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Home My WebLink About20090220Letter of Information.pdfG1VEepSLEY L.U'M:c~-o9-o( LAW OFFICES 001 W. Bannock Street PO Box 2720, Boise. Idall 83701 TELEPHONE: 208 388.1200 FACSIMILE: 208 388.1300 WEBSITE: W\wl.givenspu'sley.com Cynthia A. Melilo Direct Dial: (208)388.1273 f.-Mail: g!!ll~.(yl!JJ?\!r.!!.ïco Ga'Y G. Allen Peter G. Bartor Christopher J. Bee.or Clint R Bolinder Erik J. Boinder Jeremy C. Chou Willam C. Cole Michael C. Creamer Amber N. Dina Elizabelh M. Donick Krislin Bjorkman Du r\r~ Thomas E. Dvorak Jellrey C. Feroday Justin C. Fredin Ma ,tin C. Hendrickson Sleven J. HipPIE" Debora 1(. Kr¡SlenSen Anne C. Kunkel Jeremy G. Ladle Micliael P. Lawrence Franklin G. lee David R. Lombardi John M. Marshall Kenneil R. McClure Kelly Greene McConneft Cynlhia A. Melillo CllCisloper H. Meyer L. Edward Miller Patrick J. Miller Jt.Jdso B. Montgomery Oebora!i E. NerSOi I(elsey J. Nunez W. Hugh O'RiOdan. LL.M. Angela M. Reed Justin A. Si,,ne, Scott A. Tschirgi. LL.M. J. Will Varin Conley E. Ward RObert B. White RETIRED Kenneth L. Pursiey James A. McClure Raymond D. Glvens (1917.200) February 20, 2009 ." commission \dano PUff~\~ ~~~~~ecre\ary o ieR E C E \ V EO FEB 202009 VIA ELECTRONIC MAIL and US MAIL aean.jewell~uc.idaho.gov)Boise, \dano Jean Jewell, Secretary Idaho Public Utilities Commission 472 W. Washington P.O. Box 83720 Boise, Idaho 83720-0074 Re: Letter of Information regarding Midvale Telephone ESOP Conversion Our File: 1614-87 Dear Ms. Jewell: I am writing to provide information to the Idaho Public Utilities Commission (the "Commission") regarding Midvale Telephone Exchange, Incorporated ("Midvale"), an entity regulated by the Commission, with regard to its adoption of an Employee Stock Ownership Plan ("ESOP"). Midvale is currently owned by two shareholders: Lane Williams and Shirley Archer. Ms. Archer recently passed away and the shares are being held by her estate. To ensure the ongoing operations of Midvale, Mr. Willams has pursued the option of creating an ESOP so Midvale can be owned by those who have'devoted and continue to devote their time to operating the business, and to ensure that Midvale wil continue in its current form rather than ultimately being sold to a third party. We are not aware of any statutes, rules or regulations governing the Commission's relationship with Midvale that require approval of the proposed change of ownership of the stock of Midvale, but we wanted to inform the Commission of such change and to verify that no approvals are needed. Midvale's proposed plan to convert to an ESOP does not create any changes (other than ownership) with regard to Midvale's operations. Midvale remains the owner of all of its operating assets, it retains all of its current debt obligations and it does not take on any new debt obligations which require the approval of the Commission. I have Jean Jewell Febrvary 20, 2009 Page 2 attachedan ESOP ownerShip structuring chart to ilustrate how this transaction wil be structured, but in a nutshell, this is what Midvale is proposing: First, Midvale would adopt an ESOP and create the ESOP trust. Essentially, the ESOP trust is a benefit/retirement fund for Midvale's employees. Midvale would make a contribution every year to this retirement fund. The amount that Can be contributed is governed by federai regulations both with respect to Midvale's existing loans with the Rural Utilties Service ("RUS") and also under the laws governing ESOPs. This contribution is no different than any other company contribution to an employee benefit plan and is treated the same way for all practical purposes. The contribution in the first year would likely be in the form of Midvale stock. Second, we would create a holding company that would be a parent company of Midvale, organized to own all of the issued and outstanding shares of Midvale stock. This. parent company would exchange parent company shares for all of the shares of Midvale held by Lane Willams, the estate of Shirley Archer and the ESOP s.o that the parent company would own all of the issued and outstanding shares of Midvale stock. Lane Wi!iamsand the estate of Shirley Archer would then own shares of parent company stock. The ESOP would then purchase all of the shares of the parent company held by Lane Willams and the estate. of Shirley Archer, using the annual contribution made by Midvale to the ESOP. At the completion of the transaction, Midvale would be whoHyowned by the new parent company and the new parent company would be wholly owned by the ESOP trust, in trust for all eligible employees. Under this proposed structure, Midvale wil take on no new debt, nor wil it transfer any of its operating assets.. Midvale would continue to be the operating company, owning and using its assets to provide the services it currently provides. The only "obligation" Midvale has is to make annual contributions to the ESOP, the amount of which is governed under ESOP rules as well as RUS rules. At this time, we request that the Commission provide Midvale with some acknowledgement that the Commission will not require any official approval of this transaction and that Midvale may proceed as discussed above. If that will not be the case, Midvale wil appreciate receiving instructions regarding any information or documentation the Commission will need, or any procedures the Commission wil require to provide its approvaL' i look forward to hearing from you soon. If you have any questions or need any additional information with regard to this matter, please feel free to contact me. Sincerely,~IItJ! Cynthia A. Melillo CAM cc: Lane Wìlliams (via Electronic Mail) Terri Carlock (via Electronic Mail- (terri.carlock~puC.idaho.gov) Enclosure S:\ClIENIS\1614\67\etOfnt InlomUOI t",IPUCOOC Esop TRANSACTION STRUCTURE Currentsherenolders cif Midvale Telephone Exchange, Incorporated ("MTEn) wil contrbute all of their shares to Midvale Holding Company in exchange for en equal number of share in Midvale HóldingCompany. ESOP to.purchasefro Lane Willams and Estate of ShirleyArer all of their shares in Midvale Holding Company. I t ESOP to contrbute MTE Stock to Holding Company for Holding Company stock, t Midvale to m~e contrbution to retireent plan eVeiy year, First year contribution in MTE stock, ESOP TRANSACTION STRUCTURe. 1 S;\CLleNTS\ 1614\S7\Ownership Chart (2-3'(9).DOC