by Seller, MPC or Purchaser if the MPC Stockholders' Approval shall not
be obtained by reason of the failure to obtain the requisite vote upon a vote
actually held at the MPC Stockholders' Meeting;
(d) by Seller, MPC or Purchaser (provided that the terminating party is not
then in material breach of any representation, warranty, covenant or other
agreement contained herein) if there shall have been a material breach of any of
the representations, warranties, covenants or other agreements contained in this
Agreement on the part of the other party, which breach either (i) is not cured
with fifteen (15) days following written notice by the terminating party to the
party committing such breach, or (ii) by its nature, cannot be cured prior to
March 31, 2002;
(e) at any time after March 31, 2002, by Seller, MPC or Purchaser upon
notification of the non-terminating party by the terminating party if the
Closing shall not have occurred on or before such date and such failure to
consummate is not caused by a breach of this Agreement by the terminating party;
(f) by Purchaser if (i) the Board of Directors of MPC shall have (A) failed
to recommend, or withdrawn, modified or amended in any respect adverse to
Purchaser its approval or recommendation of, this Agreement or the transactions
contemplated herein or resolved to do so, or (B) approved or recommended a
Superior Proposal from a Person (other than Purchaser) or resolved to do so, or
(ii) Seller or MPC breaches any of its agreements in SECTION 4.04, SECTION 4.11
or SECTION 4.12; or
(g) by Seller or MPC (but only prior to adoption of the MPC Stockholders'
Approval), if the Board of Directors of MPC, by majority vote, shall have
determined that an Acquisition Proposal constitutes a Superior Proposal;
provided that, (i) MPC shall have provided to Purchaser three (3) Business Days'
notice of its intention to terminate this Agreement pursuant to this
SECTION 11.01(g) (which notice shall include the most current version of the
agreement to be entered into in connection with the Superior Proposal (or a
description of all of the material terms and conditions thereof)), (ii) MPC has
complied with the provisions of SECTION 4.04, SECTION 4.11 and SECTION 4.12,
(iii) the Superior Proposal is pending at the time of such termination,
(iv) the Board of Directors shall have determined in good faith, after giving
effect to all concessions and modifications which may be offered by Purchaser
pursuant to clause (v) below, and after consultation with its financial advisors
and outside legal counsel, that such proposal is a Superior Proposal,
(v) during the three (3) Business Days' notice referred to in (i) above, Seller
and MPC shall, and shall cause the financial and legal advisors to, negotiate in
good faith with Purchaser with respect to any modifications to the terms of this
Agreement proposed by Purchaser that would enable MPC and Purchaser to proceed
with the transactions contemplated hereby, and (vi) it shall be a condition
precedent to the termination of this Agreement by Seller or MPC pursuant to this
SECTION 11.01(g) that Seller and MPC shall have made the payment of the Fee and
Expenses required by SECTION 11.03.
11.02 EFFECT OF TERMINATION. If this Agreement is validly terminated
pursuant to SECTION 11.01 and subject to the payment of amounts due under
SECTION 11.03 below, this Agreement will forthwith become null and void, and
there will be no liability or obligation on the part of Seller, MPC or Purchaser
(or any of their respective officers, directors, employees, agents or other
representatives or Affiliates), except that (i) the provisions with respect to
expenses in SECTION 13.03 and confidentiality in SECTION 13.05 will continue to
apply following any such termination, and (ii) that nothing contained herein
shall relieve any party hereto from liability for willful breach of its
representations, warranties, covenants or agreements contained in this
Agreement.
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11.03 FEES AND EXPENSES.
(a) If this Agreement is terminated (i) pursuant to SECTION 11.01(f)or (g),
then Seller and MPC, jointly and severally, shall pay to Purchaser,
(A) simultaneously with any termination by Seller or MPC pursuant to
SECTION 11.01(g), and (B) within one Business Day following any termination by
Purchaser contemplated by SECTION 11.01(f), a fee, in cash, equal to $50,000,000
(the "FEE"), and (ii) by Purchaser pursuant to SECTION 11.01(d), and any Person
shall have made an Acquisition Proposal prior to such termination, then MPC and
Seller, jointly and severally, shall pay to Purchaser on the date of execution
of a definitive agreement with respect to an Acquisition Proposal, or, if
earlier, consummation of an Acquisition Proposal, the Fee, PROVIDED, HOWEVER,
that no Fee shall be payable pursuant to clause (ii) of this SECTION 11.03
unless and until, within 12 months of such termination, MPC or Seller enter into
a definitive agreement to consummate, or consummates, any transaction the
proposal of which would have constituted an Acquisition Proposal, and PROVIDED,
FURTHER, that Seller and MPC shall not in any event be obligated to pay more
than one such fee with respect to all such occurrences and such termination. It
is understood and agreed that the Fee constitutes liquidated damages and not a
penalty.
(b) In addition to the Fee payable pursuant to SECTION 11.03(a), (i) within
one Business Day after the termination of this Agreement pursuant to
SECTION 11.01(c), (f) or (g), or (ii) if this Agreement is terminated by
Purchaser pursuant to SECTION 11.01(d) and Purchaser is entitled to receive a
Fee pursuant to SECTION 11.03(a) in connection with such termination, on the
date of the execution of a definitive agreement with respect to an Acquisition
Proposal, or, if earlier, consummation of an Acquisition Proposal, Seller and
MPC, jointly and severally, shall pay all of Purchaser's Expenses (as defined
below) up to a maximum payment pursuant to this SECTION 11.03(b) of $10,000,000.
The term "Expenses" shall include all out-of-pocket expenses and fees (including
without limitation fees and expenses payable to all banks, investment banking
firms and other financial institutions and their respective agents and counsel
for arranging or providing financial advice or financing commitments with
respect to this Agreement and the transactions contemplated hereby and all
reasonable fees and expenses of counsel, accountants, experts and consultants to
Purchaser) actually incurred by Purchaser or on its behalf in connection with
the consummation of all transactions contemplated by this Agreement.
ARTICLE XII
DEFINITIONS
12.01 DEFINITIONS. (a) Defined Terms. As used in this Agreement, the
following defined terms have the meanings indicated below:
"1935 ACT" has the meaning ascribed to it in SECTION 2.25.
"ACQUISITION PROPOSAL" means any proposal or offer with respect to (i) a
merger, reorganization, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving (x) prior to the
Restructuring MPC or any of its subsidiaries, and (y) from and after the
Restructuring but prior to Closing, Seller or any of its subsidiaries, or
(ii) any direct or indirect acquisition of all or any substantial portion of the
assets or 10% or more of the equity securities of (x) prior to the
Restructuring, MPC or any of its subsidiaries, and (y) from and after the
Restructuring but prior to Closing, Seller or any of its subsidiaries, other
than, in any such case, the transactions contemplated by this Agreement and the
Divestiture.
"ACTIONS OR PROCEEDINGS" means any action, suit, proceeding, claims,
demands, complaints, arbitration or Governmental or Regulatory Authority
investigation.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, deficiencies, costs,
liabilities, obligations, taxes, liens, losses, expenses, and fees, including,
without
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limitation, court costs, interest and reasonable fees of attorneys, accountants
and other experts or other reasonable expenses of litigation or other
proceedings or of any claim, default or assessment.
"AFFILIATE" means any Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with the Person specified. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person whether by Contract or otherwise.
"AFFILIATE CONTRACT" has the meaning ascribed to it in SECTION 4.08.
"AFFILIATED GROUP" means any affiliated group within the meaning of Code
Section 1504(a), or any similar group defined under a similar provision of
state, local or foreign Law.
"AGREEMENT" means this Stock Purchase Agreement and the Disclosure Schedule
and the certificates delivered in accordance with SECTIONS 6.03 and 7.03, as the
same shall be amended from time to time.
"ASSETS AND PROPERTIES" of any Person means all assets and properties of
every kind, nature, character and description (whether real, personal or mixed,
whether tangible or intangible, and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person.
"BENEFICIALLY" means the beneficial owner of such securities under
Rule 13d-3 of the Securities Exchange Act of 1934, as amended, including
securities which such Person has a right to acquire (whether such right is
exercisable immediately or only after the passage of time).
"BENEFIT PLAN" means any Plan established by MPC, the Company or any
Subsidiary, or any predecessor or Affiliate of any of the foregoing, existing at
the Closing Date (or at any time within the five (5) year period prior thereto
for a Plan subject to Title IV of ERISA), to which MPC, the Company or any
Subsidiary contributes or has contributed, or under which any employee, former
employee or director of MPC, the Company or any Subsidiary or any beneficiary
thereof is covered, is eligible for coverage or has benefit rights.
"BACKGROUND MATERIALS" has the meaning ascribed to it in SECTION 3.11.
"BOOKS AND RECORDS" means all files, documents, instruments, papers, books
and records relating to the Business or Condition of MPC and the Company,
including without limitation financial statements, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and books,
stock transfer ledgers, Contracts, Licenses, customer lists, computer files and
programs, retrieval programs, operating data and plans and environmental studies
and plans.
"BUDGET" means, with respect to fiscal year 2000, the FY2000 operating and
capital budget of MPC and the Subsidiaries attached as SECTION 12.01 OF THE
DISCLOSURE SCHEDULE hereto, and, with respect to fiscal year 2001, the FY2001
operating and capital budget of MPC and the Subsidiaries which shall be
delivered to Purchaser not later than December 15, 2000 provided that the
amounts budgeted therein shall be within 5% (plus or minus) of the amounts set
forth in ANNEX II attached hereto for the line items set forth thereon, unless
MPC has previously notified Purchaser and Purchaser has consented to such other
amounts, such consent not to be unreasonably withheld or delayed.
"BUSINESS DAY" means a day other than Saturday, Sunday or any day on which
banks located in the State of Montana are authorized or obligated to close.
"BUSINESS OR CONDITION OF MPC AND THE COMPANY" means the business, financial
condition or results of operations of MPC, the Company and the Subsidiaries
taken as a whole.
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"CAUSE" means the failure to satisfactorily perform job duties, disruption
of the employer's operation, or other legitimate business reason; provided,
however, that legitimate business reasons shall not include reductions in force,
reorganizations, nor restructuring.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended and the rules and regulations promulgated
thereunder.
"CERCLIS" means the Comprehensive Environmental Response and Liability
Information System, as provided by 40 C.F.R. Section300.5.
"CLAIM NOTICE" means written notification pursuant to SECTION 10.06(a) of a
Third Party Claim as to which indemnity under ARTICLE X is sought by an
Indemnified Party, enclosing a copy of all papers served, if any, and specifying
the nature of and the basis for such Third Party Claim and for the Indemnified
Party's claim against the Indemnifying Party under ARTICLE X, together with the
amount of, or if not then reasonably determinable, the estimated amount,
determined in good faith, of the Adverse Consequences arising from such Third
Party Claim.
"CLOSING" means the closing of the transactions contemplated by
SECTION 1.03.
"CLOSING DATE" means (a) the fifth Business Day after the day on which the
last of the consents, approvals, actions, filings, notices or waiting periods
described in or related to the filings described in SECTIONS 6.04 through 6.10
and SECTIONS 7.04 through 7.06 has been obtained, made or given or has expired,
as applicable, or (b) such other date as Purchaser and Seller mutually agree
upon in writing.
"CMPL" means Canadian-Montana Pipe Line Corporation, an Alberta corporation.
"COAL SALE" means the sale, by Entech, of all the outstanding capital stock
of Basin Resources Inc., a Colorado corporation, Horizon Coal Services Inc., a
Montana corporation, North Central Energy Company, a Colorado corporation,
Northwestern Resources Co., a Montana corporation and Western Energy Company, a
Montana corporation.
"CODE" means the Internal Revenue Code of 1986, as amended, or any
replacement, and the rules and regulations promulgated thereunder.
"COLSTRIP 1, 2 AND 3 TRANSMISSION ASSETS" has the meaning ascribed to it in
that certain Asset Purchase Agreement, dated October 31, 1998, as amended, by
and between PPL Montana LLC and MPC.
"COMMON STOCK" means the common stock, par value $.01 per share, of the
Company.
"COMPANY" has the meaning ascribed to it in the forepart of this Agreement.
"CONTRACT" means any agreement, lease, license, evidence of Indebtedness,
mortgage, indenture, security agreement or other contract; PROVIDED, HOWEVER,
that Contract shall not mean a transaction under a published tariff approved by
a Governmental or Regulatory Authority.
"COVERED PARTICIPANTS" has the meaning ascribed to it in SECTION 5.04(e).
"CUT-OFF DATE" means, with respect to any representation, warranty, covenant
or agreement contained in this Agreement, the date on which such representation,
warranty, covenant or agreement ceases to survive as provided in SECTION 9.01 or
ARTICLE X.
"DATA ROOM" has the meaning ascribed to it in SECTION 3.11.
"DEFINED BENEFIT PLAN" means each Benefit Plan which is subject to Part 3 of
Title I of ERISA, Section 412 of the Code or Title IV of ERISA.
"DES" means Discovery Energy Solutions, Inc., a Montana corporation.
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"DISCLOSURE SCHEDULE" means the record delivered to Purchaser by Seller
herewith and dated as of the date hereof, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein by Seller pursuant to this Agreement.
"DISPUTE PERIOD" means the period ending thirty (30) days following receipt
by an Indemnifying Party of either a Claim Notice or an Indemnity Notice.
"DIVESTITURE" means the completion of the IPP Sale, the Oil and Gas Sale and
the Coal Sale.
"DOLLAR" or "$" means a United States dollar, the lawful currency of the
United States, unless otherwise designated.
"ENTECH" means Entech, Inc., a Montana corporation.
"ENVIRONMENTAL LAW" means any Law or Order relating to the regulation or
protection of human health, public health or safety or the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, ambient air, soil, surface
water, ground water, wetlands, land or subsurface strata), or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes.
"ENVIRONMENTAL LOSS" has the meaning ascribed to it in SECTION 10.04.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" means any Person who is in the same controlled group of
corporations or who is under common control with Seller or, before the Closing,
the Company or any Subsidiary (within the meaning of Section 414 of the Code).
"EXCHANGE ACT" means the Exchange Act of 1934, as amended.
"EXON-FLORIO AMENDMENT" means Section 721 of the Defense Production Act of
1950, as amended, and any successor thereto and the regulations issued pursuant
thereto or in consequence thereof.
"EXPENSES" shall have the meaning ascribed to it in SECTION 11.03(b).
"FEE" shall have the meaning ascribed to it in SECTION 11.03(a).
"FCC" means the Federal Communications Commission, or any successor entity
thereto.
"FERC" means the Federal Energy Regulatory Commission, or any successor
entity thereto.
"FINANCIAL STATEMENTS" means the consolidated financial statements of MPC
and its consolidated subsidiaries delivered to Purchaser pursuant to
SECTION 2.09 or 4.06.
"GAAP" means United States generally accepted accounting principles,
consistently applied throughout the specified period and in the immediately
prior comparable period.
"GOVERNMENTAL OR REGULATORY AUTHORITY" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or Canada or any state, county, city or other political
subdivision.
"HSR ACT" means Section 7A of the Clayton Act (Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the rules
and regulations promulgated thereunder.
"INCOME TAXES" means any federal, state, local, or foreign income Tax,
including any interest, penalty, or addition thereto, whether disputed or not.
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"INCOME TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Income Taxes, including any
schedule or attachment thereto.
"INDEBTEDNESS" means, with respect to any Person, whether recourse is to all
or a portion of the Assets or Properties of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation for such Person evidenced by bonds, debentures, notes or similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses, (iii) every obligation of such Person issued
or assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business), (iv) every capital lease obligation of such Person, (v) the maximum
fixed redemption or repurchase price of mandatorily redeemable stock of such
Person at the time of determination, (vii) every obligation to pay rent or other
payment amounts of such Person with respect to any sale and leaseback
transaction to which such Person is a party, (vii) all obligations under
interest rate protection, hedging or similar agreements, (ix) every obligation
of the type referred to in clauses (i) through (vii) of another Person and all
dividends of another Person the payment of which, in either case, such Person
has guaranteed or is responsible or liable for, directly or indirectly, as
obligor, guarantor or otherwise, or which is secured by a Lien on any Asset or
Property of such Person.
"INDEMNIFIED PARTY" means any Person claiming indemnification under any
provision of ARTICLE X.
"INDEMNIFYING PARTY" means any Person against whom a claim for
indemnification is being asserted under any provision of ARTICLE X.
"INDEMNITY NOTICE" means written notification pursuant to SECTION 10.06(b)
of a claim for indemnity under ARTICLE X by an Indemnified Party, specifying the
nature of and basis for such claim, together with the amount or, if not then
reasonably determinable, the estimated amount, determined in good faith, of the
Adverse Consequences arising from such claim.
"INDEPENDENT TRANSMISSION COMPANY" means a for-profit independent
transmission company proposed to be created by MPC, Avista Corp., Portland
General Electric Co., Puget Sound Energy, Inc., Sierra Pacific Power Co., and
Nevada Power Co., pursuant to the Independent Transmission Company Memorandum of
Understanding dated April 26, 2000, or any other independent transmission
company of similar nature that conforms to FERC Order 2000, whether in existence
or proposed to be created, of which MPC, the Company or any Subsidiary is a
member or proposes to be a member.
"INTELLECTUAL PROPERTY" means all patents and patent rights, trademarks and
trademark rights, trade names and trade name rights, service marks and service
mark rights, service names and service name rights, brand names, inventions,
copyrights and copyright rights, processes, formulae, trade dress, business and
product names, logos, slogans, trade secrets, industrial models, processes,
designs, methodologies, computer programs (including all source codes but
excluding third party commercial software used in the ordinary course of
business) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how and all pending applications for
and registrations of patents, trademarks, service marks and copyrights.
"INTERIM FINANCIAL STATEMENT DATE" means July 31, 2000.
"INTERIM FINANCIAL STATEMENTS" means the Financial Statements for the most
recent fiscal period of MPC delivered to Purchaser pursuant to
SECTION 2.09(a)(ii).
"IPP SALE" means the sale of the outstanding capital stock of Continental
Energy Services, Inc. a Montana corporation, by Entech.
"IRS" means the United States Internal Revenue Service or any successor
agency.
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"KNOWLEDGE OF SELLER AND MPC" (including any correlative term) with respect
to a particular fact or other matters, means that any officer of MPC, the
Company or any Subsidiary, or a reasonably prudent individual in the position of
such officer, after due inquiry, knows or is actually aware of such fact or
other matter.
"LAWS" means all laws, statutes, rules, regulations, ordinances and other
pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.
"LICENSES" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"LIENS" means any mortgage, pledge, assessment, security interest, lease,
lien, adverse claim, levy, charge or other encumbrance of any kind, or any
conditional sale Contract, title retention Contract or other Contract to give
any of the foregoing.
"MPC" has the meaning ascribed to it in the forepart of this Agreement.
"MPC AFFILIATED GROUP" means the Affiliated Group of which MPC has been or
is the common parent including MPC.
"MPC 401(k) PLAN" means the Montana Power Company and Subsidiaries Employee
Retirement Savings Plan, as in effect from time to time.
"MPC PENSION PLAN" has the meaning ascribed to it in SECTION 5.04(g).
"MPC STOCK OPTION" has the meaning ascribed to it in SECTION 5.04(i).
"MPC STOCKHOLDERS' APPROVAL" has the meaning ascribed to it in
SECTION 4.12.
"MPC STOCKHOLDERS' MEETING" has the meaning ascribed to it in SECTION 4.11.
"NPL" means the National Priorities List under CERCLA.
"OIL AND GAS SALE" means the sale, by Entech, of all the outstanding capital
stock and assets of Altana Exploration Company, a Montana corporation, and all
the outstanding capital stock of Entech Gas Ventures, Inc., a Montana
corporation, Glacier Gas Company, a Montana corporation, North American
Resources Company, a Montana corporation, The Montana Power Gas Company, a
Montana corporation, The Montana Power Trading & Marketing Company, a Montana
corporation, and Altana Exploration Ltd., an Alberta corporation.
"OPTION" with respect to any Person means any security, convertible
security, right, subscription, call, warrant, option, "phantom" stock right or
other Contract that gives the right to (i) purchase or otherwise receive or be
issued any shares of capital stock of such Person or any security of any kind
convertible into or exchangeable or exercisable for any shares of capital stock
of such Person or (ii) receive or exercise any benefits or rights similar to any
rights enjoyed by or accruing to the holder of shares of capital stock of such
Person, including any rights to participate in the equity or income of such
Person or to participate in or direct the election of any directors or officers
of such Person or the manner in which any shares of capital stock of such Person
are voted.
"ORDER" means any writ, judgment, decree, injunction or other order of any
Governmental or Regulatory Authority (in each such case whether preliminary or
final).
"PARTNERSHIP" has the meaning ascribed to it in SECTION 8.12.
"PBGC" means the Pension Benefit Guaranty Corporation established under
ERISA.
"PSC" means the Montana Public Service Commission.
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"PERMITTED LIEN" means (i) any Lien for Taxes not yet due or delinquent or
being contested in good faith by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP, (ii) any statutory Lien
arising in the ordinary course of business by operation of Law with respect to a
Liability that is not yet due or delinquent and (iii) any minor imperfection of
title or similar Lien which individually or in the aggregate with other such
Liens could not reasonably be expected to materially adversely affect the
Business or Condition of MPC and the Company.
"PENSION BENEFIT PLAN" means each Benefit Plan which is a pension benefit
plan within the meaning of Section 3(2) of ERISA.
"PERSON" means any natural person, corporation, limited liability company,
general partnership, limited partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory Authority.
"PILKO ENVIRONMENTAL REPORTS" means the reports prepared by Pilko &
Associates, Inc. for MPC, titled as follows: "Environmental Assessment of
Montana Power's Utility Business" (including Attachments A and B thereto) dated
June, 2000; "Phase II Investigation Colstrip Project" dated August, 1998; "Phase
II Investigation Corette Project" dated August, 1998; "Phase II Investigation
Hydroelectric Project Portfolio (except Milltown)" dated August, 1998; and
"Phase II Investigation Milltown Hydroelectric Project" dated August, 1998.
"PLAN" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, including, but not limited to, any "employee
benefit plan" within the meaning of Section 3(3) of ERISA.
"PROXY STATEMENT" has the meaning ascribed to it in SECTION 2.22.
"PURCHASE PRICE" has the meaning ascribed to it in SECTION 1.02.
"PURCHASER" has the meaning ascribed to it in the forepart of this
Agreement.
"PURCHASER INDEMNITEES" has the meaning ascribed to it in SECTION 10.01.
"QUALIFIED PLAN" means each Benefit Plan which is intended to qualify under
Section 401 of the Code.
"QF" means Qualified Facilities as defined in the Public Utility Regulatory
Policies Act of 1978 and the regulations promulgated thereunder, specifically 18
CFR Part 292.
"REGIONAL TRANSMISSION ORGANIZATION" means that not-for-profit corporation
incorporated in the State of Washington on April 27, 2000 in relation to the
creation of a regional transmission organization (having the characteristics and
functions set forth in FERC Order 2000) by and among Avista, the Bonneville
Power Authority, Idaho Power Company, MPC, Nevada Power Company, PacifiCorp,
Portland General Electric Company, Puget Sound Energy, Inc. and Sierra Pacific
Power Company and any other electric energy transmission system owners willing
to participate.
"REPRESENTATIVES" has the meaning ascribed to it in SECTION 4.03.
"RESOLUTION PERIOD" means the period ending thirty (30) days following
receipt by an Indemnified Party of a written notice from an Indemnifying Party
stating that it disputes all or any portion of a claim set forth in a Claim
Notice or an Indemnity Notice.
"RESTRUCTURING" means the reorganization of the corporate structure of MPC
including, but not limited to, (i) the merger of Entech with and into Entech
LLC, a Montana limited liability company wholly owned by MPC, following which
Entech LLC shall be the survivor, (ii) the merger of MPC with
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and into the Company, a Montana limited liability company wholly owned by
Seller, pursuant to which shareholders of MPC will receive capital stock of
Seller in exchange for capital stock of MPC, and following which the Company
shall be the survivor, and (iii) the distribution of the capital stock of Entech
LLC by the Company to Seller.
"RIGHTS AGREEMENT" has the meaning ascribed to it in SECTION 2.27.
"SEC" means the Securities and Exchange Commission or any successor entity
thereto.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER" has the meaning ascribed to it in the forepart of this Agreement.
"SELLER INDEMNITEES" has the meaning ascribed to it in SECTION 10.01(b).
"SUBJECT DEFINED BENEFIT PLAN" means each Defined Benefit Plan listed and
described in SECTION 2.13(a) OF THE DISCLOSURE SCHEDULE.
"SUBSIDIARIES" means CMPL, DES, Colstrip Community Services Company, a
Montana corporation, Montana Power Services Company, a Montana corporation, and
One Call Locators, Ltd., a Montana corporation.
"SUBSTITUTE STOCK OPTIONS" has the meaning ascribed to it in
SECTION 5.04(i).
"SUPERIOR PROPOSAL" shall mean a bona fide written Acquisition Proposal
which the Board of Directors of MPC (prior to the Restructuring and prior to
Closing) or Seller (after the Restructuring but prior to Closing) concludes in
good faith after consultation with a financial advisor of nationally recognized
reputation, taking into account, all legal, financial, regulatory and other
aspects of the proposal and the Person making the proposal (including, but not
limited to, any break-up fees, expense reimbursement provisions and conditions
to consummation), (i) would, if consummated, result in a transaction that is
more favorable to all of the stockholders (in their capacities as stockholders)
of MPC (prior to the Restructuring) or Seller (after the Restructuring but prior
to Closing), from a financial point of view than the transactions contemplated
by this Agreement and (ii) is reasonably capable of being consummated; provided,
that for purposes of this definition, the term "Acquisition Proposal" shall have
the meaning set forth in SECTION 12.01 except that (x) the reference to "10%" in
the definition of "Acquisition Proposal" shall be deemed to be a reference to
"51%", (y) "Acquisition Proposal" shall only be deemed to refer to a transaction
involving, prior to the Restructuring MPC, and after the Restructuring, but
prior to Closing, Seller, and (z) the reference to "assets" shall refer to the
assets of, prior to the Restructuring, MPC and its subsidiaries taken as a
whole, and after the Restructuring but prior to Closing to Seller and its
subsidiaries, taken as a whole, and not the assets of any of the Subsidiaries
alone.
"TAX RETURNS" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TAXES" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security, unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"THIRD PARTY CLAIM" has the meaning ascribed to it in SECTION 10.06(A).
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"TREAS REG." means the regulations (including any proposed or temporary
regulations) issued under the Code by the Department of Treasury as they may be
amended from time to time, or any applicable successor regulations.
"UNITS" has the meaning ascribed to it in the recitals to this Agreement.
"UTILITY BUSINESS" has the meaning ascribed to it in SECTION 2.28.
"WHOLESALE TRANSMISSION SERVICES AGREEMENT" means the Wholesale Transmission
Services Agreement dated December 17, 1999, by and between MPC and PP&L Montana,
LLC.
(b) CONSTRUCTION OF CERTAIN TERMS AND PHRASES. Unless the context of this
Agreement otherwise requires, (i) words of any gender include each other gender;
(ii) words using the singular or plural number also include the plural or
singular number, respectively; (iii) the terms "hereof," "herein," "hereby" and
derivative or similar words refer to this entire Agreement; (iv) the terms
"Article" or "Section" refer to the specified Article or Section of this
Agreement; and (v) the phrase "ordinary course of business" refers to the
business of the Company or a Subsidiary. Whenever this Agreement refers to a
number of days, such number shall refer to calendar days unless Business Days
are specified. All accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP. Any representation or warranty
contained herein as to the enforceability of a Contract shall be subject to the
effect of any bankruptcy, insolvency, reorganization, moratorium or other
similar law affecting the enforcement of creditors' rights generally and to
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at Law).
ARTICLE XIII
MISCELLANEOUS
13.01 NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to Purchaser, to:
NorthWestern Corporation
125 South Dakota Avenue
Sioux Falls, SD 57104-6403
Facsimile No.: (605) 978-2910
Attn: Eric R. Jacobsen
Vice President, General Counsel
with a copy to:
Paul, Hastings, Janofsky, & Walker, LLP
1299 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2400
Facsimile No.: (202) 508-9700
Attn: Charles A. Patrizia
If to Seller, to:
Touch America Holdings, Inc.
40 East Broadway Street
Butte, Montana 59701-9394
Facsimile No.: (406) 497-2451
Attn: Vice President and General Counsel
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If to MPC:
40 East Broadway Street
Butte, Montana 59701-9394
Facsimile No.: (406) 497-2451
Attn: Vice President and General Counsel
, in each case with a copy to:
Milbank, Tweed, Hadley & McCloy LLP
One Chase Manhattan Plaza
New York, NY 10005
Facsimile No.: (212) 530-5219
Attn: John T. O'Connor
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
13.02 ENTIRE AGREEMENT. This Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter hereof,
including without limitation that certain confidentiality agreement between the
parties dated June 1, 2000, and contains the sole and entire agreement between
the parties hereto with respect to the subject matter hereof.
13.03 EXPENSES. Except as otherwise expressly provided in this Agreement
(including without limitation as provided in SECTIONS 11.02 and 11.03), whether
or not the transactions contemplated hereby are consummated, each party will pay
its own costs and expenses incurred in connection with the negotiation,
execution and closing of this Agreement and the transactions contemplated
hereby.
13.04 PUBLIC ANNOUNCEMENTS. At all times at or before the Closing, MPC,
Seller and Purchaser will not issue or make any reports, statements or releases
to the public or generally to the employees, customers, suppliers or other
Persons to whom MPC, the Company and the Subsidiaries sell goods or provide
services or with whom the Company and the Subsidiaries otherwise have
significant business relationships with respect to this Agreement or the
transactions contemplated hereby (including transition, integration and similar
plans) without the consent of the other, which consent shall not be unreasonably
withheld. If any party is unable to obtain the approval of its public report,
statement or release from the other party and such report, statement or release
is, in the opinion of legal counsel to such party, required by Law in order to
discharge such party's disclosure obligations, then such party may make or issue
the legally required report, statement or release and promptly furnish the other
party with a copy thereof. MPC, Seller and Purchaser will also obtain the other
party's prior approval which approval shall not be unreasonably withheld of any
press release to be issued immediately following the Closing announcing the
consummation of the transactions contemplated by this Agreement.
13.05 CONFIDENTIALITY. Each party hereto will hold, and will use its best
efforts to cause its Affiliates, and in the case of Purchaser, any Person who
has provided, or who is considering providing, financing to Purchaser to finance
all or any portion of the Purchase Price, and their respective Representatives
to hold, in strict confidence from any Person (other than any such Affiliate,
Person who has provided, or who is considering providing, financing or
Representative), unless (i) compelled
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to disclose by judicial or administrative process (including without limitation
in connection with obtaining the necessary approvals of this Agreement and the
transactions contemplated hereby of Governmental or Regulatory Authorities) or
by other requirements of Law or (ii) disclosed in an Action or Proceeding
brought by a party hereto in pursuit of its rights or in the exercise of its
remedies hereunder, all documents and information concerning the other party or
any of its Affiliates furnished to it by the other party or such other party's
Representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (a) previously known by the party receiving such documents
or information, (b) in the public domain (either prior to or after the
furnishing of such documents or information hereunder) through no fault of such
receiving party or (c) later acquired by the receiving party from another source
if the receiving party is not aware that such source is under an obligation to
another party hereto to keep such documents and information confidential;
provided that following the Closing the foregoing restrictions will not apply to
Purchaser's use of documents and information concerning MPC, the Company and the
Subsidiaries furnished by Seller and MPC hereunder. In the event the
transactions contemplated hereby are not consummated, upon the request of the
other party, each party hereto will, and will cause its Affiliates, any Person
who has provided, or who is providing, financing to such party and their
respective Representatives to, promptly (and in no event later than five
(5) Business Days after such request) redeliver or cause to be redelivered all
copies of confidential documents and information furnished by the other party in
connection with this Agreement or the transactions contemplated hereby and
destroy or cause to be destroyed all notes, memoranda, summaries, analyses,
compilations and other writings related thereto or based thereon prepared by the
party which furnished such documents and information or its Representatives.
13.06 WAIVER. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
13.07 AMENDMENT. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of each party hereto.
13.08 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person.
13.09 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any party hereto without the
prior written consent of the other party hereto and any attempt to do so will be
void, except (a) for assignments and transfers by operation of Law and (b) that
Purchaser may assign any or all of its rights, interests and obligations
hereunder to a wholly-owned subsidiary, provided that any such subsidiary agrees
in writing to be bound by all of the terms, conditions and provisions contained
herein, but no such assignment referred to in clause (b) shall relieve Purchaser
of its obligations hereunder. Subject to the preceding sentence, this Agreement
is binding upon, inures to the benefit of and is enforceable by the parties
hereto and their respective successors and assigns.
13.10 HEADINGS. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
13.11 INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be
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fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom.
13.12 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the Laws of the State of New York applicable to a Contract
executed and performed in such State.
13.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
13.14 INSURANCE COVERAGE AFTER CLOSING. The parties hereto agree and
acknowledge that, except as disclosed in SECTION 13.14 OF THE DISCLOSURE
SCHEDULE, each insurance policy listed in SECTION 2.18 OF THE DISCLOSURE
SCHEDULE maintained by Seller and its Affiliates (including MPC, the Company and
the Subsidiaries) shall be available to or cover MPC, the Company and the
Subsidiaries or their respective assets, properties, operations and liabilities
after the Closing Date, and all benefits and coverage under each such insurance
policy shall continue following the Closing Date.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officer of each party hereto as of the date first above
written.
NORTHWESTERN CORPORATION
By: /s/ ERIC R. JACOBSEN
-----------------------------------------
Name: Eric R. Jacobsen
Title: Vice President, General Counsel
TOUCH AMERICA HOLDINGS, INC.
By: /s/ J.P. PEDERSON
-----------------------------------------
Name: J.P. Pederson
Title: Vice President & Chief Financial
Officer
THE MONTANA POWER COMPANY
By: /s/ J.P. PEDERSON
-----------------------------------------
Name: J.P. Pederson
Title: Vice President & Chief Financial
Officer
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ANNEX C
MONTANA BUSINESS CORPORATION ACT
SECTIONS 35-1-826 THROUGH 35-1-839
35-1-826 Definitions.
As used in 35-1-826 through 35-1-839, the following definitions apply:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" includes the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under 35-1-827 and who exercises that right when and in the
manner required by 35-1-829 through 35-1-837.
(4) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment at the average rate currently paid by the
corporation on its principal bank loans or, if the corporation has no loans, at
a rate that is fair and equitable under all the circumstances.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial shareholder to the
extent of the rights granted by a nominee certificate on file with a
corporation.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
35-1-827 Right to dissent.
(1) A shareholder is entitled to dissent from and obtain payment of the fair
value of the shareholder's shares in the event of any of the following corporate
actions:
(a) consummation of a plan of merger to which the corporation is a party
if:
(i) shareholder approval is required for the merger by 35-1-815 or
the articles of incorporation and the shareholder is entitled to vote on
the merger; or
(ii) the corporation is a subsidiary that is merged with its parent
corporation under 35-1-818;
(b) consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired if the shareholder
is entitled to vote on the plan;
(c) consummation of a sale or exchange of all or substantially all of
the property of the corporation other than in the usual and regular course
of business if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the shareholders
within 1 year after the date of sale;
(d) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of the shares;
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(ii) creates, alters, or abolishes a right in respect of redemption,
including a provision with respect to a sinking fund for the redemption
or repurchase of the shares;
(iii) alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
35-1-828 Dissent by nominees and beneficial owners.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares held
on his behalf only if:
(a) he submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(b) he does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
35-1-829 Notice of dissenters' rights.
(1) If a proposed corporate action creating dissenters' rights under
35-1-827 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under 35-1-826 through 35-1-839 and must be accompanied by a copy of 35-1-826
through 35-1-839.
(2) If a corporate action creating dissenters' rights under 35-1-827 is
taken without a vote of shareholders, the corporation shall give written
notification to all shareholders entitled to assert dissenters' rights that the
action was taken and shall send them the dissenters' notice described in
35-1-831.
35-1-830 Notice of intent to demand payment.
(1) If proposed corporate action creating dissenters' rights under 35-1-827
is submitted to a vote at a shareholders' meeting, a shareholder who wishes to
assert dissenters' rights:
(a) shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action
is effectuated; and
(b) may not vote his shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1)(a)
is not entitled to payment for his shares under 35-1-826 through 35-1-839.
35-1-831. Dissenters' notice.
(1) If proposed corporate action creating dissenters' rights under 35-1-827
is authorized at a shareholders' meeting, the corporation shall deliver a
written dissenters' notice to all shareholders who satisfied the requirements of
35-1-830.
(2) The dissenters' notice must be sent no later than 10 days after the
corporate action was taken and must:
(a) state where the payment demand must be sent and where and when
certificates for certified shares must be deposited;
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(b) inform shareholders of uncertificated shares to what extent transfer
of the shares will be restricted after the payment is received;
(c) supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and that requires the person asserting dissenters'
rights to certify whether or not he acquired beneficial ownership of the
share before the date;
(d) set a date by which the corporation must receive the payment demand,
which may not be fewer than 30 nor more than 60 days after the date the
required notice under subsection (1) is delivered; and
(e) be accompanied by a copy of 35-1-826 through 35-1-839.
35-1-832 Duty to demand payment.
(1) A shareholder sent a dissenters' notice described in 35-1-831 shall
demand payment, certify whether the shareholder acquired beneficial ownership of
the shares before the date required to be set forth in the dissenters' notice
pursuant to 35-1-831(2)(c), and deposit his certificates in accordance with the
terms of the notice.
(2) The shareholder who demands payment and deposits his certificates under
subsection (1) retains all other rights of a shareholder until these rights are
canceled or modified by the taking of the proposed corporate action.
(3) A shareholder who does not demand payment or deposit his certificates
where required, each by the date set in the dissenters' notice, is not entitled
to payment for his shares under 35-1-826 through 35-1-839.
35-1-833 Share restrictions.
(1) The corporation may restrict the transfer of uncertificated shares from
the date of the demand for their payment is received until the proposed
corporate action is taken or the restrictions are released under 35-1-835.
(2) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are canceled
or modified by the taking of the proposed corporate action.
35-1-834 Payment.
(1) Except as provided in 35-1-836, as soon as the proposed corporate action
is taken or upon receipt of a payment demand, the corporation shall pay each
dissenter who complied with 35-1-832 the amount the corporation estimates to be
the fair value of the dissenter's shares plus accrued interest.
(2) The payment must be accompanied by:
(a) the corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(b) a statement of the corporation's estimate of the fair value of the
shares;
(c) an explanation of how the interest was calculated;
(d) a statement of the dissenter's right to demand payment under
35-1-837; and
(e) a copy of 35-1-826 through 35-1-839.
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35-1-835 Failure to take action.
(1) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under 35-1-831 and repeat the payment demand procedure.
35-1-836 After-acquired shares.
(1) A corporation may elect to withhold payment required by 35-1-834 from a
dissenter unless the dissenter was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1), after taking the proposed corporate action, the corporation
shall estimate the fair value of the shares plus accrued interest and shall pay
this amount to each dissenter who agrees to accept it in full satisfaction of
his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, and explanation of how the interest
was calculated, and a statement of the dissenter's right to demand payment under
35-1-837.
35-1-837 Procedure if shareholder dissatisfied with payment or offer.
(1) A dissenter may notify the corporation in writing of the dissenter's own
estimate of the fair value of the dissenter's shares and the amount of interest
due and may demand payment of the dissenter's estimate, less any payment under
35-1-834, or reject the corporation's offer under 35-1-836 and demand payment of
the fair value of the dissenter's shares and the interest due if"
(a) the dissenter believes that the amount paid under 35-1-834 or
offered under 35-1-836 is less than the fair value of the dissenter's shares
or that the interest due in incorrectly calculated;
(b) the corporation fails to make payment under 35-1-834 within 60 days
after the date set for demanding payment; or
(c) the corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(2) A dissenter waives the right to demand payment under this section unless
he notifies the corporation of his demand in writing under subsection
(1) within 30 days after the corporation made or offered payment for his shares.
35-1-838 Court action.
(1) If a demand for payment under 35-1-837 remains unsettled, the
corporation shall commence a proceeding with 60 days after receiving the payment
demand and shall petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(2) The corporation shall commence the proceeding in the district court of
the county where the corporation's principal office or, if its principal office
is not located in the state, where its registered office located. If the
corporation is a foreign corporation without a registered office in this state,
it
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shall commence the proceeding in the county in this state where the registered
office of the domestic corporation merged with or whose shares were acquired by
the foreign corporation was located.
(3) The corporation shall make all dissenters whose demands remain
unsettled, whether or not residents of this state, parties to the proceeding as
in an action against their shares, and all parties must be served by certified
mail or by publication as provided by law.
(4) The jurisdiction of the district court in which the proceeding is
commenced under subsection (2) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them or in any amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding is entitled to judgment:
(a) for the amount, if any, by which the court finds the fair value of
the dissenter's shares plus interest exceeds the amount paid by the
corporation; or
(b) for the fair value plus accrued interest of his after-acquired
shares for which the corporation elected to withhold payment under 35-1-836.
35-1-839 Court costs and attorney fees.
(1) The court in an appraisal proceeding commenced under 35-1-838 shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court. The court shall assess the costs
against the corporation, except that the court may assess costs against all or
some of the dissenters, in amounts the court finds equitable, to the extent the
court finds dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under 35-1-837.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of 35-1-829 through 35-1-837; or
(b) against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by 35-1-826 through 35-1-839.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated and that the fees
for those services should not be assessed against the corporation, the court may
award the counsel reasonable attorney fees to be paid out of the amounts awarded
the dissenters who were benefited.
C-5
[LOGO MONTANA POWER COMPANY]
IMPORTANT
PLEASE SUBMIT YOUR PROXY TODAY BY ONE OF THE FOLLOWING METHODS:
TELEPHONE [GRAPHIC] INTERNET [GRAPHIC] MAIL [GRAPHIC]
If you do so now, the company will
be saved the expense of follow up
solicitations.
PLEASE SEE REVERSE SIDE FOR INSTRUCTIONS.
- --------------------------------------------------------------------------------
- PLEASE DETACH AT PERFORATION -
[X] PLEASE MARK VOTES AS COMMON STOCK
IN THE EXAMPLE USING The proxy is instructed to vote as follows
BLACK OR BLUE INK
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2 AND 3.
FOR AGAINST WITHOLD
1. MERGER OF THE MONTANA POWER COMPANY [ ] [ ] [ ]
WITH AND INTO THE MONTANA POWER L.L.C.
Approval of the agreement and plan of merger among The Montana Power
Company, Touch America Holdings, Inc., a Delaware corporation and a wholly
owned subsidiary of The Montana Power Company, and The Montana Power
L.L.C., a Montana limited liability company and a wholly owned subsidiary
of Touch America Holdings, dated as of February 20, 2001, the result of
which is that holders of common shares of The Montana Power Company will
receive one share of Touch America Holdings' common stock for each share of
common stock of The Montana Power Company and the holders of shares of
Preferred Stock, $6.875 Series of The Montana Power Company will receive one
share of Touch America Holdings' Preferred Stock, $6.875 Series for each
share of Preferred Stock, $6.875 Series of The Montana Power Company.
FOR AGAINST WITHOLD
2. SALE OF THE UTILITY BUSINESS TO NORTHWESTERN [ ] [ ] [ ]
Approval of the sale of substantially all of the assets of The Montana
Power Company relating to its utility business as contemplated by the Unit
Purchase Agreement between NorthWestern Corporation, The Montana Power
Company, and Touch America Holdings, Inc., dated as of September 29, 2000.
FOR AGAINST WITHOLD
3. REDEMPTION OF PREFERRED STOCK [ ] [ ] [ ]
Approval of the redemption of the Montana Power Company's outstanding
Preferred Stock, $4.20 Series and Preferred Stock, $6.00 Series.
Signature(s): Dated: , 2001
------------------------------------------------------------------------------------- ---------------
Please sign as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If stock is registered in joint tenancy, all tenants must sign the proxy.
VOTE BY TELEPHONE OR INTERNET
QUICK***EASY***IMMEDIATE
[TELEPHONE GRAPHIC] VOTE BY TELEPHONE VOTE BY INTERNET [PC GRAPHIC]
It's fast and convenient and your vote is It's fast and convenient and your vote is posted immediately.
posted immediately. In addition, you may elect to receive all future materials by
Internet.
Just follow these four easy steps: Just follow these four easy steps:
1. Have your proxy card in hand when you call. 1. Have your proxy card in hand when you access our web site.
2. Using a touch-tone telephone, call our toll-free 2. Go to the website: www.voteyourproxy.com
number 1-800-245-6767.
3. You will be prompted to enter the control 3. You will be prompted to enter the proxy number, company
number shown on the reverse side. number, and account number shown on the reverse side.
4. Follow the voting instructions to vote your 4. Follow the prompts to vote your shares.
shares.
VOTE BY MAIL
Mark, sign and date your proxy form below, detach it and return it in the postage paid envelope provided.
IF YOU VOTE BY TELEPHONE OR INTERNET, DO NOT RETURN THIS VOTING INSTRUCTION FORM. THANK YOU FOR YOUR VOTE!
- --------------------------------------------------------------------------------------------------------------------
o PLEASE DETACH AT PERFORATION o
[LOGO FOR THE MONTANA POWER COMPANY]
PROXY VOTING INSTRUCTIONS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF SHAREHOLDERS THAT WILL BE HELD AT THE MOTHER LODE THEATRE, 316 W. PARK, BUTTE, MONTANA
ON JULY 25, 2001.
The undersigned hereby appoints R. P. Gannon, J. P. Pederson, and P. T. Fleming and each of them, with power
of substitution, proxies to represent, and to vote all stock of the undersigned at The Montana Power
Company's Special Meeting of Shareholders on July 25, 2001, and at any adjournments thereof. In their
discretion, the proxies are authorized to vote upon such other matters as may properly come before the
meeting. This proxy when properly executed will be voted in the manner directed herein. If NO SPECIFICATION
IS MADE, THIS PROXY WILL BE VOTED "FOR" ITEMS 1, 2 AND 3.
Your vote for the proposals may be indicated on the reverse side.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET, PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
---
[LOGO MONTANA POWER COMPANY]
IMPORTANT
PLEASE SUBMIT YOUR PROXY TODAY BY ONE OF THE FOLLOWING METHODS:
TELEPHONE [GRAPHIC] INTERNET [GRAPHIC] MAIL [GRAPHIC]
If you do so now, the company will
be saved the expense of follow up
solicitations.
PLEASE SEE REVERSE SIDE FOR INSTRUCTIONS.
- --------------------------------------------------------------------------------
- PLEASE DETACH AT PERFORATION -
[X] PLEASE MARK VOTES AS COMMON STOCK
IN THE EXAMPLE USING The proxy is instructed to vote as follows
BLACK OR BLUE INK
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2 AND 3.
FOR AGAINST WITHOLD
1. MERGER OF THE MONTANA POWER COMPANY [ ] [ ] [ ]
WITH AND INTO THE MONTANA POWER L.L.C.
Approval of the agreement and plan of merger among The Montana Power
Company, Touch America Holdings, Inc., a Delaware corporation and a wholly
owned subsidiary of The Montana Power Company, and The Montana Power
L.L.C., a Montana limited liability company and a wholly owned subsidiary
of Touch America Holdings, dated as of February 20, 2001, the result of
which is that holders of common shares of The Montana Power Company will
receive one share of Touch America Holdings' common stock for each share of
common stock of The Montana Power Company and the holders of shares of
Preferred Stock, $6.875 Series of The Montana Power Company will receive one
share of Touch America Holdings' Preferred Stock, $6.875 Series for each
share of Preferred Stock, $6.875 Series of The Montana Power Company.
FOR AGAINST WITHOLD
2. SALE OF THE UTILITY BUSINESS TO NORTHWESTERN [ ] [ ] [ ]
Approval of the sale of substantially all of the assets of The Montana
Power Company relating to its utility business as contemplated by the Unit
Purchase Agreement between NorthWestern Corporation, The Montana Power
Company, and Touch America Holdings, Inc., dated as of September 29, 2000.
FOR AGAINST WITHOLD
3. REDEMPTION OF PREFERRED STOCK [ ] [ ] [ ]
Approval of the redemption of the Montana Power Company's outstanding
Preferred Stock, $4.20 Series and Preferred Stock, $6.00 Series.
Signature(s): Dated: , 2001
------------------------------------------------------------------------------------- ---------------
Please sign as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If stock is registered in joint tenancy, all tenants must sign the proxy.
VOTE BY TELEPHONE OR INTERNET
QUICK***EASY***IMMEDIATE
[TELEPHONE GRAPHIC] VOTE BY TELEPHONE VOTE BY INTERNET [PC GRAPHIC]
It's fast and convenient and your vote is It's fast and convenient and your vote is posted immediately.
posted immediately. In addition, you may elect to receive all future materials by
Internet.
Just follow these four easy steps: Just follow these four easy steps:
1. Have your proxy card in hand when you call. 1. Have your proxy card in hand when you access our website.
2. Using a touch-tone telephone, call our toll-free 2. Go to the website: www.voteyourproxy.com
number 1-800-245-6767. ---------------------
3. You will be prompted to enter the control 3. You will be prompted to enter the proxy number, company
number shown on the reverse side. number, and account number shown on the reverse side.
4. Follow the voting instructions to vote your 4. Follow the prompts to vote your shares.
shares.
VOTE BY MAIL
Mark, sign and date your proxy form below, detach it and return it in the postage paid envelope provided.
IF YOU VOTE BY TELEPHONE OR INTERNET, DO NOT RETURN THIS VOTING INSTRUCTION FORM. THANK YOU FOR YOUR VOTE!
- --------------------------------------------------------------------------------------------------------------------
o PLEASE DETACH AT PERFORATION o
[LOGO FOR THE MONTANA POWER COMPANY]
PROXY VOTING INSTRUCTIONS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF SHAREHOLDERS THAT WILL BE HELD AT THE MOTHER LODE THEATRE, 316 W. PARK, BUTTE, MONTANA
ON JULY 25, 2001.
The undersigned hereby appoints R. P. Gannon, J. P. Pederson, and P. T. Fleming and each of them, with power
of substitution, proxies to represent, and to vote all stock of the undersigned at The Montana Power
Company's Special Meeting of Shareholders on July 25, 2001, and at any adjournments thereof. In their
discretion, the proxies are authorized to vote upon such other matters as may properly come before the
meeting. This proxy when properly executed will be voted in the manner directed herein. If NO SPECIFICATION
IS MADE, THIS PROXY WILL BE VOTED "FOR" ITEMS 1 AND 2.
Your vote for the proposals may be indicated on the reverse side.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET, PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
---
[LOGO MONTANA POWER COMPANY]
IMPORTANT
PLEASE SUBMIT YOUR PROXY TODAY BY ONE OF THE FOLLOWING METHODS:
TELEPHONE [GRAPHIC] INTERNET [GRAPHIC] MAIL [GRAPHIC]
If you do so now, the company will
be saved the expense of follow up
solicitations.
PLEASE SEE REVERSE SIDE FOR INSTRUCTIONS.
- --------------------------------------------------------------------------------
- PLEASE DETACH AT PERFORATION -
[X] PLEASE MARK VOTES AS COMMON STOCK
IN THE EXAMPLE USING The proxy is instructed to vote as follows
BLACK OR BLUE INK
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2 AND 3.
FOR AGAINST WITHOLD
1. MERGER OF THE MONTANA POWER COMPANY [ ] [ ] [ ]
WITH AND INTO THE MONTANA POWER L.L.C.
Approval of the agreement and plan of merger among The Montana Power
Company, Touch America Holdings, Inc., a Delaware corporation and a wholly
owned subsidiary of The Montana Power Company, and The Montana Power
L.L.C., a Montana limited liability company and a wholly owned subsidiary
of Touch America Holdings, dated as of February 20, 2001, the result of
which is that holders of common shares of The Montana Power Company will
receive one share of Touch America Holdings' common stock for each share of
common stock of The Montana Power Company and the holders of shares of
Preferred Stock, $6.875 Series of The Montana Power Company will receive one
share of Touch America Holdings' Preferred Stock, $6.875 Series for each
share of Preferred Stock, $6.875 Series of The Montana Power Company.
FOR AGAINST WITHOLD
2. SALE OF THE UTILITY BUSINESS TO NORTHWESTERN [ ] [ ] [ ]
Approval of the sale of substantially all of the assets of The Montana
Power Company relating to its utility business as contemplated by the Unit
Purchase Agreement between NorthWestern Corporation, The Montana Power
Company, and Touch America Holdings, Inc., dated as of September 29, 2000.
FOR AGAINST WITHOLD
3. REDEMPTION OF PREFERRED STOCK [ ] [ ] [ ]
Approval of the redemption of the Montana Power Company's outstanding
Preferred Stock, $4.20 Series and Preferred Stock, $6.00 Series.
Signature(s): Dated: , 2001
------------------------------------------------------------------------------------- ---------------
Please sign as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If stock is registered in joint tenancy, all tenants must sign the proxy.
VOTE BY TELEPHONE OR INTERNET
QUICK***EASY***IMMEDIATE
[TELEPHONE GRAPHIC] VOTE BY TELEPHONE VOTE BY INTERNET [PC GRAPHIC]
It's fast and convenient and your vote is It's fast and convenient and your vote is posted immediately.
posted immediately. In addition, you may elect to receive all future materials by
Internet.
Just follow these four easy steps: Just follow these four easy steps:
1. Have your proxy card in hand when you call. 1. Have your proxy card in hand when you access our web site.
2. Using a touch-tone telephone, call our toll-free 2. Go to the website: www.proxyvotenow.com
number 1-800-216-1306.
3. You will be prompted to enter the control 3. You will be prompted to enter the proxy number, company
number shown on the reverse side. number, and account number shown on the reverse side.
4. Follow the voting instructions to vote your 4. Follow the prompts to vote your shares.
shares.
VOTE BY MAIL
Mark, sign and date your proxy form below, detach it and return it in the postage paid envelope provided.
IF YOU VOTE BY TELEPHONE OR INTERNET, DO NOT RETURN THIS VOTING INSTRUCTION FORM. THANK YOU FOR YOUR VOTE!
- --------------------------------------------------------------------------------------------------------------------
o PLEASE DETACH AT PERFORATION o
[LOGO FOR THE MONTANA POWER COMPANY]
PROXY VOTING INSTRUCTIONS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF SHAREHOLDERS THAT WILL BE HELD AT THE MOTHER LODE THEATRE, 316 W. PARK, BUTTE, MONTANA
ON JULY 25, 2001.
The undersigned hereby appoints R. P. Gannon, J. P. Pederson, and P. T. Fleming and each of them, with power
of substitution, proxies to represent, and to vote all stock of the undersigned at The Montana Power
Company's Special Meeting of Shareholders on July 25, 2001, and at any adjournments thereof. In their
discretion, the proxies are authorized to vote upon such other matters as may properly come before the
meeting. This proxy when properly executed will be voted in the manner directed herein. If NO SPECIFICATION
IS MADE, THIS PROXY WILL BE VOTED "FOR" ITEMS 1, 2 AND 3.
Your vote for the proposals may be indicated on the reverse side.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET, PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
---