<PAGE>
[TPC LETTERHEAD]
March 18, 1997
Dear Stockholder:
On March 11, 1997, TPC Corporation ("TPC") entered into a merger agreement
with PacifiCorp Holdings, Inc. ("PHI") and one of its subsidiaries that provides
for the acquisition of TPC by PHI. Under the terms of the merger agreement, a
PHI subsidiary has commenced a tender offer for all outstanding shares of TPC
common stock at $13.41 per share.
YOUR BOARD OF DIRECTORS HAS APPROVED THE PHI OFFER AND THE MERGER AND
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO AND IN THE
BEST INTERESTS OF TPC'S STOCKHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS
RECOMMENDS THAT ALL TPC STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR COMMON
STOCK TO PHI.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors. These factors included, among other
things, the opinion dated March 11, 1997 of Lehman Brothers Inc., financial
advisor to TPC, that the cash consideration to be offered to TPC stockholders
pursuant to the offer and the merger is fair to such stockholders from a
financial point of view.
Attached to this letter is a copy of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9. Also enclosed is the
offer to purchase of PHI's subsidiary, together with related materials. These
documents set forth the terms and conditions of the offer and other important
information. We encourage you to read the enclosed materials carefully.
On behalf of myself, the other members of management and the directors of
TPC, I want to thank you for the support you have given the Company.
Sincerely,
Larry W. Bickle
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
TPC CORPORATION
(Name of Subject Company)
TPC CORPORATION
(Name of Person(s) Filing Statement)
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
CLASS B COMMON STOCK, PAR VALUE $.01 PER SHARE
(Titles of Classes of Securities)
CUSIP NO. 872616107
(with respect to the Class A Common Stock)
CUSIP NO. N/A
(with respect to the Class B Common Stock)
(CUSIP Numbers of Classes of Securities)
------------------------
M. SCOTT JONES
GENERAL COUNSEL
TPC CORPORATION
200 WESTLAKE PARK BOULEVARD, SUITE 1000
HOUSTON, TEXAS 77079
(281) 597-6200
(Name, address and telephone number of person
authorized to receive notice and communications
on behalf of the person(s) filing statement)
WITH A COPY TO:
STEPHEN A. MASSAD
BAKER & BOTTS, L.L.P.
910 LOUISIANA
ONE SHELL PLAZA
HOUSTON, TEXAS 77002-4995
(713) 229-1475
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is TPC Corporation, a Delaware corporation
("TPC"). The address of the principal executive offices of TPC is 200 WestLake
Park Boulevard, Suite 1000, Houston, Texas 77079. The titles of the classes of
equity securities to which this Schedule relates are (i) TPC's Class A Common
Stock, par value $.01 per share (the "Class A Common Stock") and (ii) TPC's
Class B Common Stock, par value $.01 per share (the "Class B Common Stock" and
together with the Class A Common Stock, the "Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Schedule relates to the tender offer by Power Acquisition Company, a
Delaware corporation (the "Offeror"), and a wholly owned subsidiary of
PacifiCorp Holdings, Inc., a Delaware corporation ("PHI"), to purchase (i) all
outstanding shares of Common Stock at the purchase price of $13.41 per share of
Common Stock, net to the tendering holder (pre-tax) in cash upon the terms and
subject to the conditions set forth in the Offer to Purchase dated March 18,
1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer"). The Offer is disclosed in a Tender Offer
Statement on Schedule 14D-1 dated March 18, 1997. According to the Offer to
Purchase, the principal executive offices of the Offeror and PHI are located at
700 N.E. Multnomah, Portland, Oregon 97232. PHI is a wholly owned subsidiary of
PacifiCorp, an Oregon corporation ("PacifiCorp").
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of March 11, 1997 (the "Merger Agreement"), among TPC, PHI and the Offeror. A
copy of the Merger Agreement is filed as Exhibit 1 to this Schedule and is
incorporated herein by reference in its entirety. For a summary of the material
terms of the Merger Agreement, see Annex I to this Schedule. The Merger
Agreement provides that following the completion of the Offer, the Offeror will
be merged into TPC, with TPC continuing as a wholly owned subsidiary of PHI (the
"Merger"). In the Merger, all remaining shares of Common Stock not tendered in
the tender offer (other than shares of Common Stock owned by TPC, or any
subsidiary of TPC, Offeror, PHI or any other subsidiary of PHI and shares of
Common Stock held by stockholders who perfect any available appraisal rights
under the Delaware General Corporation Law) will be converted into the right to
receive $13.41 per share in cash.
ITEM 3. IDENTITY AND BACKGROUND.
(a) Identity.
The name and business address of TPC, which is the person filing this
Schedule, are set forth in Item 1 above.
(b) Contracts.
Except as otherwise described in this Schedule or in the exhibits or
schedules hereto, to the knowledge of TPC, as of the date hereof, there are no
material contracts, agreements, arrangements or understandings, or any actual or
potential conflicts of interest, between TPC or its affiliates and (i) TPC or
its executive officers, directors or affiliates, or (ii) the Offeror, PHI or
their executive officers, directors or affiliates.
Certain information with respect to certain contracts, agreements,
arrangements or understandings between TPC and certain of its directors,
executive officers and affiliates is set forth in Annexes I and III hereto and
is incorporated herein by reference. Descriptions of how outstanding options to
purchase Common Stock, some of which are held by officers and directors of TPC,
will be treated in connection with the Offer and the Merger, and of provisions
in the Merger Agreement dealing with the indemnification of and insurance for
officers and directors of TPC and certain employee benefit and employment
matters are set forth in Annex I, "Description of Certain Agreements--Merger
Agreement" under the captions "Stock
2
<PAGE>
Options," "Directors," "Directors/Officers Indemnification and Insurance," and
"Employment Matters," which are incorporated herein by reference.
Michael E. McMahon, a director of TPC, is a Managing Director of Lehman
Brothers Inc. ("Lehman Brothers") (see Item 5 to this Schedule, "Persons to be
Retained, Employed or to be Compensated").
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation.
THE BOARD HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN
THE BEST INTERESTS OF, THE STOCKHOLDERS OF TPC. THE BOARD RECOMMENDS THAT ALL
HOLDERS OF COMMON STOCK ACCEPT THE OFFER AND TENDER ALL OF THEIR COMMON STOCK
PURSUANT TO THE OFFER. The Board's determination and recommendation were made by
the unanimous vote of the eight directors present at the Board's March 11, 1997
meeting. The ninth member of TPC's Board advised the chairman after the meeting
that he concurred with the Board's decisions.
The Board's recommendation is based in part on the oral opinion delivered by
Lehman Brothers to the Board on March 11, 1997, that, as of such date, the cash
consideration to be offered to the holders of Common Stock pursuant to the Offer
and the Merger is fair to such holders from a financial point of view. Lehman
Brothers subsequently confirmed its opinion in writing. The full text of such
opinion, which sets forth the assumptions made, the matters considered and the
limitations on the review undertaken by Lehman Brothers, is set forth as Annex
II hereto and is incorporated herein by reference.
A copy of the letter to TPC's stockholders communicating the Board's
recommendation is filed as Exhibit 2 to this Schedule and is incorporated herein
by reference.
(b) Background and Reasons for the Recommendation.
At a meeting of the Board on May 15, 1996, the Board, at the suggestion of
certain of its stockholders and directors, discussed possibilities for
increasing stockholder value, considering TPC's results and prospects,
developments in the industries in which TPC operates and market conditions as a
whole. The Board instructed management of TPC to engage Lehman Brothers to begin
a preliminary analysis of TPC. In the Fall of 1996 Lehman Brothers contacted a
limited number of parties that it believed might be interested in exploring a
strategic transaction with TPC. On November 1, 1996, the Board established a
special committee of independent directors (the "Special Committee") to
participate in and oversee this process. At its November 12, 1996 meeting, the
Board determined, given all available information, to formally explore and
investigate potential transactions. The Board instructed management of TPC and
Lehman Brothers to establish a formal process, subject to the review and
oversight of the Special Committee, to explore TPC's strategic alternatives for
increasing stockholder value, including the possible sale or merger of all or a
portion of TPC.
On November 12, 1996, TPC publicly announced that it had engaged Lehman
Brothers to assist it in exploring strategic alternatives, including a possible
sale or merger of all or a part of TPC. The press release stated, however, that
the Board has not made a determination that TPC would be sold or merged or that
such a transaction would be in the best interests of the stockholders.
During the course of this process, Lehman Brothers identified and contacted
numerous gas and electric utility companies, interstate pipeline companies,
midstream natural gas companies and other companies, both domestic and foreign,
that it believed might have an interest in acquiring or merging with TPC.
Interested parties, including an affiliate of PHI, signed confidentiality
agreements and received descriptive information about TPC and its subsidiaries.
Interested parties were asked to submit preliminary indications of interest by
December 20, 1996. Following submission of preliminary indications of interest,
the Special Committee invited certain parties, including the PHI affiliate, to
visit TPC's data room, receive management presentations and then submit
definitive proposals for the acquisition of TPC for cash or
3
<PAGE>
stock. These requests to bid included a form of transaction agreement on which
the participants were invited to comment.
Bids were submitted by interested parties on February 14, 1997 (including
such parties' comments to the proposed form of transaction agreement). PHI's
initial proposal was that, subject to certain conditions, it acquire TPC in a
stock-for-stock merger in which each share of Common Stock would be converted
into common stock of PacifiCorp, PHI's parent, having a market value at the time
of consummation of the merger of $13.00 per share of Common Stock.
TPC's legal and financial advisors analyzed the proposals received and
contacted certain participants or their advisors to clarify various matters
prior to the Special Committee's meeting on February 18, 1997. In such
discussions, representatives of PHI indicated that PacifiCorp was precluded by
certain regulatory constraints from issuing new shares of its stock to acquire
TPC; rather, PHI proposed to use cash to repurchase shares of PacifiCorp common
stock in the open market for delivery to the stockholders of TPC in the merger.
PHI advised TPC that it estimated it would take 75 to 90 business days to
acquire all such shares.
The Special Committee convened, with representatives of management and legal
and financial advisors, on February 18, 1997 to evaluate the outcome of the
process and each of the proposals received. With respect to each proposal, the
Special Committee considered, among other things, the type and amount of
consideration offered, the proposed revisions to the form of transaction
agreement that TPC had distributed, the nature and timing of any necessary
regulatory approvals, the federal income tax consequences of the proposal to
TPC's stockholders and the risks of nonconsummation of the proposal. After
discussion, the Special Committee instructed Lehman Brothers to further explore
the proposals made by PHI and certain other parties and to determine the maximum
amount per share each such party was willing to offer.
With respect to PHI's initial proposal, the Special Committee concluded,
based on materials included with PHI's proposal regarding certain TPC balance
sheet assumptions, that PHI might be willing to increase its offer price to
approximately $13.45 per share in light of anticipated year-end 1996 balance
sheet information compared to PHI's assumptions. The Special Committee also
expressed its concern regarding the risk of delay in consummating a transaction
resulting from the need for PHI to make open market purchases of the necessary
amount of PacifiCorp common stock prior to the mailing of proxy materials to TPC
stockholders, including the possibility of delays beyond the time frame
anticipated by PHI. The Special Committee also discussed the differences to PHI
between a cash acquisition and a stock-for-stock merger when PHI would be
required as a preliminary step to acquire its shares for cash, including the
fact that either such transaction would be accounted for as a purchase. In
addition, based on the aforesaid discussions with advisors, the Special
Committee concluded that PHI would probably prefer to pursue an all cash
transaction. Based on this review and evaluation, the Special Committee
instructed its advisors to determine whether PHI would be willing to acquire the
TPC Common Stock for $13.45 per share in cash in a tender offer to be followed
by a second step merger.
Further discussions with PHI and such other parties determined by the
Special Committee were held following the February 18 meeting of the Special
Committee. PHI responded preliminarily on February 18 that it preferred an all
cash transaction and would be willing to increase the price paid in such a
transaction to a price in the range of $13.40 to $13.45 per share, subject to
(i) satisfactory resolution of certain confirmatory due diligence items,
including the financial information underlying PHI's assumptions on price, (ii)
resolution of certain issues regarding the form of proposed transaction
agreement and (iii) approval by the boards of directors of PHI and PacifiCorp.
Following that discussion, TPC transmitted to PHI a proposed form of merger
agreement revised to reflect a two-step cash transaction. Representatives of PHI
and TPC, together with their respective legal and financial advisors, met in
person on February 20 and by phone on February 21 to discuss the foregoing
matters.
4
<PAGE>
On February 24, 1997, TPC's financial and legal advisors presented the
Special Committee with an update on the course of discussions with PHI and the
other parties. The Special Committee concluded that PHI's proposal, including
the proposed form of merger agreement and assuming that it involved a per share
price in the range of $13.40 to $13.45, was the most attractive proposal from
the standpoint of TPC's stockholders that had been received. The Special
Committee also concluded that if such a proposal could be finalized, it should
be presented to the full Board. Accordingly, the Special Committee instructed
management and TPC's advisors to facilitate the completion of PHI's remaining
confirmatory due diligence items and to seek to resolve expeditiously any
remaining issues, including the form of proposed merger agreement. The Special
Committee also instructed Lehman Brothers to remain in contact with the other
interested parties in the event a satisfactory final agreement with PHI could
not be reached.
Over the course of the next ten days, including at meetings between the
parties on March 3 and 4, 1997, PHI proceeded to complete its remaining
confirmatory due diligence items and the parties proceeded to resolve
substantially all issues regarding the form of proposed merger agreement. PHI
advised TPC that the boards of directors of PHI and PacifiCorp would be convened
on March 11, 1997 to consider approval of the transaction. TPC scheduled a
meeting of its Board for the same day.
On March 6, 1997, management of PHI advised Lehman Brothers that management
of PHI would be willing to recommend to the boards of directors of PHI and
PacifiCorp that the parties execute a definitive agreement for the acquisition
of TPC in an all cash, two-step transaction at a price of $13.41 per share of
Common Stock. Lehman Brothers responded that such a proposal would be presented
to the TPC Board. That evening, TPC distributed to each member of its Board
information concerning the potential transaction, PHI and its affiliates, and a
draft of the proposed merger agreement in its then currently negotiated form.
TPC's Board met on the afternoon of March 11, 1997. At the meeting, the
Board received presentations from management and TPC's legal and financial
advisors regarding the proposals received for the purchase of TPC as well as the
results of the negotiation of the Merger Agreement with PHI. In addition, Lehman
Brothers delivered its oral opinion (which was subsequently confirmed in
writing) that, as of that date and subject to the matters described by it, the
cash consideration to be offered to the holders of Common Stock pursuant to the
Offer and the Merger was fair to such holders from a financial point of view.
The Board also considered TPC's business, financial condition, results of
operations, current business strategy and future prospects, recent and
historical market prices for the Common Stock and other matters. In addition,
Lehman Brothers reviewed and updated its presentations made earlier to the
Special Committee and the Board. During the course of the meeting, TPC was
advised that the boards of directors of PacifiCorp and PHI had approved the
Merger Agreement, the Offer and the Merger. At the meeting, the Board approved
the Merger Agreement and the Merger and resolved to recommend the Offer to TPC's
stockholders. Immediately after the conclusion of the meeting, PHI, the Offeror
and TPC executed the Merger Agreement, pursuant to which the Offeror agreed to
make the Offer. In addition, a stockholder agreement by and among PHI, the
Offeror, Larry W. Bickle, John A. Strom and J. Chris Jones (the "Stockholder
Agreement") was executed, pursuant to which such three individuals agreed to
tender their shares of Common Stock in the Offer and to sell such shares to the
Offeror, at the price paid in the Offer, subject to certain conditions. The
parties issued press releases publicly announcing the transaction before the
opening of business on March 12, 1997.
See Annex I, "Description of Certain Agreements--Merger Agreement," below
for additional summary information regarding the terms and conditions of the
Merger Agreement and the Stockholder Agreement.
In reaching the conclusions and recommendations described above, the Board
considered a number of factors in addition to those already described,
including, among other things, the following:
(i) The financial and other terms and conditions of the Offer and the
Merger Agreement;
5
<PAGE>
(ii) The recommendation of the Offer by the Special Committee based upon
its independent review of the proposals received by TPC;
(iii) The oral opinion delivered by Lehman Brothers to the Board on
March 11, 1997 (subsequently confirmed in writing) that, as of such date and
on the basis of and subject to the matters described by it, the cash
consideration to be offered to the holders of Common Stock pursuant to the
Offer and the Merger was fair to such holders from a financial point of view
(see Annex II hereto);
(iv) The conclusion of the Board, based on the advice of Lehman
Brothers, that the cash consideration offered for the Common Stock in the
Offer and Merger was higher in value than the consideration offered in any
other definitive proposal received in TPC's process of exploring strategic
alternatives;
(v) The belief of the Board that, in view of (i) the November 12, 1996
public announcement that TPC had hired Lehman Brothers to explore strategic
alternatives, including the possible sale or merger of TPC, (ii) the number
of parties directly contacted by management and Lehman Brothers and (iii)
the number of parties who participated in the process and received
information with respect to TPC, it was unlikely that any party potentially
interested in submitting a proposal to acquire TPC had not been afforded an
opportunity to do so;
(vi) The fact that the $13.41 per share price to be received by TPC's
stockholders pursuant to the Offer and the Merger represents a substantial
premium over (i) the closing market price of $8.88 for the Class A Common
Stock on November 12, 1996, the last trading day prior to TPC's press
release regarding its process for exploring strategic alternatives, and (ii)
the closing market price of $10.88 for the Class A Common Stock on March 10,
1997, the last trading day prior to the date on which the Board approved the
Offer;
(vii) The fact that, pursuant to the terms of the Merger Agreement, the
Board is entitled, prior to the consummation of the PHI Offer, to terminate
the Merger Agreement and withdraw its recommendation of the Offer in order
to approve an alternative transaction with a third party on terms more
favorable to TPC's stockholders from a financial point of view than the
Offer and the Merger taken together; provided that TPC is obligated to pay
to PHI a fee of $9,000,000 upon any such termination (see "Termination"
under "Description of Certain Agreements--Merger Agreements" in Annex I);
and
(viii) The fact that the Stockholder Agreement terminates by its terms
if the Merger Agreement is terminated by either PHI or TPC.
The foregoing discussion of the information and factors considered by the
Board is not intended to be exhaustive. In view of the variety of factors
considered in connection with its evaluation of the Offer and the Merger, the
Board did not find it practicable to, and did not, quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determination. In addition, individual members of the Board may have given
different weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to an engagement letter dated July 17, 1996 (the "Engagement
Letter"), TPC retained Lehman Brothers as its general financial advisor in
connection with its review of its strategic and financial options regarding (a)
any transaction or series or combination of transactions other than in the
ordinary course of business, whereby, directly or indirectly, control of TPC or
its businesses, or a material amount of any of their respective assets, is
transferred for consideration (as hereinafter defined), including, without
limitation, by means of a sale or exchange of capital stock or assets, a merger
or consolidation, a tender or exchange offer, a leveraged buy-out, a minority
investment the formation of a joint venture or partnership, or any similar
transaction ( "Sale Transaction") and (b) any transaction or series or
combination of transactions, other than in the ordinary course of business,
whereby, directly or indirectly, the control of
6
<PAGE>
another company or business or of a material amount of any of their respective
assets is transferred for consideration by means of a sale or exchange of
capital stock, the formation of a joint venture or partnership (or other new
entity) or any similar transaction, but specifically excluding any transaction
or series or combination of transactions involving a purchase or merger or
consolidation of the whole Company or a sale of all or substantially all of the
assets of TPC ("Other Transaction") (Sale Transactions and Other Transactions
are sometimes collectively referred to as "Transactions" or singularly as a
"Transaction").
"Consideration" is defined in the Engagement Letter as the gross value of
all cash, securities and other property paid directly or indirectly by an
acquiror to a seller or sellers in connection with a Transaction or contributed
by TPC or any other parties in the case of a Transaction involving a joint
venture or strategic partnership. Consideration also includes the aggregate
principal amount of any indebtedness for money borrowed assumed by an acquiror
either contractually or by operation of law in connection with a Transaction. In
the case of a Sale Transaction, consideration also includes proportionate
consolidation of the net debt of Market Hub Partners based on TPC's equity
interest therein.
For such financial advisory services, TPC has paid or agreed to pay Lehman
Brothers under the Engagement Letter as follows: (a) a retainer of $75,000 for
the services rendered thereunder through September 30, 1996 and an additional
amount of $75,000 as a retainer for the services rendered thereunder from and
after October 1, 1996, through the remainder of the term thereof, payable on
October 1, 1996 ($75,000 previously paid to Lehman Brothers pursuant to a prior
engagement letter dated February 19, 1996 being credited against the retainer
fees owed pursuant to this subparagraph (a)); and (b) for a Sale Transaction,
Lehman Brothers is entitled to receive a transaction fee equal to 1% of the
consideration involved in such Sale Transaction. The advisory fees paid pursuant
to subparagraph (a) will be credited (but only once) against any transaction fee
owed pursuant to subparagraph (b). The foregoing compensation is payable by TPC
to Lehman Brothers at the closing of a Transaction, provided that compensation
attributable to that part of the consideration which is contingent upon the
occurrence of any future event is payable by TPC to Lehman Brothers at the
earlier of (i) the receipt by the payee of such consideration and (ii) the time
that the amount of such consideration can be determined. TPC has also agreed to
reimburse Lehman Brothers for its reasonable direct, out-of-pocket expenses and
to indemnify Lehman Brothers and certain related persons against certain
liabilities resulting from or arising out of its performance under the
Engagement Letter.
Michael E. McMahon, a director of TPC, is a Managing Director of Lehman
Brothers.
Neither TPC nor any person acting on its behalf currently intends to employ,
retain or compensate any other person to make solicitations or recommendations
to security holders on their behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Transactions in Securities.
To the knowledge of TPC, except as otherwise set forth in this Schedule, no
transactions in the Common Stock have been effected during the past 60 days by
TPC or by any executive officer, director, affiliate or subsidiary of TPC.
Larry W. Bickle, Chairman and Chief Executive Officer of TPC contributed
157,147 shares of Common Stock to a newly formed charitable remainder unitrust
on January 20, 1997.
(b) Intent to Tender.
To the knowledge of TPC, all of its executive officers, directors,
affiliates or subsidiaries currently intend to tender pursuant to the Offer all
shares of Common Stock that are held of record or beneficially owned by such
persons.
7
<PAGE>
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Negotiations.
Except as set forth in this Schedule, no negotiation is being undertaken or
is underway by TPC in response to the Offer which relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
TPC or any subsidiary thereof; (ii) a purchase, sale or transfer of a material
amount of assets by TPC or any subsidiary thereof; (iii) a tender offer for or
other acquisition of securities by or of TPC; or (iv) any material change in the
present capitalization or dividend policy of TPC.
(b) Transactions and Other Matters.
Except as set forth in this Schedule, there are no transactions, Board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to in
Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the General
Corporation Law of the State of Delaware provides generally and in pertinent
part that a Delaware corporation may indemnify its directors and officers
against expenses, judgments, fines, and settlements actually and reasonably
incurred by them in connection with any civil, criminal, administrative, or
investigative suit or action, except actions by or in the right of the
corporation if, in connection with the matters in issue, they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation, and in connection with any criminal suit or
proceeding, if in connection with the matters in issue, they had no reasonable
cause to believe their conduct was unlawful. Section 145 further provides that
in connection with the defense or settlement of any action by or in the right of
the corporation, a Delaware corporation may indemnify its directors and officers
against expenses actually and reasonably incurred by them if, in connection with
the matters in issue, they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation,
except that no indemnification may be made in respect to any claim, issue, or
matter as to which such person has been adjudged liable to the corporation,
unless the Delaware Court of Chancery or other court in which such action or
suit is brought approves such indemnification. Section 145 further permits a
Delaware corporation to grant its directors and officers additional rights of
indemnification through bylaw provisions and otherwise, and to purchase
indemnity insurance on behalf of its directors and officers. Article Seven of
the Amended and Restated Certificate of Incorporation of TPC and the Bylaws of
TPC provide, in general, that the Company shall indemnify its officers and
directors to the maximum extent permitted under applicable law.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------
<C> <S>
*1 Agreement and Plan of Merger, dated as of March 11, 1997, among TPC, PHI and Offeror.
**2 Letter to the stockholders of the Company dated March 18, 1997.
*3 Stockholder Agreement, dated as of March 11, 1997, among PHI, the Offeror, Larry W. Bickle, J.
Chris Jones and John A. Strom.
*4 Letter Agreement, dated as of October 23, 1996, between Lehman Brothers Inc., on behalf of TPC
Corporation, and PacifiCorp Power Marketing, Inc.
*5 Resolutions of the Board of Directors of TPC Corporation establishing a Performance Bonus for
Senior Executives.
*6 Change in Control Agreement dated as of November 8, 1996 by and between TPC Corporation and
Michael E. Calderone.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------
<C> <S>
*7 Change in Control Agreement dated as of November 8, 1996 by and between TPC Corporation and Ronald
H. Benson.
*8 Change in Control Agreement dated as of November 8, 1996 by and between TPC Corporation and M.
Scott Jones.
*9 Change in Control Agreement dated as of November 8, 1996 by and between TPC Corporation and Robert
D. Kincaid.
*10 Change in Control Agreement dated as of November 8, 1996 by and between TPC Corporation and Joseph
J. DiNorscia.
*11 Change in Control Agreement dated as of November 8, 1996 by and between TPC Corporation and
Marilyn I. Eckersley.
*12 Change in Control Agreement dated as of November 8, 1996 by and between TPC Corporation and
Patrick J. Peldner.
*13 Change in Control Agreement dated as of November 8, 1996 by and between TPC Corporation and D.
Hughes Watler, Jr.
*14 Press Release of TPC Corporation dated March 12, 1997.
**15 Opinion of Lehman Brothers dated March 11, 1997.
</TABLE>
- ------------------------
* Filed herewith
** Included in copies mailed to Stockholders.
9
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
TPC CORPORATION
By: /s/ LARRY W. BICKLE
-----------------------------------------
Larry W. Bickle
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Dated: March 18, 1997
10
<PAGE>
ANNEX I
DESCRIPTION OF CERTAIN AGREEMENTS
MERGER AGREEMENT.
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the full text thereof, which is
incorporated herein by reference and a copy of which has been filed as Exhibit 1
to this Schedule. Capitalized terms used in this Annex I and not otherwise
defined in this Schedule have the meanings ascribed to them in the Merger
Agreement.
THE OFFER. The Merger Agreement provides that PHI will cause Offeror to
commence and Offeror will commence the Offer at an amount per share specified in
the recitals to the Merger Agreement or such greater amount per share paid
pursuant to the Offer (the "Per Share Amount"). The Merger Agreement specifies
certain conditions for the Offer, including, among other things, there being
validly tendered and not withdrawn that number of Shares of TPC Common Stock
that, when combined with any Shares already owned by PHI and its direct or
indirect subsidiaries, represent at least the majority of the then outstanding
Shares of TPC Common Stock on a fully diluted basis (including, without
limitation, all shares issuable upon the conversion of any convertible
securities or upon the exercise of any options, warrants or rights) (the
"Minimum Condition"). Pursuant to the Merger Agreement, Offeror expressly
reserves the right to change or waive any such condition, to increase the Per
Share Amount, and to make any other changes in the terms and conditions of the
Offer; provided however, that no change may be made which (A) decreases the Per
Share Amount, (B) reduces the maximum number of Shares to be purchased in the
Offer, (C) imposes conditions to the Offer in addition to those set forth in
Annex A to the Merger Agreement (see "CONDITIONS TO THE OFFER" below), (D)
changes or waives the Minimum Condition, (E) extends the Offer, except as
described in the following sentence, (F) provides for a different Per Share
Amount in respect of Class A Common Stock than in respect of Class B Common
Stock, or (G) waives or changes the terms of the Offer in any manner adverse to
the holders of Shares (other than PHI and its Subsidiaries). The Merger
Agreement provides that the Offer will expire 20 business days after it is
commenced, will be extended for an aggregate of up to 10 business days from the
initial expiration date if requested by TPC and may be extended by Offeror for
an aggregate of up to 20 business days from the expiration date (but no more
than 20 business days therefrom) without the written consent of TPC, except that
(i) the Offer may be extended without such consent for up to an aggregate of 30
days from the initial expiration date until the expiration or termination of the
waiting period, if applicable, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act") and (ii) Offeror may extend the Offer, if at the time the Offer
would otherwise expire, a 5 day cure period under clause (f) or (g) of Annex A
to the Merger Agreement is in effect, to a date 5 days after the end of such 5
day cure period.
THE MERGER. The Merger Agreement provides that, on the terms and subject to
the conditions set forth in the Merger Agreement and in accordance with the
relevant provisions of the Delaware General Corporation Law (the "DGCL"), as
soon as practicable following the satisfaction or waiver, if permissible, of the
conditions described below under "CONDITIONS TO THE MERGER." Offeror will be
merged with and into TPC with TPC as the surviving corporation in the Merger
(the "Surviving Corporation"). The Merger will become effective at the time of
filing of a certificate of merger, or certificate of ownership and merger, as
required by the DGCL (the "Effective Time"). At the Effective Time, each Share
issued and outstanding immediately prior to the Effective Time (other than
Shares owned by PHI, by Offeror or by any other direct or indirect subsidiary of
PHI or of TPC, or held in the treasury of TPC, all of which will be canceled
without any conversion thereof and no payment or distribution will be made with
respect thereto, and the Shares owned by stockholders who have complied with all
of the relevant provisions providing for appraisal rights under the DGCL) will
be canceled and converted automatically into the right to receive an amount
I-1
<PAGE>
equal to the Per Share Amount in cash (the "Merger Consideration") net to the
holder, without any interest thereon, and each share of common stock of Offeror
issued and outstanding immediately prior to the Effective Time will be converted
into and exchanged for one validly issued, fully paid and nonassessable share of
common stock, par value $.01 per share, of the Surviving Corporation.
STOCKHOLDERS MEETING. The Merger Agreement provides that, if required by
applicable law in order to consummate the Merger, TPC will, subject to its
fiduciary duties under applicable law duly call an annual or special meeting of
its stockholders (the "Stockholders Meeting") as soon as practicable following
the consummation of the Offer to consider and vote upon the adoption of the
Merger and the Merger Agreement. The Merger Agreement provides that in the event
that Offeror acquires at least 90% of the outstanding Shares pursuant to the
Offer or otherwise, the parties will take all necessary and appropriate actions
to cause the Merger to become effective as soon as practicable after the
consummation of the Offer without a Stockholders Meeting in accordance with
Section 253 of the DGCL. PHI has agreed to cause all the Shares purchased
pursuant to the Offer and all other Shares beneficially owned by PacifiCorp,
Offeror or any other Subsidiary of PacifiCorp, to be voted in favor of the
Merger and the Merger Agreement.
STOCK OPTIONS. The Merger Agreement provides that (a) TPC will use its best
efforts to enter into an agreement with each holder of an employee or director
stock option to purchase Shares (in each case, an "Option") that provides that,
immediately after the date on which Offeror will have accepted for payment all
Shares validly tendered and not withdrawn prior to the expiration date with
respect to the Offer, each Option that is then outstanding, whether or not then
exercisable or vested, will be canceled by TPC, and each holder of a canceled
Option will be entitled to receive from Offeror at the same time as payment for
Shares is made by Offeror in connection with the Offer, in consideration for the
cancellation of such Option, an amount in cash equal to the product of (i) the
number of Shares previously subject to such Option, whether or not then
exercisable or vested, and (ii) the excess, if any, of the Per Share Amount over
the exercise price per Share previously subject to such Option, reduced by any
applicable withholding.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains
representations and warranties by TPC, relating to, among other things, (i) the
organization of TPC and its Subsidiaries and other corporate matters, (ii) the
capital structure of TPC, (iii) the authorization, execution, delivery and
consummation of the transactions contemplated by the Merger Agreement, (iv)
consents and approvals, (v) documents filed by TPC with the SEC and the accuracy
of the information contained therein, (vi) the accuracy of the information
contained in documents filed with the SEC in connection with the Offer and the
Merger, (vii) litigation, (viii) environmental matters (ix) absence of material
changes, and (x) taxes. In addition, the Merger Agreement contains
representations and warranties by PHI and Offeror, relating to, among other
things, (a) the organization and ownership of PHI and Offeror and other
corporate matters, (b) the authorization, execution, delivery and consummation
of the transactions contemplated by the Merger Agreement, (c) the accuracy of
information contained in documents filed with the SEC in connection with the
Offer and the Merger, (d) consents and approvals, (e) financial statements of
PHI, (f) regulatory status and (g) absence of ownership of Shares.
CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the Merger Agreement,
TPC has agreed that, prior to the Effective Time, except as otherwise provided
in the Merger Agreement or with the prior written consent of PHI, TPC will, and
will cause each of its Subsidiaries to, conduct its operations only in the
ordinary and usual course of business consistent with past practice. TPC has
further agreed that it will use all reasonable efforts, and will cause each of
its Subsidiaries to use all reasonable efforts, to (i) preserve intact the
present business organization of TPC and its Subsidiaries, (ii) keep available
the services of the present officers and employees of TPC and its Subsidiaries,
and (iii) preserve the material relationships of TPC and its Subsidiaries with
licensors, licensees, customers, suppliers, employees and any others having
business dealings with TPC or any of its Subsidiaries. TPC has agreed that,
unless otherwise contemplated or disclosed in the Merger Agreement or consented
to by PHI, neither TPC nor any material subsidiary, can, between the date of the
Merger Agreement and the Effective Time: (i) amend or otherwise change its
I-2
<PAGE>
charter or bylaws, (ii) issue, sell, pledge, dispose of, grant or encumber any
shares of capital stock of any class of TPC or any Subsidiary, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest of TPC or any
Subsidiary or, any assets and properties material to TPC and the Subsidiaries,
taken as a whole, except for (a) sales of natural gas, in the ordinary course of
business and in a manner consistent with past practice, by the marketing
business of TPC or (b) pledges of assets and properties required by any
financing document to which TPC or a Subsidiary is a party on the date of the
Merger Agreement, (iii) declare, set aside, make or pay any dividend or other
distribution with respect to any of its capital stock (except for such
declarations, set-asides, dividends and other distributions made from any
Subsidiary to TPC), (iv) reclassify, combine, split or subdivide, or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock,
(v) acquire any corporation, partnership or other business organization or any
division thereof or any material amount of assets, except for acquisitions of
natural gas, in the ordinary course of business, by the marketing business of
TPC; (vi) incur any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse, or otherwise become responsible for, the
obligations of any person, or make any loans or advances, except borrowing in
the ordinary course of business pursuant to any existing revolving credit
agreement of TPC, (vii) enter into or amend any contract, agreement, commitment
or arrangement with respect to any matter described in the foregoing clauses (v)
and (vi), (viii) increase the compensation payable or to become payable to, or
grant any severance or termination pay to, its officers, employees, directors or
consultants, except pursuant to existing contractual arrangements, (ix) pay,
discharge or satisfy any claim, liability or obligation other than in the
ordinary course of business and consistent with past practice and other than
liabilities reflected or reserved against in the consolidated balance sheet of
TPC and the consolidated Subsidiaries as at December 31, 1996, including the
notes thereto, or subsequently incurred in the ordinary course of business and
consistent with past practice, (x) enter into any collective bargaining
agreements or change accounting practices, (xi) make any contribution to the TPC
ESOP in excess of the amount necessary to amortize existing loans from TPC over
the remaining portion of the original seven year period of such loans, (xii)
amend in any material respect or terminate any contract or agreement material to
TPC and the Subsidiaries, or (xiii) agree to take in writing, or otherwise, any
of the actions described in the foregoing clauses (i) through (xii) or any
action which would result in any of the conditions to the Offer not being
satisfied (other than as contemplated by the Merger Agreement).
ACCESS. Pursuant to the Merger Agreement, TPC has agreed that it will (i)
give PHI and Offeror and their authorized representatives reasonable access to
all offices, properties and other facilities and to all books and records of TPC
and its Subsidiaries, (ii) permit PHI and Offeror to make such inspections as it
may reasonably require, and (iii) cause its officers and those of its
Subsidiaries to furnish PHI and Offeror such financial and operating data and
other information with respect to the business and properties of TPC and its
Subsidiaries. In this regard, PHI and Offeror have agreed to comply with the
terms of the Confidentiality Agreement between TPC and PacifiCorp Power
Marketing dated October 23, 1996 (the "Confidentiality Agreement"). (See
"Description of Certain Agreements--Confidentiality Agreement" in this Annex
I.).
ALTERNATIVE PROPOSALS. The Merger Agreement provides that until the earlier
of the termination of the Merger Agreement or the Effective Time, TPC will not,
and will cause its officers, directors, Subsidiaries, affiliates,
representatives and agents, directly or indirectly, not to initiate, solicit or
encourage, any proposal, offer or inquiry to acquire all or any substantial part
of the business and properties of TPC or any capital stock of TPC whether by
merger, purchase of assets, tender offer or otherwise, whether for cash,
securities or any other consideration or combination thereof (any such
transaction, an "Alternative Transaction"). TPC has agreed to cease and to cause
to be terminated any existing discussions or negotiations regarding Alternative
Transactions, with parties other than PHI and Offeror commenced before the date
of the Merger Agreement. TPC has also agreed not to grant its consent to any
party other than PHI and Offeror to take any action such party has agreed not to
take pursuant to any "standstill" restrictions that are equivalent to the
standstill provisions contained in the
I-3
<PAGE>
Confidentiality Agreement, or to provide any confidential or non-public
information regarding TPC and its Subsidiaries to, or have discussions with, any
person regarding an Alternative Transaction.
Notwithstanding the foregoing, the Merger Agreement provides that if TPC
receives an unsolicited proposal or indication of interest for or with respect
to a potential Alternative Transaction (an "Alternative Proposal"), TPC may
engage in discussions or negotiations regarding such Alternative Proposal and
furnish confidential or non-public information concerning TPC or its
Subsidiaries if in the reasonable, good faith judgment of the TPC Board of
Directors, taking into account the advice of outside counsel, the failure to do
so would violate the fiduciary duties of the TPC Board of Directors to the
holders of Shares under applicable law, and if the Alternative Proposal is a
tender offer, the TPC Board of Directors may take and disclose to TPC's
stockholders a position contemplated by rule 14e-2 under the Exchange Act. The
Merger Agreement also provides that TPC will inform PHI promptly of its receipt
of any Alternative Proposal.
DIRECTORS. The Merger Agreement provides that promptly upon the acceptance
for payment of, and payment for, Shares by Offeror pursuant to the Offer,
Offeror will be entitled to designate such number of directors on the TPC Board
of Directors as will give Offeror, subject to compliance with Section 14(f) of
the Exchange Act, a majority of such directors, and TPC will, at such time,
cause Offeror's designees to be so elected by its existing Board of Directors;
provided, however, that in the event that Offeror's designees are elected to the
TPC Board of Directors, until the Effective Time such Board of Directors will
have at least three directors who are directors of TPC on the date of the Merger
Agreement (the "Independent Directors"); and provided further that, in such
event, if the number of Independent Directors will be reduced below three for
any reason whatsoever, the remaining Independent Directors or Director will
designate a person to fill such vacancy who will be deemed to be an Independent
Director for purposes of the Merger Agreement or, if no Independent Director
then remains, the other directors will designate three persons to fill such
vacancies who will not be officers or affiliates of TPC or any of its
Subsidiaries or of PHI or any of its Subsidiaries, and such persons will be
deemed to be Independent Directors for purposes of the Merger Agreement. In
connection with the foregoing, TPC has agreed promptly, at the option of PHI,
either to increase the size of TPC's Board of Directors and/or obtain the
resignation of such number of its current directors as is necessary to enable
Offeror's designees to be elected or appointed to TPC's Board of Directors as
provided above.
DIRECTORS/OFFICERS INDEMNIFICATION AND INSURANCE. The Merger Agreement
provides that, with certain limitations, the Certificate of Incorporation of the
Surviving Corporation and each of its Subsidiaries will contain provisions no
less favorable with respect to indemnification and advancement of expenses than
are set forth in the Amended and Restated Certificate of Incorporation of TPC as
of the date of execution of the Merger Agreement. The Merger Agreement provides
that TPC will defend, indemnify and hold harmless, and after the Effective Time,
the Surviving Corporation will defend, indemnify and hold harmless, certain
present and former directors and officers of TPC as identified in the Merger
Agreement to the full extent required or permitted under Delaware law. Pursuant
to the Merger Agreement, such rights to be defended, indemnified and held
harmless will continue in full force and effect without time limitation from and
after the Effective Time for a period of six years after the Effective Time. The
Merger Agreement provides further that, with certain limitations, the Surviving
Corporation will, for six years from the Effective Time, maintain in effect the
directors' and officers' liability insurance policies in force and existing at
the time of the execution of the Merger Agreement.
EMPLOYMENT MATTERS. The Merger Agreement provides that all employees of TPC
and its subsidiaries prior to the Effective Time will be employed by the
Surviving Corporation immediately after the Effective Time. However with certain
limitations, PHI and the Surviving Corporation will not be obligated to continue
employing such employees for any length of time thereafter unless obligated by
contract. The employees of TPC and its Subsidiaries will also be granted service
credit under any applicable employee benefit plan or program which recognizes
service time. The Merger Agreement provides that for one year
I-4
<PAGE>
after the Effective Time, PHI will cause the Surviving Corporation to continue
or cause to be continued without significant adverse change to any employee or
former employee of TPC and its Subsidiaries all TPC Employee Benefit Plans and
the TPC 401(k) Plan, except that PHI or the Surviving Corporation may, during
such period, replace any of the TPC Employee Benefit Plans or the TPC 401(k)
Plan with a plan that is substantially equivalent to or more favorable than the
plan it replaces.
The Merger Agreement provides that, to the extent permitted by the relevant
provisions of the Internal Revenue Code of 1986 (the "Code"), PHI will maintain
or cause to be maintained the TPC ESOP as a separate qualified plan or separate
feature in a qualified plan solely for the benefit of the TPC ESOP participants
and the employees of the business that was conducted by TPC prior to the
Effective Time, until the notes issued by the TPC ESOP (the "ESOP Notes") are
paid in full (prior to or at maturity). Employees who are TPC ESOP participants
before the Effective Time and who are involuntarily terminated other than for
cause will become fully vested upon termination and will be entitled to an
allocation for the year of termination. If (i) PacifiCorp or its delegatee so
elects, or (ii) certain Code provisions do not permit the TPC ESOP to be
maintained as a separate plan or feature of a plan, PacifiCorp shall cause a
matching contribution and a two percent of eligible compensation contribution to
be made to repay the ESOP Notes. At any time, PacifiCorp or its delegatee may
elect to prepay the ESOP Notes in full.
The Merger Agreement provides certain protections and advantages (lump sum
cash severance payment and continued health insurance coverage under Part 6 of
ERISA) for the benefit of any employee of TPC or its Subsidiaries who is
terminated from employment by the Surviving Corporation within 12 months after
the Effective Time for any reason other than cause, or who is required to
transfer to a job location that is more than 50 miles from his or her current
job location or take a reduction in base rate pay, but refuses such transfer or
reduction and terminates his or her employment with the Surviving Corporation.
The above described benefits are to apply in lieu of severance benefits
applicable under TPC's general severance policy, and do not apply to the named
officers and key employees who are party to change in control agreements.
CONDITIONS TO THE OFFER. Annex A to the Merger Agreement provides that
notwithstanding any other provision of the Offer, Offeror shall not be required
to accept for payment or pay for any Shares tendered pursuant to the Offer
unless (i) the Minimum Condition shall have been satisfied and (ii) any
applicable waiting period under the HSR Act shall have expired or been
terminated. Furthermore, Offeror may terminate or amend the Offer and may
postpone the acceptance for payment of and payment for Shares tendered, if at
any time on or after the date of this Agreement, and prior to the acceptance for
payment of Shares, any of the following conditions shall exist:
(a) there shall have been issued and shall remain in effect any injunction,
order or decree by any court or governmental authority, which (i) restrains or
prohibits the making of the Offer or the consummation of the Merger, (ii)
prohibits or limits ownership or operation by TPC, PHI or Offeror of all or any
material portion of the business or assets of TPC and its Subsidiaries, taken as
a whole, or PHI and its Subsidiaries, taken as a whole, or compels TPC, PHI or
any of their Subsidiaries to dispose of or hold separate all or any material
portion of the business or assets of TPC and its Subsidiaries, taken as a whole,
or PHI and its Subsidiaries, taken as a whole, in each case as a result of the
Transactions; (iii) imposes material limitations on the ability of PHI or
Offeror to exercise effectively full rights of ownership of any Shares; or (iv)
requires divestiture by PHI or Offeror of any material portion of the Shares;
(b) there shall have been any action taken, or any statute, rule,
regulation, order or injunction issued or otherwise applicable to (i) PHI, TPC
or any Subsidiary or affiliate of PHI or TPC or (ii) any Transaction, by any
court or governmental authority (other than, in the case of both (i) and (ii),
the application of the waiting period provisions of the HSR Act to the Offer or
the Merger), which results in any of the consequences referred to in clauses (i)
through (iv) of paragraph (a) above;
I-5
<PAGE>
(c) there shall have occurred and be continuing (i) any general suspension
of trading in, or limitation on prices for, securities on the New York Stock
Exchange or in the over-the-counter market, (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (iii) a commencement of a war or armed hostilities involving the United
States, (iv) any limitation (whether or not mandatory) by any governmental
authority on the extension of credit by banks or other financial institutions,
(v) in the case of any of the foregoing existing at the time of the commencement
of the Offer, in the reasonable judgment of PHI, a material worsening thereof;
(d) a tender offer or exchange offer for more than fifty percent (50%) of
the Shares shall have been made or publicly proposed by a third party for a
price in excess of the Per Share Amount;
(e) the TPC Board of Directors or any committee thereof shall have withdrawn
or modified in a manner adverse to PHI or Offeror its approval or recommendation
of the Offer, the Merger or this Agreement or shall have approved or recommended
another merger, consolidation, business combination with, or acquisition of TPC
or all or substantially all its assets or another tender offer or exchange offer
for Shares, or shall have resolved to do any of the foregoing;
(f) TPC shall have failed to perform in any material respect any of its
covenants in this Agreement and shall not have cured such default (provided 5
days written notice of such default shall have been given to TPC by PHI);
(g) the representations and warranties of TPC shall fail to be true and
correct in all material respects on and as of the date made or at such later
time as the Merger Agreement provides, and such failure shall not have been
cured in all material respects (provided 5 days written notice of such failure
shall have been given to TPC by PHI);
(h) the Merger Agreement shall have been terminated in accordance with its
terms;
(i) Offeror and TPC shall have agreed that Offeror shall terminate the Offer
or postpone the acceptance for payment of or payment for Shares thereunder; or
(j) since December 31, 1996, except as expressly contemplated by the Merger
Agreement, disclosed in any form report or document required to be filed by TPC
with the Securities and Exchange Commission since such date and prior to the
date of the Merger Agreement or as set forth in a schedule to the Merger
Agreement, there shall have been any event having, individually or in the
aggregate, a change or effect that is reasonably likely to be materially adverse
to the business, operations, properties, financial condition, assets or
liabilities (including, without limitation, contingent liabilities) of TPC and
the Subsidiaries taken as a whole, except for changes that affect the industries
in which TPC and the Subsidiaries operate generally.
CONDITIONS TO THE MERGER. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
or waiver, where permissible, prior to the Effective Time of the following
conditions: (i) the Merger Agreement shall have been adopted by the requisite
vote of the stockholders of TPC in accordance with TPC's Amended and Restated
Certificate of Incorporation and applicable law, if such vote is required, (ii)
no United States or state statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated or enforced that has
the effect of making the acquisition or ownership of the Shares illegal or
otherwise prohibiting or materially restricting the consummation of the Merger,
(iii) the waiting period applicable to the consummation of the Merger under the
HSR Act shall have expired or been terminated, and (iv) Offeror or its permitted
assignee will have purchased all Shares validly tendered and not withdrawn
pursuant to the Offer.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time (i) by mutual consent of the parties to the Merger Agreement,
(ii) by TPC, upon approval of the TPC Board of Directors, if (1) Offeror shall
have (A) failed to commence the Offer within ten days following the date of the
Merger Agreement, (B) terminated the Offer without having accepted any Shares
for
I-6
<PAGE>
payment thereunder or (C) failed to pay for Shares pursuant to the Offer within
90 days following the commencement of the Offer, unless such failure to pay for
Shares shall have been caused by or resulted from the failure of TPC to satisfy
the conditions set forth in paragraph (f) or (g) of Annex A to the Merger
Agreement or (2) prior to the purchase of Shares pursuant to the Offer, the TPC
Board of Directors shall have withdrawn or modified in a manner adverse to
Offeror or PHI its approval or recommendation of the Offer, the Merger Agreement
or the Merger in order to approve the execution by TPC of a definitive agreement
providing for an Alternative Transaction or in order to approve a tender offer
or exchange offer for Shares by a third party, in either case on terms more
favorable to TPC's stockholders from a financial point of view than the Offer
and the Merger taken together, as determined by the TPC Board of Directors in
the exercise of its good faith judgment and after consultation with its legal
counsel and financial advisors; PROVIDED, HOWEVER, that termination as described
in clause (2) will not be effective until TPC has made payment to PHI of the fee
required to be paid as specified in the second sentence under the caption "FEES
AND EXPENSES" below, (iii) by PHI if (1) due to an occurrence or circumstance
that results in a failure to satisfy any condition set forth in Annex A to the
Merger Agreement, Offeror shall have (A) failed to commence the Offer within ten
days following the date of the Merger Agreement, (B) terminated the Offer
without having accepted any Shares for payment or (C) failed to pay for Shares
pursuant to the Offer within 90 days following the commencement of the Offer,
unless any such failure listed above shall have been caused by or resulted from
the failure of PHI or Offeror to perform in any material respect any material
covenant or agreement of either of them contained in the Merger Agreement or the
material breach by PHI or Offeror of any material representation or warranty of
either of them contained in the Merger Agreement or (2) prior to the purchase of
Shares pursuant to the Offer, the TPC Board of Directors or any committee
thereof shall have withdrawn or modified in a manner adverse to Offeror or PHI
its approval or recommendation of the Offer, the Merger Agreement or the Merger
or shall have recommended another merger, consolidation, business combination
with, or acquisition of, TPC or all or substantially all its assets or another
tender offer or exchange offer for Shares, or shall have resolved to do any of
the foregoing, or (iv) by either PHI, Offeror or TPC if the Merger is not
consummated on or before the first anniversary of the date of the Merger
Agreement; provided, however, that the party seeking to terminate the Merger
Agreement as described in this clause (iv) is not willfully or negligently in
material breach of the Merger Agreement.
FEES AND EXPENSES. The Merger Agreement provides that, except as described
in the following sentence, whether or not the Offer or the Merger is
consummated, all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby will be paid by the party
incurring such expenses. The Merger Agreement provides further that, if the
Merger Agreement is terminated by TPC as described in clause (ii)(2) under the
caption "TERMINATION" above, or by PHI under the provision described in clause
(iii)(2) under the caption "TERMINATION" above, TPC will pay to PHI a fee of
$9,000,000 in cash.
AMENDMENT. The Merger Agreement may be amended through a written instrument
at any time prior to the Effective Time by the Board of Directors of the
parties. The Merger Agreement provides certain special rules for the amendment
of the Merger Agreement after the election or appointment of Offeror designees
to the TPC Board of Directors.
STOCKHOLDER AGREEMENT.
Messrs. Larry W. Bickle, John A. Strom and J. Chris Jones, executive officer
of TPC, are each party to a Stockholder Agreement dated March 11, 1997 with PHI
and the Offeror. The Stockholder Agreement provides that each of Messrs. Bickle,
Strom and Jones will tender his Shares into the Offer so long as the per Share
amount is not less than $13.41 in cash (net to the seller). Additionally, each
of Bickle, Strom and Jones has agreed to sell, and the Offeror has agreed to
purchase, their Shares at a price per Share equal to $13.41, or such higher
price per Share as may be offered by the Offeror in the Offer, provided that
such obligations to purchase and sell are both subject to (i) the Offeror having
accepted Shares for payment
I-7
<PAGE>
under the Offer and the Minimum Condition (minus any shares which are the
subject of the Stockholder Agreement but are not purchased in the Offer) having
been satisfied, and (ii) the expiration or termination of any applicable waiting
period under the HSR Act. Each of Bickle, Strom and Jones has also agreed not to
transfer or agree to transfer his Shares, grant a proxy for his Shares or enter
into a voting agreement respecting them, or take any other action that would in
any way restrict, limit or interfere with the performance of his obligations
under the Stockholder Agreement or the transactions contemplated thereby. The
Stockholder Agreement terminates upon the earlier of (i) the Merger Agreement
being terminated by TPC, PHI or the Offeror, or (ii) the purchase and sale of
the Shares of Bickle, Strom and Jones as described above. The foregoing summary
of the Stockholder Agreement is qualified in its entirety by the text of the
Stockholder Agreement, a copy of which is filed as Exhibit 3 to the Schedule
14D-9 and is incorporated herein by reference.
CONFIDENTIALITY AGREEMENT.
On October 23, 1996, TPC and PacifiCorp Power Marketing, Inc. ("PPM"), an
affiliate of PHI, entered into a confidentiality agreement (the "Confidentiality
Agreement") pursuant to which TPC agreed to provide to PPM and its
representatives certain information and material concerning TPC, its
subsidiaries and affiliates on a confidential basis. In consideration of such
disclosure, PPM agreed that neither it nor its affiliates would solicit to
employ any of the current officers and employees of TPC without TPC's prior
written consent. PPM also agreed on behalf of itself and its affiliates to
certain standstill provisions for a period of three years with respect to
certain actions involving or leading to a transaction with TPC without the
written consent or invitation of the Board. The foregoing summary of the
Confidentiality Agreement is qualified in its entirety by the text of the
Confidentiality Agreement, a copy of which is filed as Exhibit 4 to the Schedule
14D-9 and is incorporated herein by reference.
I-8
<PAGE>
ANNEX II
LEHMAN BROTHERS
March 11, 1997
Board of Directors
TPC Corporation
200 West Lake Park Boulevard, Suite 1000
Houston, Texas 77079
Members of the Board:
We understand that Pacificorp Holdings, Inc. ("PHI"), a wholly owned
subsidiary of Pacificorp, and TPC Corporation ("TPC" or the "Company") have
entered into an Agreement and Plan of Merger dated as of March 11, 1997 (the
"Agreement"), pursuant to which ACo, a wholly owned subsidiary of PHI, will make
a cash tender offer to acquire all the issued and outstanding shares of Class A
and Class B common stock of TPC, par value $0.01 per share, for $13.41 per share
net to the seller in cash (the "Tender Offer"). The Tender Offer will be
conditional upon, among other things, the tender of shares of TPC common stock
which represent at least a majority of the outstanding shares of TPC common
stock on a fully diluted basis. Following consummation of the Tender Offer, each
share of TPC stock which is outstanding and not purchased pursuant to the Tender
Offer, will be converted into the right to receive $13.41 per share in cash
pursuant to a merger of ACo with and into TPC (the "Merger", and together with
the Tender Offer, the "Proposed Transaction"). The terms and conditions of the
Proposed Transaction are set forth in more detail in the Agreement.
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company's stockholders of the consideration to be offered to such stockholders
in the Proposed Transaction. We have not been requested to opine as to, and our
opinion does not in any manner address, the Company's underlying business
decision to proceed with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Transaction, (2) publicly available
information concerning Pacificorp and the Company that we believe to be relevant
to our analysis including the Company's Form 10-K for the year ended December
31, 1996, (3) financial and operating information with respect to the business,
operations and prospects of the Company furnished to us by the Company, (4) a
trading history of the Company's common stock from January 1, 1992 to the
present and a comparison of that trading history with those of other companies
that we deemed relevant, (5) a comparison of the historical financial results
and present financial condition of the Company with those of other companies
that we deemed relevant, (6) a comparison of the financial terms of the Proposed
Transaction with the financial terms of certain other recent transactions that
we deemed relevant, and (7) the results of our efforts to solicit indications of
interest and proposals from third parties with respect to a purchase of all or a
part of the Company's business. In addition, we have had discussions with the
management of the Company concerning its business, operations, assets, financial
condition and prospects and have undertaken such other studies, analyses and
investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information used by us without assuming
any responsibility for independent verification of such information and have
further relied upon the assurances of management of the Company that they are
not aware of any facts or circumstances that would make such information
inaccurate or misleading. With respect to the financial projections of the
Company, upon advice of the Company we have assumed
II-1
<PAGE>
that such projections have been reasonably prepared on a basis reflecting the
best currently available estimates and judgments of the management of the
Company as to the future financial performance of the Company and that the
Company will perform substantially in accordance with such projections. In
arriving at our opinion, we have not conducted a physical inspection of the
properties and facilities of the Company and have not made or obtained any
evaluations or appraisals of the assets or liabilities of the Company. Our
opinion necessarily is based upon market, economic and other conditions as they
exist on, and can be evaluated as of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
offered to the stockholders of the Company in the Proposed Transaction is fair
to such stockholders.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, the Company has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. In the ordinary course of our business, we actively
trade in the equity securities of the Company for our own account and for the
accounts of our customers and, accordingly, may at any time hold a long or short
position in such securities. Michael McMahon, a director TPC, is also a Managing
Director of Lehman Brothers.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of the Company as to
whether to accept the consideration to be offered to such stockholder in
connection with the Proposed Transaction.
Very truly yours,
LEHMAN BROTHERS
By: /s/ H.E. MCGEE III
-----------------------------------------
H.E. McGee III
MANAGING DIRECTOR
II-2
<PAGE>
ANNEX III
TPC CORPORATION
200 WESTLAKE PARK BOULEVARD
HOUSTON, TEXAS 77079
------------------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
------------------------
NO VOTE OR OTHER ACTION OF TPC'S STOCKHOLDERS
IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND
YOU ARE REQUESTED NOT TO SEND TPC A PROXY.
------------------------
This Information Statement is being mailed on or about March , 1997 as
part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") to the holders of shares (the "Shares") of the Class A
Common Stock, par value $.01 per share, and the Class B Common Stock, par value
$.01 per share (the "Common Stock"), of TPC Corporation, a Delaware corporation
("TPC"). Capitalized terms used and not otherwise defined herein shall have the
meanings set forth in the Schedule 14D-9. This Information Statement is being
furnished in connection with the possible designation by PacifiCorp Holdings,
Inc., a Delaware corporation ("PHI"), and the direct parent of Power Acquisition
Company, a Delaware corporation ("Offeror") of persons (the "Offeror Designees")
to the Board of Directors of TPC (the "Board"). Such designation is to be made
pursuant to an Agreement and Plan of Merger dated March 11, 1997 (the "Merger
Agreement") among TPC, PHI and Offeror.
The Merger Agreement provides that promptly upon the acceptance for payment
of, and payment for, Shares by Offeror pursuant to the Offer, Offeror will be
entitled to designate such number of directors as will give Offeror, subject to
compliance with Section 14(f) of the Exchange Act, a majority of such directors,
and TPC will, at such time, cause Offeror's designees to be so elected by its
existing Board; provided, however, that in the event that Offeror's designees
are elected to the Board, until the Effective Time (as defined in the Merger
Agreement) such Board will have at least three directors who are directors of
TPC on the date of the Merger Agreement (the "Independent Directors"); and
provided further that, in such event, if the number of Independent Directors
will be reduced below three for any reason whatsoever the remaining Independent
Directors will designate a person to fill such vacancy who will be deemed to be
an Independent Director for purposes of the Merger Agreement or, if no
Independent Director then remains, the other directors will designate three
persons to fill such vacancies who will not be officers or affiliates of TPC or
any of its subsidiaries or of PHI or any of its subsidiaries, and such persons
will be deemed to be Independent Directors for purposes of the Merger Agreement.
Subject to applicable law, TPC will take all action requested by PHI necessary
to effect any such election. In connection with the foregoing, TPC will
promptly, at the option of PHI, either increase the size of the Board and/or
obtain the resignation of such number of its current directors as is necessary
to enable Offeror's designees to be elected or appointed to the Board as
provided above.
The information contained in this Information Statement concerning PHI and
the Offeror Designees has been furnished to TPC by such persons, and TPC assumes
no responsibility for the accuracy or completeness of such information.
III-1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
GENERAL
The outstanding voting securities of TPC as of March 7, 1997 consisted of
17,424,252 Shares of Class A Common Stock and 579,963 Shares of Class B Common
Stock, with approximately 3,497,494 Shares reserved for issuance pursuant to
outstanding stock options granted by TPC to key employees, directors and
consultants. Each Share is entitled to one vote on matters other than the
election of directors, in which case the holders of the Class A Common Stock are
entitled to elect two members to the Board class being elected each year, and
the holder of the Class B Common Stock is entitled to elect one member to the
Board class being elected each year.
The Board is divided into three classes serving staggered terms in
accordance with TPC's Amended and Restated Certificate of Incorporation.
BENEFICIAL OWNERS
The following table and the information under "Stockholders' Agreements"
below describe the ownership of Shares by each person known by TPC to own
beneficially more than five percent of the Shares (including any "group" as that
term is used in Section 13(d) (3) of the Exchange Act). Unless otherwise
indicated, to TPC's knowledge, such persons have sole voting and investment
power with respect to such Shares, and all such Shares are owned beneficially
and of record by the person indicated. The table reflects the ownership of such
Shares (including Shares that may be acquired within sixty days of March 7,
1997) at March 7, 1997.
Certain of the information in the following table and set forth under
"Stockholders' Agreements" was taken from materials filed with the SEC by
certain owners of TPC's capital stock. Certain of the stockholders identified in
the following table have entered into agreements regarding the disposition and
voting of their capital stock as described under "Stockholders' Agreements"
which may cause certain of the parties to such agreements to be deemed to have
beneficial ownership of stock subject to such agreements. All of the percentages
in the following table assume that the 579,963 outstanding shares of Class B
Common Stock have been converted into the same number of Shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AT MARCH 7, 1997
-----------------------
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER CLASS
- ------------------------------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Foreign & Colonial Management Limited (1).................................................. 921,000 5.28%
Exchange House
Primrose Street
London EC2A 2NY, England
Gaz de France (2).......................................................................... 4,046,999 23.22%
No. 32 Lookerman Square
Suite L-100
Dover, Delaware 19901
Miami Valley Leasing, Inc. (3)............................................................. 1,000,000 5.74%
Courthouse Plaza Southwest
Dayton, Ohio 45402
</TABLE>
III-2
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AT MARCH 7, 1997
-----------------------
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER CLASS
- ------------------------------------------------------------------------------------------- ---------- -----------
NAR Group Limited (4)...................................................................... 1,546,000 8.87%
<S> <C> <C>
Citco Building
P.O. Box 662
Wickhams Cay
Road Town, Tortola
British Virgin Islands
</TABLE>
- ------------------------
(1) Foreign & Colonial Management Limited ("F&C") is an investment advisor
wholly owned by Hypo Foreign & Colonial Management (Holdings) Limited
("Holdings"). Both of these entities are organized under the laws of the
United Kingdom. F&C and Holdings share voting and dispositive power with
respect to the shares indicated as beneficially owned by F&C.
(2) The Shares indicated as beneficially owned by Gaz de France ("GDF") are held
of record by GDF US INCORPORATED, a Delaware corporation and an indirect
wholly owned subsidiary of GDF. Messr. Abiteboul, a director of TPC, is
President of GDF US INCORPORATED. These shares include 579,963 Shares
issuable upon conversion of the Class B Common Stock now owned by GDF.
(3) Miami Valley Leasing, Inc., an Ohio corporation ("Miami Valley"), is a
wholly owned subsidiary of DPL Inc. ("DPL"), also an Ohio corporation. DPL
is also the parent company of The Dayton Power and Light Company ("DP&L"),
an Ohio corporation engaged in the business of generating, transmitting and
selling electric energy and distributing natural gas in the State of Ohio.
Mr. Thomas Jenkins is an officer of both DPL and DP&L, however, Mr. Jenkins
disclaims any beneficial ownership to the Shares owned by Miami Valley.
(4) The Shares beneficially owned by NAR Group Limited, a private investment
holding company ("NAR"), are owned of record by Intercontinental Mining &
Resources Incorporated, a British Virgin Islands company and a wholly owned
subsidiary of NAR. NAR is a private investment holding company that is a
joint venture between the family of Mr. Alan Quasha, and Compagnie
Financiere Richemont A.G., a Swiss public company engaged in the tobacco,
luxury goods, and other businesses. Mr. Quasha and his family may be deemed
to beneficially own the shares reported as beneficially owned by NAR,
however, Mr. Quasha and his family disclaim such beneficial ownership.
STOCKHOLDERS' AGREEMENTS
Effective June 14, 1991, TPC sold an aggregate of 565,065 Shares of Class B
Common Stock, and preferred shares that are no longer outstanding, to GDF and
certain other entities (which certain other entities no longer own any such
shares). In connection with this transaction, Phemus Corporation,
Intercontinental Mining & Resources Incorporated, a wholly owned subsidiary of
NAR Group Limited, and another company that has since sold its Shares entered
into a stockholders' agreement with GDF ("Stockholders' Agreement"). The
Stockholders' Agreement provides, among other things, that so long as such
stockholders own Shares, they will consult with GDF regarding the nomination of
two directors to be elected by holders of the Shares. Such nominees must also be
acceptable to TPC. Messrs. Jarvis and Pignatelli serve on TPC's Board in
accordance with this arrangement.
By letter agreement dated June 12, 1991, TPC agreed with the holders of the
Class B Common Stock that if TPC granted any additional options under TPC's 1991
Stock Option Plan (the "1991 Plan") or sold any of the 375,000 Shares held in
treasury on that date, TPC would issue additional Class B Common Stock to the
holders of such stock equal to five percent of the options granted or treasury
stock sold. Pursuant to this agreement and in connection with the grant of
additional options under the 1991 Plan, TPC issued 9,079 additional shares of
Class B Common Stock in 1992, 5,819 additional shares of Class B Common Stock in
1993, and no additional Class B Common Stock in 1994, 1995 or 1996.
III-3
<PAGE>
MANAGEMENT
The following table describes the ownership of Shares by (i) each director
of TPC, (ii) the Chief Executive Officer and each of the four most highly
compensated executive officers of TPC, and (iii) all officers and directors of
TPC as a group. Unless otherwise indicated, to TPC's knowledge, such persons
have sole voting and investment power with respect to such shares and all such
shares are owned beneficially and of record by the person indicated. The table
reflects the ownership of such Shares (including Shares that may be acquired
within sixty days after March 7, 1997) at March 7, 1997.
Certain of the information in the following table was taken from materials
filed with the SEC by certain owners of TPC's Common Stock. All of the
percentages in the following table assume that the 579,963 Shares of Class B
Common Stock have been converted into the same number of Shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AT MARCH 7, 1997
------------------------
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER CLASS
- --------------------------------------------------------------------------------- ---------- ------------
<S> <C> <C>
Larry W. Bickle (1).............................................................. 580,293 3.2%
John A. Strom (1)................................................................ 732,642 4.1%
J. Chris Jones (1)............................................................... 634,140 3.5%
Ronald H. Benson (1)............................................................. 27,700 0.2%
Michael E. Calderone (1)......................................................... 39,602 0.2%
Jean P. Abiteboul (2)(4)......................................................... 8,400 *
W. J. Bowen (3).................................................................. 9,400 *
Bernard Brelle (2)(4)............................................................ 2,400 *
Robert Cosson (2)(4)............................................................. 8,400 *
Roger L. Jarvis (2).............................................................. 8,400 *
Thomas M. Jenkins (2)(5)......................................................... -- --
Michael E. McMahon (2)........................................................... 400 *
James S. Pignatelli (3).......................................................... 8,900 *
All officers and directors as a group (nineteen persons
including those listed above) (6).............................................. 2,411,319 12.5%
</TABLE>
- ------------------------
* Less than 0.1%.
(1) Shares shown as beneficially owned by Messrs. Bickle, Strom, Jones, Benson,
and Calderone include 567,313, 567,313, 567,313, 25,000 and 36,013 Shares,
respectively, which each of them has the right to acquire within sixty days
after March 7, 1997, through the exercise of stock options.
(2) All Shares shown as beneficially owned are Shares which the named director
has the right to acquire within sixty days after March 7, 1997, through the
exercise of stock options.
(3) Shares shown as beneficially owned by Messrs. Bowen and Pignatelli include
5,000 and 500 Shares, respectively, and the right to acquire 4,400 and 8,400
Shares, respectively, within sixty days after March 7, 1997, through the
exercise of stock options.
(4) Messrs. Abiteboul, Brelle and Cosson are affiliated with GDF, which
beneficially owns 4,046,999 Shares, including 579,963 Shares issuable upon
conversion of the Class B Shares now owned by GDF.
(5) See footnote (3) to the table beginning on page III-2.
(6) Shares shown as beneficially owned by the officers and directors of TPC as a
group include 1,929,716 Shares which such officers and directors have the
right to acquire within sixty days after March 7, 1997, through the exercise
of stock options.
III-4
<PAGE>
THE BOARD OF DIRECTORS
OFFEROR DESIGNEES
PHI has informed TPC that each of the Offeror Designees listed below has
consented to act as a director. To the best knowledge of TPC, none of the
Offeror Designees or their associates beneficially owns any equity securities of
TPC or has been involved in any transaction with TPC or any of its directors or
executive officers that are required to be disclosed pursuant to the rules and
regulations of the SEC.
It is expected that, upon assuming office, the PHI Designees will thereafter
constitute at least a majority of the Board of TPC.
PHI may designate the following individuals to the Board of TPC. Each such
individual's name, age as of the date hereof, present principal occupation or
employment and five year employment history is set forth below.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT (AND PRINCIPAL
NAME AGE CITIZENSHIP BUSINESS); MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- ------------------------- --- ------------- ----------------------------------------------------------
<S> <C> <C> <C>
John A. Bohling 53 U.S. Senior Vice President of PacifiCorp (since 1993);
Executive Vice President of Pacific Power & Light Company
(1991-1993); Director and Vice President of Power
Acquisition Company (since March 1997)
Richard T. O'Brien 42 U.S. Senior Vice President and Chief Financial Officer (since
1995) and Vice President (1993-1995) of PacifiCorp;
Senior Vice President (since 1993) and Chief Financial
Officer (since 1996) of PacifiCorp Holdings, Inc.; Chief
Financial Officer (1992-1993) and Vice President and
Treasurer (1989-1992) of NERCO, Inc., a former mining and
resource subsidiary of PacifiCorp; Director and Vice
President of Power Acquisition Company (since March 1997)
Dennis P. Steinberg 50 U.S. Senior Vice President (since 1994) and Vice President
(1990-1994) of PacifiCorp; Director and President of
Power Acquisition Company (since March 1997)
Donald N. Furman 40 U.S. Vice President of PacifiCorp (since February 1997);
President of PacifiCorp Power Marketing, Inc., a power
marketing and trading subsidiary of PacifiCorp Holdings,
Inc. (since 1995); Assistant Vice President of PacifiCorp
(1994-1995); Senior Vice President--Operations of
Citizens Lehman Power LP (1991-1994); Vice President of
Power Acquisition Company (since March 1997)
William E. Peressini 40 U.S. Vice President (since 1996) and Treasurer (since 1994) of
PacifiCorp; Treasurer of PacifiCorp Holdings, Inc. (since
1994); Executive Vice President of PacifiCorp Financial
Services, Inc. (1992-1994); Senior Vice President and
Chief Financial Officer of PacifiCorp Financial Services,
Inc. (1989-1992)
</TABLE>
III-5
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT (AND PRINCIPAL
NAME AGE CITIZENSHIP BUSINESS); MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- ------------------------- --- ------------- ----------------------------------------------------------
<S> <C> <C> <C>
Brian D. Sickels 51 U.S. Vice President of PacifiCorp (since February 1997); Vice
President of Power Systems, PacifiCorp (1995-1997);
Assistant Vice President, PacifiCorp (1992-1994). He is
also presently Senior Vice President and Chief Operating
Officer of PacifiCorp Power Marketing, Inc.
</TABLE>
CURRENT DIRECTORS
The Board is currently comprised of nine directors: Larry W. Bickle, Roger
L. Jarvis, Michael E. McMahon, Robert Cosson, Jean P. Abiteboul, W.J. Bowen,
James S. Pignatelli, Bernard Brelle and Thomas M. Jenkins. The information set
forth below is as of March 7, 1997.
TPC's Amended and Restated Certificate of Incorporation and By-laws provide
that the directors of TPC are to be classified into three classes, with the
directors in each class serving for three-year terms and until their successors
are elected, except that the initial terms of the directors of TPC expired, or
will expire, at the 1996, 1997 and 1998 annual meeting of the stockholders of
TPC, depending upon the particular class in which each such director was placed.
The terms of the persons presently serving on the Board expire at the annual
meetings of stockholders for the years indicated: Messrs. Michael E. McMahon,
Roger L. Jarvis and Bernard Brelle: 1997; Messrs. W.J. Bowen, James S.
Pignatelli and Jean P. Abiteboul: 1998; and Messrs. Larry W. Bickle, Thomas M.
Jenkins and Robert Cosson: 1999.
Jean P. Abiteboul, 45, is Vice President, Manager of the Major Projects
Department of the International Division of Gaz de France. He has served as
President of the United States subsidiary of Gaz de France since its formation
in 1991. In addition, M. Abiteboul has acted as Chairman and Chief Executive
Officer of NOVERGAZ (1994) Inc., a non-regulated gas company in Montreal,
Canada, since May 1994. M. Abiteboul is a director of Northern New England Gas
Corporation and Gaz Metropolitain. M. Abiteboul has served as a director of TPC
since 1991.
Larry W. Bickle, 51, has been Chairman of the Board of Directors and Chief
Executive Officer of TPC since December 1990. Mr. Bickle was a co-founder of TPC
and served as President of TPC from its formation in 1984 until February 1994.
Mr. Bickle is also a director of St. Mary Land & Exploration Company. Mr. Bickle
has been a director of TPC since 1984.
W. J. Bowen, 74, has extensive experience in the energy industry. In May
1992, Mr. Bowen retired as Chairman of the Board of Transco Energy Company after
an eighteen year career. Mr. Bowen is also a director of J.B. Poindexter & Co.,
Inc. and has served as a director of TPC since 1994.
Bernard Brelle, 44, has been head of the Tariffs and Contracts Department of
the Commercial Division of Gaz de France since 1993. From 1990 to 1992 he was
Regional Manager of CFM, an affiliate company of Gaz de France. Mr. Brelle has
been a director of TPC since 1995.
Robert Cosson, 47, has been the President of Financial and Jurisdictional
Services of Gaz de France since 1990. Mr. Cosson has been a director of TPC
since 1991.
Roger L. Jarvis, 42, has been the Chief Executive Officer of Spinnaker
Exploration LLC since December 1996. Prior thereto, Mr. Jarvis was an
independent consultant and private investor, and was President, Chief Executive
Officer and a director of King Ranch, Inc., a privately-held company with
interests in agribusinesses, oil and gas exploration and production, real estate
development, and retail businesses. Mr. Jarvis has been a director of TPC since
1991.
Thomas M. Jenkins, 46, is Group Vice President, Treasurer and Chief
Financial Officer of DPL Inc., the parent company of The Dayton Power and Light
Company ("DP&L"), which positions he has held since 1990. Mr. Jenkins is also
Group Vice President and Chief Financial Officer of DP&L, which positions
III-6
<PAGE>
he has held since 1995. From 1990 to 1995, Mr. Jenkins was Group Vice President
and Treasurer of DP&L. Mr. Jenkins has been a director of TPC since 1996.
Michael E. McMahon, 49, is a Managing Director of Lehman Brothers, Inc. He
was a Partner of Aeneas Group, Inc., a wholly owned subsidiary of Harvard
Management Company, Inc., from January 1993 to September 1994. From December
1989 through 1992, Mr. McMahon was Managing Director and co-head of the Energy &
Chemicals Group of Salomon Brothers Inc. Mr. McMahon also serves as a director
of Triton Energy Corporation. Mr. McMahon has been a director of TPC since 1993.
James S. Pignatelli, 53, has served as Senior Vice President and Chief
Operating Officer of Tucson Electric since 1994. Mr. Pignatelli retired from
Mission Energy Company in 1993, where he served as the President and Chief
Executive Officer. Mr. Pignatelli is a director of BWIP International and has
served as a director of TPC since 1991.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The business and affairs of TPC are managed under the direction of the
Board. The Board has responsibility for establishing broad corporate policies
and for the overall performance of TPC, rather than day-to-day operating
details. The Board met ten times in 1996. The Board has regularly scheduled
meetings during the year and meets at other times during the year as necessary
to review significant developments affecting TPC and to act on matters requiring
Board approval. In 1996, each of the directors attended at least seventy-five
percent of the meetings of the Board and the committees on which he served
except for Messrs. Brelle and Cosson whose attendance was below this threshold.
BOARD COMMITTEES
The Board has five standing committees which include an Executive Committee,
an Audit Committee, a Compensation Committee, a Nominating Committee and a
Strategic Planning Committee. Actions taken by a committee of the Board are
reported to the Board of Directors at its next meeting.
The Executive Committee consists of five directors. Although this Committee
has very broad powers, it is intended that this committee only meet to take
formal action on a specific matter when it would be impracticable to call a
formal meeting of the Board. The Executive Committee, and all other committees
of the Board, are prohibited by TPC's By-laws from taking certain major
corporate actions. The members of the Executive Committee in 1996 were Messrs.
Abiteboul, Bickle, Bowen, Jarvis and Pignatelli. In 1996, there were no
Executive Committee meetings.
The Audit Committee consists of three nonemployee directors. This committee
recommends the appointment of a firm of independent certified public accountants
to audit the accounting records of TPC each year. It reviews with
representatives of the independent public accountants the auditing arrangements
and scope of the independent public accountants' examination of the accounting
records, results of those audits, their fees, and any problems identified by the
independent public accountants regarding internal accounting controls, together
with their recommendations. It also meets with TPC's Chief Financial Officer and
its Controller to review reports on the functioning of TPC's programs for
compliance with its policies and procedures regarding financial reporting and
internal controls. The members of the Audit Committee in 1996 were Messrs.
Jarvis, Jenkins and Pignatelli. The Audit Committee met three times in 1996.
The Compensation Committee consists of four nonemployee directors. This
Committee makes recommendations to the Board of Directors as to the salaries and
annual bonuses of the Chief Executive Officer and the other elected officers,
and reviews the salaries of certain other senior executives. It makes
recommendations to the Board of Directors regarding grants of stock options to
elected and other senior executive officers and other eligible employees and
consultants, and reviews guidelines for the administration of TPC's incentive
compensation programs. It also reviews and makes recommendations to the Board
III-7
<PAGE>
of Directors with respect to proposed compensation or benefits plans or
programs, and periodically reviews the operations of such plans or programs. The
members of the Compensation Committee in 1996 were Messrs. Abiteboul, Bowen,
Jarvis and McMahon. The Compensation Committee met three times in 1996.
The Nominating Committee consists of three directors. This Committee
identifies, evaluates, and nominates potential individuals to stand for election
as directors of TPC as an opening on the Board occurs. The members of the
Nominating Committee in 1996 were Messrs. Bickle, Cosson and Jarvis. The
Nominating Committee did not meet in 1996.
The Strategic Planning Committee consists of five directors. This Committee
determines the focus of TPC's annual business plan, as well as establishes and
monitors TPC's strategic goals throughout the year. The members of the Strategic
Planning Committee in 1996 were Messrs. Abiteboul, Bickle, Bowen, McMahon and
Pignatelli. The Strategic Planning Committee met two times in 1996.
DIRECTOR NOMINATION PROCEDURES
The By-Laws provide that nominations for election of directors by the
stockholders will be made by the Board or by any stockholder entitled to vote in
the election of directors generally. The By-Laws require that stockholders
intending to nominate candidates for election as directors deliver written
notice thereof to the Secretary of TPC not later than eighty days in advance of
the meeting of stockholders; provided however, that in the event that the date
of the meeting is not publicly announced by TPC by an inclusion in a filing with
the SEC pursuant to Section 13(a) or 14(a) of the Exchange Act, by mail, or by
press release more than ninety days prior to the meeting, notice by the
stockholder to be timely must be delivered to the Secretary of TPC not later
than the close of business on the tenth day following the day on which such
announcement of the date of the meeting was so communicated. The By-Laws further
require that the notice by the stockholder set forth certain information
concerning such stockholder and the stockholder's nominees, including their
names and addresses, a representation that the stockholder is entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice, the class and number of
shares of TPC's stock owned or beneficially owned by such stockholder, and such
other information as would be required to be included in a proxy statement
soliciting proxies for the election of the nominees of such stockholder and the
consent of each nominee to serve as a director of TPC if so elected. The
chairman of the meeting may refuse to acknowledge the nomination of any person
not made in compliance with these requirements. Similar procedures prescribed by
the By-laws are applicable to stockholders desiring to bring any other business
before an annual meeting of stockholders.
DIRECTOR COMPENSATION
Employee directors are not compensated for their services as a director of
TPC. In 1996, each nonemployee director was paid $3,000 per quarter, $1,000 per
Board meeting attended and $500 for each committee meeting attended.
Nonemployee directors participate in both the Non-Management Director Stock
Option Plan (the "1992 Director Plan") and the 1995 Stock Option Plan for
Non-Employee Directors (the "1995 Director Plan"), which were respectively
adopted on February 4, 1992 and February 13, 1995. The 1992 Director Plan
provides for nonqualified stock options to purchase up to 100,000 Shares, in the
aggregate, by TPC's outside directors. The 1995 Director Plan provides for
nonqualified stock options to purchase up to 48,000 Shares, in the aggregate, by
TPC's outside directors.
Under the 1992 Director Plan, each director, on the date of the Board
meeting following his initial election to the Board, is granted an option to
purchase 10,000 Shares, which option vests ratably over a five year period.
Under the 1995 Director Plan, on May 15th of each year (or the first succeeding
business day thereafter) each nonemployee director receives an annual option
grant to purchase 2,000 Shares, which
III-8
<PAGE>
options also vest ratably over five years. The exercise price for the options
granted under both the 1992 Director Plan and the 1995 Director Plan is the fair
market value of TPC's Shares on the date of grant.
EXECUTIVE OFFICERS
Larry W. Bickle, 51, Chairman of the Board and Chief Executive Officer. For
Mr. Bickle's business background, see the "Board of Directors" above.
John A. Strom, 43, a co-founder of TPC, has served as its President since
February 1994. From April 1992 until February 1994, Mr. Strom served as Senior
Vice President of TPC, and from 1984 to March 1992, as Vice President--Marketing
of TPC.
J. Chris Jones, 41, has served as Chief Financial Officer of TPC since
February 1996, and Senior Vice President and Chief Operating Officer since May
1993. From January 1986 until May 1993, Mr. Jones served as Vice President and
Chief Financial Officer of TPC.
Marilyn I. Eckersley, 42, has been Vice President--Administration since
February 1996. From May 1994 to February 1996, Mrs. Eckersley served as
Manager--Administration, and prior thereto held various administrative positions
with TPC.
Joseph J. DiNorscia, 44, has been Vice President--Risk Management of TPC
since February 1994. Mr. DiNorscia joined TPC in 1990 as Manager of Portfolio
Services. Prior to joining TPC, Mr. DiNorscia served as Manager of Risk
Management and Strategy Development for Lyondell Petrochemical Company.
Robert D. Kincaid, 36, has been Treasurer of TPC since 1992. From 1990 to
1991, he was associated with EnCap Partners, a private partnership engaged in
the management of institutional debt and equity funds for energy related
investments.
Michael E. Calderone, 40, has been Vice President--Gas Marketing of TPC
since February 1994. Mr. Calderone joined TPC in 1992 as Manager of
Transportation and Exchange and, since that time, has held the positions of
Director of Profit Optimization and Manager of Marketing.
Patrick J. Peldner, 48, has been Vice President--Power Marketing of TPC
since July 1996 and Vice President--Storage from February 1994 to July 1996. Mr.
Peldner joined TPC in October 1992 as Manager of Storage Development. Prior to
joining TPC, Mr. Peldner was Vice President of Property Acquisitions and a
member of the executive committee for Nicor Oil and Gas Corporation from 1987 to
1992.
M. Scott Jones, 42, joined TPC in November 1992 as Vice President, General
Counsel and Secretary. Mr. Jones was a shareholder of the Houston, Texas law
firm of Dickerson, Carmouche & Jones prior to that time.
Ronald H. Benson, 51, has been Vice President--Corporate Development of TPC
since November 1994. From March 1993 to November 1994, Mr. Benson acted as an
independent consultant in the energy business. Mr. Benson was President of
Phibro Energy Production Inc. from December 1989 to March 1993.
D. Hughes Watler, Jr., 48, joined TPC as Controller in September 1995. Prior
to joining TPC, Mr. Watler was Chief Financial Officer of Texoil, Inc. from 1992
to 1995, and prior thereto was a partner with the accounting firm, Price
Waterhouse.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the Chief
Executive Officer and the other four most highly compensated executive officers
of TPC (the "Named Officers") for the fiscal year ended December 31, 1996.
III-9
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- ---------------
OTHER ANNUAL SHARES ALL OTHER
SALARY COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) BONUS($)(1) ($)(3) OPTIONS (#)(4) ($)(5)
- -------------------------------------------- --------- ------------ ------------ --------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry W. Bickle............................. 1996 162,000 189,200 9,973 35,000 3,136
Chairman of the Board and 1995 157,500 62,235(2) 10,728 10,000 9,492
Chief Executive Officer 1994 108,000 137,699 12,668 50,000 19,310
John A. Strom............................... 1996 162,000 189,200 9,973 35,000 3,136
President 1995 157,500 62,235(2) 10,728 10,000 9,492
1994 108,000 137,699 12,668 50,000 19,310
J. Chris Jones.............................. 1996 162,000 189,200 9,973 35,000 3,566
Senior Vice President, Chief 1995 157,500 62,235(2) 10,728 10,000 9,492
Financial Officer and 1994 108,000 137,699 12,668 50,000 19,310
Chief Operating Officer
Ronald H. Benson............................ 1996 84,000 341,000 1,192 15,000 4,224
Vice President--Corporate 1995 84,000 59,485(2) 243 -- 1,053
Development 1994 3,500 -- -- 50,000 --
Michael E. Calderone........................ 1996 106,800 147,050 685 15,000 4,199
Vice President--Gas Marketing 1995 87,508 84,571(2) 2,322 25,000 9,492
1994 84,000 92,288 3,669 57,125 3,669
</TABLE>
- ------------------------
(1) Amounts include cash compensation earned and received by the Named Officers
as well as amounts deferred under TPC's 401(k) Plan.
(2) A portion of each Named Officer's third quarter 1995 bonus was deferred
until the first quarter of 1996. The amounts deferred for each of the Named
Officers, respectively, was $105,750, $105,750, $105,750, $300,000 and
$100,000.
(3) Amounts shown include car allowances paid to the Named Officers, the value
of financial planning services and the payment of insurance premiums for
long-term disability coverage.
(4) All options awarded in 1994, 1995 and 1996 were granted under the terms of
TPC's 1994 Stock Option Plan (the "1994 Plan").
III-10
<PAGE>
(5) Amounts shown are derived from TPC contributions to its 401(k) Plan and to
its ESOP. The respective amounts paid under each plan are shown in the
following table. TPC's ESOP contributions to each of the Named Officers for
1996 will not be calculated until the second quarter of 1997.
<TABLE>
<CAPTION>
NAME YEAR 401 (K)($) ESOP ($)
- --------------------------------------------------------------- --------- ----------- -----------
<S> <C> <C> <C>
Larry W. Bickle................................................ 1996 3,136 --
1995 2,310 7,182
1994 2,310 17,000
John A. Strom.................................................. 1996 3,136 --
1995 2,310 7,182
1994 2,310 17,000
J. Chris Jones................................................. 1996 3,566 --
1995 2,310 7,182
1994 2,310 17,000
Ronald H. Benson............................................... 1996 4,224 --
1995 1,053 --
1994 -- --
Michael E. Calderone........................................... 1996 4,199 --
1995 2,310 7,182
1994 1,785 1,884
</TABLE>
The following table shows, as to the Named Officers, information about
option grants in the last fiscal year. TPC does not grant any stock appreciation
rights. The fair value of each option grant is estimated as of the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions: a risk-free interest rate of 6.206%, expected volatility of 33%, a
dividend yield of 0% and an expected option term of four years. No gain to the
options is possible without an increase in stock price which will benefit all
stockholders proportionately. Actual gains, if any, on option exercises and
common stockholdings are dependent on the future performance of the Shares.
There can be no assurance that the actual realized values will not be greater or
less than potential realizable values shown in this table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
PERCENT OF
TOTAL
SHARES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS GRANTED EMPLOYEES BASE PRICE EXPIRATION PRESENT VALUE
NAME (#)(1) IN 1996 ($/SH)(2) DATE ($)
- -------------------------------- --------------- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Larry W. Bickle................. 35,000 8.5% 8.25 5/15/06 102,212
John A. Strom................... 35,000 8.5% 8.25 5/15/06 102,212
J. Chris Jones.................. 35,000 8.5% 8.25 5/15/06 102,212
Ronald H. Benson................ 15,000 3.7% 8.25 5/15/06 43,805
Michael E. Calderone............ 15,000 3.7% 8.25 5/15/06 43,805
</TABLE>
(1) Option granted under the 1994 Plan. Options generally are nontransferable
and vest ratably over four years.
(2) The exercise price is the closing market price per share of the Shares on
the date of grant, as reported on the New York Stock Exchange Composite
Tape.
III-11
<PAGE>
The following table shows aggregate fiscal year-end option values for the
Named Officers. No options were exercised during the last fiscal year by any of
the Named Officers. TPC does not grant any stock appreciation rights.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF SHARES OPTIONS AT
UNDERLYING UNEXERCISED YEAR-END
SHARES OPTIONS AT YEAR-END ($)(1)
ACQUIRED ON VALUE -------------------------- ----------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE
- --------------------------------- ----------------------- --------------------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Larry W. Bickle.................. 0 0 567,313 67,500 2,611,345
John A. Strom.................... 0 0 567,313 67,500 2,611,345
J. Chris Jones................... 0 0 567,313 67,500 2,611,345
Ronald H. Benson................. 0 0 25,000 40,000 --
Michael E. Calderone............. 0 0 36,013 63,112 2,100
<CAPTION>
NAME UNEXERCISABLE
- --------------------------------- -------------
<S> <C>
Larry W. Bickle.................. 26,620
John A. Strom.................... 26,250
J. Chris Jones................... 26,250
Ronald H. Benson................. 11,250
Michael E. Calderone............. 12,650
</TABLE>
- ------------------------
(1) Based on the closing market price of $9.00 per Share as reported on the New
York Stock Exchange Composite Tape for December 31, 1996. These amounts do
not reflect the actual amounts, if any, which may be realized in the future
upon exercise of stock options and should not be considered indicative of
future stock performance.
SENIOR EXECUTIVE PERFORMANCE BONUS AND SEVERANCE PACKAGE
Messrs. Larry Bickle, John Strom and Chris Jones (the "Senior Executives"),
upon the consummation of a change in control of TPC prior to December 31, 1997,
are entitled to receive a cash bonus measured by their performance in obtaining
a premium to the then current market price for TPC's Shares in such a
transaction. The transactions contemplated by the Schedule 14D-9 constitute a
change of control for those purposes.
If the entire company is sold for a per Share price equal to $15.50, the
Senior Executives will each receive a Performance Bonus equal to two times his
Base Amount (being the respective Senior Executive's base amount on the date of
the consummation of the change in control as determined in accordance with
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code")). A
per Share price between $10.50 and $15.50 will entitle each of the Senior
Executives to a performance bonus equal to the interpolated value; I.E.,
four-tenths of their Base Amount for each dollar of per Share value between
$10.50 and $15.50. For example, a per Share sales price of $12.00 results in a
Performance Bonus equal to six-tenths of the Senior Executive's Base Amount. In
addition thereto, if a per Share price in excess of $15.50 is received, each of
the Senior Executives will be entitled to an additional one-half of the Base
Amount for each dollar of Share value in excess of $15.50. If the entire company
is sold for a per Share price less than or equal to $10.50, the Senior
Executives will not receive any performance bonus.
Each Senior Executive will also be entitled to a severance payment equal to
his respective Base Amount in accordance with TPC's severance policy, plus the
cost to continue his medical and dental health benefits for up to two years
following the consummation of the transaction. The value of the benefits to be
paid to any one of the Senior Executives, as a result of a change of control in
TPC, shall be limited so that such amounts would not be subject to the excise
tax on "excess parachute payments" imposed by Section 4999 of the Code.
It is currently estimated that Mr. Bickle will receive approximately
$690,000, Mr. Strom will receive approximately $681,000 and Mr. Jones will
receive approximately $684,000 as a performance bonus and severance payment upon
the consummation of the change in control of TPC, and, in each case, the medical
and dental health benefits described above.
III-12
<PAGE>
A copy of the resolutions adopted by the Board establishing the foregoing
benefits is attached as Exhibit 5 to the Schedule 14D-9 and is incorporated
herein by reference.
CHANGE OF CONTROL AGREEMENTS
TPC is a party to a change in control agreement (a "Change in Control
Agreement") with Michael E. Calderone, Ronald H. Benson and [28] other officers,
key employees, affiliate employees and consultants (each a "Named Executive") of
TPC. The Senior Executives are not parties to the Change in Control Agreement.
Under the Change in Control Agreement, if, prior to the expiration or
termination thereof, a change in control (as defined in the Change in Control
Agreement) occurs, each Named Executive would be entitled to receive (i) a
retention bonus equal to a specified multiple of their Base Amount, and (ii) in
the case of certain of the Named Executives, if, thereafter TPC or, in certain
circumstances, the Named Executive, terminates the Named Executive's employment
and, in the case of termination by TPC, "cause" for such termination does not
exist, a cash severance benefit equal to a specified multiple of the Named
Executive's Base Amount, as provided in the respective agreement of each Named
Executive. Each Named Executive who is entitled to a severance payment would
also be entitled to continuing group medical and dental insurance coverage for a
period of twenty-four months following such termination at no cost to the Named
Executive. In the event that any Named Executive's receipt of all payments under
the Change in Control Agreement would subject such Named Executive to the excise
tax imposed by Section 4999 of the Code, then the aggregate present value of all
payments to such Named Executive shall be reduced so that such amounts would not
be subject to the excise tax imposed by Section 4999 of the Code. The Change in
Control Agreements with the Named Executives will expire on November 8, 1997,
provided however, that the term shall automatically be extended without further
action by the parties for additional one year periods, unless TPC gives a Named
Executive six months' written notice of its intent not to extend the current
term of the respective Change in Control Agreement.
For Messrs. Calderone and Benson, the retention bonus shall be equal to (i)
one times the Base Amount and two-thirds times the Base Amount, respectively,
equaling approximately $177,000 for Mr. Calderone and $131,000 for Mr. Benson
and (ii) the severance compensation shall be equal to two times the Base Amount
and four-thirds times the Base Amount, respectively, equaling, upon a qualified
termination of employment following consummation of the Offer, approximately
$354,000 for Mr. Calderone and $263,000 for Mr. Benson.
A copy of the Change in Control Agreements with the executive officers of
TPC are attached as Exhibits 6-13 to the Schedule 14D-9 and are incorporated
herein by reference.
ACCELERATION AND TREATMENT OF OPTIONS
The Merger Agreement provides that (a) TPC will use its best efforts to
enter into an agreement with each holder of an employee or director stock option
to purchase Shares (in each case, an "Option") that provides that, immediately
after the date on which Offeror will have accepted for payment all Shares
validly tendered and not withdrawn prior to the expiration date with respect to
the Offer (the "Tender Offer Acceptance Date"), each Option that is then
outstanding, whether or not then exercisable or vested, will be canceled by TPC,
and each holder of a canceled Option will be entitled to receive from Offeror at
the same time as payment for Shares is made by Offeror in connection with the
Offer, in consideration for the cancellation of such Option, an amount in cash
equal to the product of (i) the number of Shares previously subject to such
Option, whether or not then exercisable or vested, and (ii) the excess, if any,
of the Per Share Amount over the exercise price per Share previously subject to
such Option, reduced by any applicable withholding.
III-13
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH MHP. In December 1994, TPC formed Market Hub Partners,
Inc. and Market Hub Partners, L.P. (collectively referred to as Market Hub
Partners or MHP) with subsidiaries of NIPSCO Industries, Inc., New Jersey
Resources Corporation, DPL Inc., and Public Service Enterprise Group,
Incorporated. Subsidiaries of TPC and these four companies own the stock of
Market Hub Partners, Inc., the 1% general partner of Market Hub Partners, L.P.,
and are the limited partners of Market Hub Partners. MHP owns and operates two
natural gas market centers located in Texas and Louisiana and it is anticipated
that MHP will construct, own and operate three such additional natural gas
market centers.
Miami Valley Leasing, Inc. ("Miami Valley"), is a wholly owned subsidiary of
DPL Inc. ("DPL") and the beneficial owner of 5.74% of TPC's Shares as of March
7, 1997. Miami Valley Market Hub, Inc., a wholly owned subsidiary of Miami
Valley, is a stockholder of MHP's corporate general partner and a limited
partner of MHP. Mr. Thomas M. Jenkins, a director of TPC, is an officer of DPL.
DPL is also the parent company of Miami Valley Resources, Inc., an Ohio
corporation ("MVR"), which entered into a storage contract with MHP in September
1995 for storage services at MHP's Egan facility in Louisiana. The contract
provides MVR with firm monthly withdrawal and injection capacity, with a term
that expires in March 1999. The demand charges payable to MHP for the full term
of the contract are estimated to be $792,000. The commodity charges payable to
MHP under the contract are not currently estimable, as they will depend upon
MVR's actual usage of the storage facility. The demand charges and the commodity
charges under this contract are comparable with the demand and commodity charges
included in storage contracts between MHP and nonaffiliated parties.
RELATIONSHIP WITH GDF. In 1991, TPC entered into a Technical Cooperation
Agreement with GDF Technology U.S, Incorporated ("GDF Tech"), a wholly owned
subsidiary of GDF and a holder of 3,467,036 Shares of Class A Common Stock and
579,963 Shares of Class B Common Stock. The Agreement granted TPC access to
technology under a consulting arrangement which was renewed in 1994. In 1996,
TPC paid $366,000 in fees to GDF Tech under this Agreement. The renewed
technology agreement with GDF Tech expires in April 1999, and may be terminated
by the Company at any time upon six months' notice. TPC anticipates that total
minimum fees of approximately $1,257,000 will be expensed ratably over the
remaining term of the agreement.
RELATIONSHIP WITH LEHMAN BROTHERS, INC. In November 1996, the Board
retained Lehman Brothers, Inc. to assist it in exploring strategic alternatives
for increasing shareholder value, including the possible sale or merger of all
or part of TPC. Assuming the successful completion of a change in control of
TPC, Lehman Brothers will receive a fee from TPC for its services.
Mr. McMahon, a director of TPC since 1993, is a managing director of Lehman
Brothers.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires TPC's directors and executive
officers, and persons who own more than ten percent of a registered class of
TPC's equity securities, to file reports of ownership and changes in ownership
of shares of TPC's stock with the SEC. Directors, officers and greater than ten
percent stockholders are required by the SEC Regulations to furnish TPC with
copies of all Section 16(a) reports they file. Based on TPC's review of the
copies of such reports received by it, and written representations from certain
reporting persons that no Form 5s were required for those persons, TPC believes
that, from January 1 through December 31, 1996, its directors, officers and
greater than ten percent stockholders complied with all applicable filing
requirements of Section 16(a), with the exceptions of Messrs. Jarvis and
Jenkins.
III-14
<PAGE>
AGREEMENT AND PLAN OF MERGER
TPC CORPORATION,
PACIFICORP HOLDINGS, INC.
AND
POWER ACQUISITION COMPANY
EXECUTED ON MARCH 11, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I THE OFFER................................................... 2
1.1. The Offer................................................... 2
1.2. Company Action.............................................. 3
ARTICLE II THE MERGER.................................................. 4
2.1. The Merger.................................................. 4
2.2. Effective Time; Closing..................................... 4
2.3. Effect of the Merger........................................ 5
2.4. Certificate of Incorporation; Bylaws........................ 5
2.5. Directors and Officers.................................... 5
2.6. Conversion of Securities.................................. 5
2.7. Employee Stock Options.................................... 6
2.8. Dissenting Shares......................................... 6
2.9. Surrender of Shares; Stock Transfer Books ................ 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF TPC..................... 8
3.1. Organization and Qualification; Subsidiaries.............. 8
3.2. Charter and Bylaws........................................ 9
3.3. Capitalization............................................ 9
3.4. Authority; Due Authorization; Binding Agreement........... 10
3.5. No Violation; Consents.................................... 10
3.6. Compliance................................................ 11
3.7. SEC Filings; Financial Statements ........................ 11
3.8. Absence of Certain Changes or Events...................... 12
3.9. Litigation................................................ 12
3.10. Employee Benefit Plans.................................... 12
3.11. Offer Documents; Schedule 14D-9........................... 14
3.12. Properties................................................ 14
3.13. Taxes..................................................... 15
3.14. Environmental Matters..................................... 16
3.15. Brokers................................................... 17
3.16. Regulatory Status......................................... 17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PHI AND ACo............. 17
4.1. Corporate Organization.................................... 17
4.2. Authority; Due Authorization; Binding Agreement........... 18
4.3. No Violation; Consents.................................... 18
4.4. Offer Documents; Proxy Statement.......................... 19
4.5. Brokers................................................... 19
4.6. Financing................................................. 19
-i-
<PAGE>
4.7. Regulatory Status......................................... 19
4.8. Ownership of Shares....................................... 19
4.9. Financial Statements...................................... 19
ARTICLE V CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME............ 20
ARTICLE VI ADDITIONAL AGREEMENTS..................................... 22
6.1. Stockholders Meeting...................................... 22
6.2. Proxy Statement........................................... 22
6.3. Access to Information; Confidentiality.................... 23
6.4. Alternative Proposals..................................... 24
6.5. Directors' and Officers' Indemnification and Insurance.... 25
6.6. Notification of Certain Matters........................... 27
6.7. Further Action; Best Efforts.............................. 27
6.8. Public Announcements...................................... 28
6.9. PHI Guarantee............................................. 28
6.10. Employee Matters.......................................... 28
6.11. Directors................................................. 30
ARTICLE VII CONDITIONS TO THE MERGER.................................. 31
7.1. Conditions to the Obligations of Each Party to Effect
the Merger.............................................. 31
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER......................... 32
8.1. Termination............................................... 32
8.2. Effect of Termination..................................... 33
8.3. Fees and Expenses......................................... 33
8.4. Amendment................................................. 33
8.5. Waiver.................................................... 33
ARTICLE IX GENERAL PROVISIONS........................................ 34
9.1. Survival.................................................. 34
9.2. Scope of Representations and Warranties................... 34
9.3. Notices................................................... 34
9.4. Certain Definitions ...................................... 36
9.5. Severability.............................................. 37
9.6. Entire Agreement; Assignment.............................. 38
9.7. Parties in Interest....................................... 38
9.8. Specific Performance...................................... 38
9.9. Governing Law............................................. 38
9.10. Headings.................................................. 38
9.11. Counterparts.............................................. 38
-ii-
<PAGE>
SCHEDULES
Schedule 2.7.............. Stock Option Loans
Schedule 3.1.............. Subsidiaries
Schedule 3.3.............. Capitalization
Schedule 3.5.............. No Conflict
Schedule 3.6.............. Compliance
Schedule 3.7.............. SEC Reporting Requirements
Schedule 3.8.............. Absence of Certain Changes or Events
Schedule 3.9.............. Litigation
Schedule 3.10............. Employee Benefit Plans
Schedule 3.13............. Tax Matters
Schedule 3.14............. Environmental Matters
Schedule 3.15............. Brokers
Schedules 3.16 and 4.7.... Regulatory Status
Schedule 5................ Conduct of Business
Schedule 9.4(h)........... Permitted Encumbrances
-i-
<PAGE>
SCHEDULE OF DEFINED TERMS
DEFINED TERM SECTION OR EXHIBIT
1935 Act................................................. Section 3.16
affiliate................................................ Section 9.4(a)
Agreement................................................ Preamble
Alternative Proposal..................................... Section 6.4(b)
Alternative Transaction.................................. Section 6.4(a)
beneficial owner......................................... Section 9.4(c)
best efforts............................................. Section 9.4(b)
business day............................................. Section 9.4(d)
Certificate of Merger.................................... Section 2.2
Certificates............................................. Section 2.9(b)
Closing ................................................. Section 2.2
Confidentiality Agreement................................ Section 6.3(c)
Contamination............................................ Section 9.4(e)
control.................................................. Section 9.4(f)
controlled by............................................ Section 9.4(f)
Delaware Law............................................. Section 2.1
Dissenting Share......................................... Section 2.8(a)
Effective Time........................................... Section 2.2
Environmental Laws....................................... Section 3.14(a)
ERISA.................................................... Section 3.10(a)
Exchange Act............................................. Section 1.2(b)
GAAP..................................................... Section 3.7(b)
HSR Act.................................................. Section 3.5(b)
Hazardous Substances..................................... Section 9.4(g)
Indemnified Parties...................................... Section 6.5(b)
Independent Directors.................................... Section 6.11
IRS...................................................... Section 3.13(b)
Lehman Brothers.......................................... Section 1.2(a)
Material Adverse Effect.................................. Section 3.1
Material Subsidiaries.................................... Section 3.1
Merger................................................... Recitals
Merger Consideration..................................... Section 2.6(a)
Minimum Condition........................................ Section 1.1(a)
Offer.................................................... Recitals
Offer Documents.......................................... Section 1.1(b)
Offer to Purchase........................................ Section 1.1(b)
Option................................................... Section 2.7
Parent................................................... Preamble
-i-
<PAGE>
DEFINED TERM SECTION OR EXHIBIT
Parent Parties........................................... Preamble
Paying Agent............................................. Section 2.9(a)
Per Share Amount......................................... Section 1.1(a)
Permitted Encumbrances................................... Section 9.4(h)
person................................................... Section 9.4(i)
Proxy Statement.......................................... Section 4.4
Returns.................................................. Section 3.13(a)
Schedule 14D-1........................................... Section 1.1(b)
Schedule 14D-9........................................... Section 1.2(b)
SEC...................................................... Section 1.1(b)
Securities Act........................................... Section 3.7(a)
Shares................................................... Recitals
Stockholders Meeting..................................... Section 6.1(a)
ACo...................................................... Preamble
Subsidiaries............................................. Section 9.4(i)
Subsidiaries............................................. Section 3.1
Subsidiary............................................... Section 9.4(i)
Subsidiary............................................... Section 3.1
Surviving Corporation.................................... Section 2.1
Taxes.................................................... Section 3.13(f)
Tender Offer Acceptance Date............................. Section 2.7
TPC...................................................... Preamble
TPC 401(k) Plan.......................................... Section 3.10(a)
TPC Board of Directors................................... Recitals
TPC Common Stock......................................... Recitals
TPC Employee Benefit Plans............................... Section 3.10(c)
TPC ESOP................................................. Section 3.10(a)
TPC ERISA Affiliate...................................... Section 3.10(a)
TPC Preferred Stock...................................... Section 3.3
TPC SEC Reports.......................................... Section 3.7(a)
TPC Stockholder Approval................................. Section 6.1
Transactions............................................. Section 1.2(a)
under common control with................................ Section 9.4(f)
ANNEX A
Conditions to the Offer
-ii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, executed this 11th day of March,
1997 (this "AGREEMENT"), is by and among PacifiCorp Holdings, Inc, a Delaware
corporation ("PHI") and a wholly owned subsidiary of PacifiCorp, an Oregon
corporation ("Parent"), Power Acquisition Company, a Delaware corporation and a
direct or indirect wholly owned subsidiary of PHI ("ACO," and together with PHI,
the "PHI PARTIES"), and TPC Corporation, a Delaware corporation ("TPC").
RECITALS:
A. The boards of directors of PHI, ACo and TPC have each determined
that it is in the best interests of their respective stockholders for ACo to
acquire TPC upon the terms and subject to the conditions set forth herein.
B. In furtherance of such acquisition, it is proposed that ACo shall
make a cash tender offer (the "OFFER") to acquire all the issued and outstanding
shares (the "SHARES") of Class A Common Stock, par value $.01 per share, and
Class B Common Stock, par value $.01 per share of TPC (collectively, "TPC COMMON
STOCK"), for $13.41 per Share net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions of this Agreement and the
Offer.
C. The boards of directors of PHI and ACo have each approved the
making of the Offer and the transactions relating thereto.
D. The board of directors of TPC (the "TPC BOARD OF DIRECTORS") has
approved the making of the Offer and resolved, subject to the terms and
conditions contained herein, to recommend that holders of Shares tender their
Shares pursuant to the Offer.
E. The boards of directors of PHI, ACo and TPC have each approved
the merger (the "MERGER") of ACo with and into TPC in accordance with applicable
Delaware law following the consummation of the Offer and upon the terms and
subject to the conditions set forth herein.
F. Larry W. Bickle, John A. Strom and J. Chris Jones, stockholders
of TPC, have agreed to tender all of their TPC Common Stock pursuant to the
Offer.
AGREEMENT:
In consideration of the mutual promises contained herein, the benefits
to be derived by each party hereunder and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, PHI, ACo and TPC
agree as follows:
-1-
<PAGE>
ARTICLE I
THE OFFER
1.1. THE OFFER.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.1 and none of the events set forth in ANNEX A shall
have occurred or be existing (unless such event shall have been waived by ACo),
PHI shall cause ACo to commence, and ACo shall commence, the Offer at the amount
per Share specified in the recitals of this Agreement or such greater amount per
share paid pursuant to the Offer (the "PER SHARE AMOUNT") as promptly as
reasonably practicable after the date hereof, but in no event later than five
business days after the public announcement of ACo's intention to commence the
Offer. The Offer shall expire 20 business days after it is commenced, shall be
extended for an aggregate of up to 10 business days from the initial expiration
date if requested by TPC and may be extended by ACo for an aggregate of up to 20
business days from the initial expiration date (but not more than 20 business
days therefrom) without the written consent of TPC, except that (i) the Offer
may be extended without such consent for up to an aggregate of 30 days from the
initial expiration date until the expiration or termination of the waiting
period, if applicable, under the HSR Act (as defined in Section 3.5(b)) and (ii)
ACo may extend the Offer, if, at the time the Offer would otherwise expire, a 5
day cure period under clause (f) or (g) of Annex A is in effect, to a date 5
days after the end of such 5 day cure period. The obligation of ACo to accept
for payment and pay for Shares tendered pursuant to the Offer shall be subject
only to (i) the condition (the "MINIMUM CONDITION") that at least the number of
Shares that, when combined with the Shares already owned by Parent and its
wholly owned Subsidiaries, constitute a majority of the then outstanding Shares
on a fully diluted basis (including, without limitation, all Shares issuable
upon the conversion of any convertible securities or upon the exercise of any
options, warrants or rights, whether or not vested or exercisable) shall have
been validly tendered and not withdrawn prior to the expiration of the Offer and
(ii) the satisfaction or waiver of the other conditions set forth in ANNEX A.
ACo expressly reserves the right to change or waive any such condition, to
increase the Per Share Amount, and to make any other changes in the terms and
conditions of the Offer; PROVIDED, HOWEVER, that (notwithstanding Section 8.4)
no change may be made which (A) decreases the Per Share Amount, (B) reduces the
maximum number of Shares to be purchased in the Offer, (C) imposes conditions to
the Offer in addition to those set forth in ANNEX A, (D) changes or waives the
Minimum Condition, (E) extends the Offer, except as expressly provided above,
(F) provides for a different Per Share Amount in respect of Class A Common Stock
than in respect of Class B Common Stock, or (G) waives or changes the terms of
the Offer in any manner adverse to the holders of Shares (other than PHI and its
Subsidiaries). The Per Share Amount shall, subject to applicable withholding of
taxes, be net to the seller in cash, without interest thereon, upon the terms
and subject to the conditions of the Offer. Subject to the terms and conditions
of the Offer (including, without limitation, the Minimum Condition), ACo shall
accept for payment and pay, as promptly as practicable after expiration of the
Offer, for all Shares validly tendered and not withdrawn.
-2-
<PAGE>
(b) As soon as reasonably practicable on the date of commencement of
the Offer, ACo shall file with the Securities and Exchange Commission (the
"SEC") and disseminate to holders of Shares to the extent required by law a
Tender Offer Statement on Schedule 14D-1 (together with all amendments and
supplements thereto, the "SCHEDULE 14D-1") with respect to the Offer and the
other Transactions (as defined below). The Schedule 14D-1 shall contain or
shall incorporate by reference an offer to purchase (the "OFFER TO PURCHASE")
and forms of the related letter of transmittal and any related summary
advertisement (the Schedule 14D-1, the Offer to Purchase and such other
documents, together with all supplements and amendments thereto, being referred
to herein collectively as the "OFFER DOCUMENTS"). PHI, ACo and TPC agree to
correct promptly any information provided by any of them for use in the Offer
Documents which shall have become false or misleading, and PHI and ACo further
agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to
be filed with the SEC and the other Offer Documents as so corrected to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. TPC and its counsel shall be given an
opportunity to review and comment on the Offer Documents and any amendments
thereto prior to the filing thereof with the SEC. PHI and ACo will provide TPC
and its counsel with a copy of any written comments or telephonic notification
of any oral comments PHI or ACo may receive from the SEC or its staff with
respect to the Offer Documents promptly after the receipt thereof and will
provide TPC and its counsel with a copy of any written responses and telephonic
notification of any oral response of PHI, ACo or their counsel. In the event
that the Offer is terminated or withdrawn by ACo, PHI and ACo shall cause all
tendered Shares to be returned to the registered holders of the Shares
represented by the certificate or certificates surrendered to the Paying Agent
(as defined in Section 2.9).
1.2. COMPANY ACTION.
(a) TPC hereby approves of and consents to the Offer and represents
that (i) the TPC Board of Directors, at a meeting duly called and held, has (A)
determined that this Agreement and the transactions contemplated hereby,
including, without limitation, each of the Offer and the Merger (the
"TRANSACTIONS"), are fair to and in the best interests of the holders of Shares
(other than Parent and its Subsidiaries), (B) approved and adopted this
Agreement and the Transactions and (C) resolved to recommend, subject to the
conditions set forth herein, that the stockholders of TPC accept the Offer and
approve and adopt this Agreement and the Transactions; and (ii) Lehman Brothers,
Inc. ("LEHMAN BROTHERS") has delivered to the TPC Board of Directors a written
opinion that the consideration to be received by the holders of Shares pursuant
to each of the Offer and the Merger is fair to such holders from a financial
point of view. TPC has been authorized by Lehman Brothers, subject to prior
review by such financial advisor, to include the fairness opinion of Lehman
Brothers (or references thereto) in the Offer Documents and in the Schedule 14D-
9 (as defined in Section 1.2(b)) and the Proxy Statement referred to in Section
4.4. Subject to the fiduciary duties of the TPC Board of Directors under
applicable law, TPC hereby consents to the inclusion in the Offer Documents of
the recommendation of the TPC Board of Directors described above.
(b) As soon as reasonably practicable on the date of commencement of
the Offer, TPC shall file with the SEC a Solicitation/Recommendation Statement
on Schedule 14D-9 (together with all amendments and supplements thereto, the
"SCHEDULE 14D-9") containing, subject only to the
-3-
<PAGE>
fiduciary duties of the TPC Board of Directors under applicable law, the
recommendation of the TPC Board of Directors described in Section 1.2(a) and
shall disseminate the Schedule 14D-9 to the extent required by Rule 14d-9
promulgated under the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), and any other applicable federal securities laws. TPC, PHI
and ACo agree to correct promptly any information provided by any of them for
use in the Schedule 14D-9 which shall have become false or misleading, and TPC
further agrees to take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and disseminated to holders of Shares, in
each case as and to the extent required by applicable federal securities laws.
PHI, ACo and their counsel shall be given an opportunity to review and
comment on the Schedule 14D-9 and any amendments thereto prior to the filing
thereof with the SEC. TPC will provide PHI and ACo and their counsel with a
copy of any written comments or telephonic notification of any oral comments
TPC may receive from the SEC or its staff with respect to Schedule 14D-9
promptly after the receipt thereof and will provide PHI and ACo and their
counsel with a copy of any written responses and telephonic notification of
any oral response of TPC or its counsel.
(c) TPC shall promptly furnish ACo with mailing labels containing the
names and addresses of all record holders of Shares and with security position
listings of Shares held in stock depositories, each as of the most recent date
reasonably practicable, together with all other available listings and computer
files containing names, addresses and security position listings of record
holders and non-objecting beneficial owners of Shares as of the most recent date
reasonably practicable. TPC shall furnish ACo with such additional information,
including, without limitation, updated listings and computer files of
stockholders, mailing labels and security position listings, and such other
assistance as PHI, ACo or their agents may reasonably request in connection with
the Transactions. Subject to the requirements of applicable law, and except for
such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer or the Merger, PHI and ACo shall
hold in confidence the information contained in such labels, listings and files,
shall use such information only in connection with the Transactions, and, if
this Agreement shall be terminated in accordance with Section 8.1, shall deliver
promptly to TPC all copies of such information then in their possession and
shall certify in writing to TPC its compliance with this Section 1.2(c).
ARTICLE II
THE MERGER
2.1. THE MERGER. Upon the terms and subject to the conditions set
forth in Article VII, and in accordance with the Delaware General Corporation
Law ("DELAWARE LAW"), at the Effective Time (as defined in Section 2.2), ACo
shall be merged with and into TPC. As a result of the Merger, the separate
corporate existence of ACo shall cease and TPC shall continue as the surviving
corporation of the Merger (the "SURVIVING CORPORATION").
2.2. EFFECTIVE TIME; CLOSING. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII, the parties hereto shall cause the
-4-
<PAGE>
Merger to be consummated by filing this Agreement or a certificate of merger
(in either case, the "CERTIFICATE OF MERGER") with the Secretary of State of
the State of Delaware in such form as is required by, and executed in
accordance with the relevant provisions of, Delaware Law (the date and time of
such filing being the "EFFECTIVE TIME"). Prior to such filing, a closing (the
"CLOSING") shall be held at the offices of Baker & Botts, L.L.P. in Houston,
Texas, or such other place as the parties shall agree, for the purpose of
confirming the satisfaction or waiver, as the case may be, of the conditions
set forth in Article VII. The date of the closing is herein called the
"CLOSING DATE."
2.3. EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
TPC and ACo shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of TPC and ACo shall become
the debts, liabilities, obligations, restrictions, disabilities and duties of
the Surviving Corporation.
2.4. CERTIFICATE OF INCORPORATION; BYLAWS.
(a) Subject to the requirements of Section 6.5, at the Effective
Time, the Certificate of Incorporation of ACo shall be the Certificate of
Incorporation of the Surviving Corporation, and Article I of the Certificate of
the Surviving Corporation shall be amended to read as follows:
"The name of the corporation is TPC Corporation."
(b) Subject to the requirements of Section 6.5, the Bylaws of ACo, as
in effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation and such Bylaws.
2.5. DIRECTORS AND OFFICERS. The directors of ACo immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of TPC
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
2.6. CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of ACo, TPC or the holders of any
of the Shares:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be canceled pursuant to Section 2.6(b)
and any Dissenting Shares (as defined in Section 2.8)) shall be canceled and
shall be converted automatically into the right to receive an amount equal to
the Per Share Amount in cash (the "MERGER CONSIDERATION") payable, without
interest, to the holder of such Share, upon surrender, in the manner provided in
Section 2.9, of the certificate that formerly evidenced such Share;
-5-
<PAGE>
(b) Each Share held in the treasury of TPC and each Share owned by
ACo or PHI, or any direct or indirect wholly owned Subsidiary of PHI or of TPC
immediately prior to the Effective Time shall be canceled without any conversion
thereof and no payment or distribution shall be made with respect thereto; and
(c) Each share of common stock, par value $.01 per share, of ACo
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
2.7. EMPLOYEE STOCK OPTIONS. (a) TPC shall use its best efforts to
enter into an agreement with each holder of an employee or director stock option
to purchase Shares (in each case, an "OPTION") that provides that, immediately
after the date on which ACo shall have accepted for payment all Shares validly
tendered and not withdrawn prior to the expiration date with respect to the
Offer (the "TENDER OFFER ACCEPTANCE DATE"), each Option that is then
outstanding, whether or not then exercisable or vested, shall be canceled by
TPC, and each holder of a canceled Option shall be entitled to receive from ACo
at the same time as payment for Shares is made by ACo in connection with the
Offer, in consideration for the cancellation of such Option, an amount in cash
equal to the product of (i) the number of Shares previously subject to such
Option, whether or not then exercisable or vested, and (ii) the excess, if any,
of the Per Share Amount over the exercise price per Share previously subject to
such Option, reduced by any applicable withholding.
(b) If the Tender Offer Acceptance Date has not occurred by May 1,
1997 TPC may, upon approval of its Board of Directors, enter into loan
arrangements with any employee of TPC and its Subsidiaries who is a holder of an
Option that would expire on or prior to May 8, 1997 and who elects to exercise
that Option prior to the Tender Offer Acceptance Date to provide the option
holder with a loan amount sufficient to satisfy the exercise price and
applicable federal income taxes payable as a result of the exercise. The terms
of the loan arrangements made available to holders of Options shall be no more
favorable to the holders than those approved by the Board of Directors of TPC
and set forth in SCHEDULE 2.7.
2.8. DISSENTING SHARES. (a) Notwithstanding anything in this Agreement
to the contrary, no Share, the holder of which shall not have voted in favor of
the Merger and shall have properly complied with the provisions of Section 262
of the Delaware Law as to appraisal rights (a "DISSENTING SHARE"), shall be
deemed converted into and to represent the right to receive Merger Consideration
hereunder; and the holders of Dissenting Shares, if any, shall be entitled to
payment, solely from the Surviving Corporation, of the appraised value of such
Dissenting Shares to the extent permitted by and in accordance with the
provisions of Section 262 of the Delaware Law; PROVIDED, HOWEVER, that (i) if
any holder of Dissenting Shares shall, under the circumstances permitted by the
Delaware Law, subsequently deliver a written withdrawal of his or her demand for
appraisal of such Dissenting Shares, (ii) if any holder fails to establish his
or her entitlement to rights to payment as provided in such Section 262 or (iii)
if neither any holder of Dissenting Shares nor the Surviving Corporation has
filed a petition demanding a determination of the value of all Dissenting Shares
within the time provided in such Section 262, such holder or holders (as the
case may be) shall
-6-
<PAGE>
forfeit such right to payment for such Dissenting Shares pursuant to such
Section 262 and each such Dissenting Share shall thereupon be deemed to have
been converted into and to have become exchangeable for, as of the Effective
Time, the right to receive the Merger Consideration, without any interest
thereon, upon surrender, in the manner provided in Section 2.9, of the
certificate or certificates that formerly evidenced such Shares.
(b) TPC shall give PHI (i) prompt notice of any written demands for
appraisal of any TPC Common Stock, attempted withdrawals of such demands and any
other instruments received by TPC relating to stockholders' rights of appraisal
and (ii) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under the Delaware Law. TPC shall not, except with the
prior written consent of PHI, voluntarily make any payment with respect to any
demands for appraisal of TPC Common Stock, offer to settle or settle any such
demands or approve any withdrawal of any such demands.
2.9. SURRENDER OF SHARES; STOCK TRANSFER BOOKS. (a) Prior to the
Effective Time, ACo shall designate a bank or trust company reasonably
satisfactory to TPC to act as agent (the "PAYING AGENT") for the holders of
Shares in connection with the Merger to receive the funds to which holders of
Shares shall become entitled pursuant to Section 2.6(a). Immediately prior to
the Effective Time, PHI shall cause ACo to have sufficient funds to deposit, and
shall cause ACo to deposit in trust with the Paying Agent, cash in the aggregate
amount equal to the product of (i) the number of shares outstanding immediately
prior to the Effective Time (other than Shares owned by PHI or ACo and
Dissenting Shares) and (ii) the Per Share Amount. Such funds shall be invested
by the Paying Agent as directed by the Surviving Corporation, PROVIDED, HOWEVER,
that such investments shall be in obligations of or guaranteed by the United
States of America or of any agency thereof and backed by the full faith and
credit of the United States of America, in commercial paper obligations rated
A-1 or P-1 or better by Moody's Investors Services, Inc. or Standard & Poor's
Corporation, respectively, or in deposit accounts, certificates of deposit or
banker's acceptances of, repurchase or reverse repurchase agreements with, or
Eurodollar time deposits purchased from, commercial banks with capital, surplus
and undivided profits aggregating in excess of $100 million (based on the most
recent financial statements of such bank which are then publicly available at
the SEC or otherwise); PROVIDED, HOWEVER, that no loss on any investment made
pursuant to this Section 2.9 shall relieve PHI or the Surviving Corporation of
its obligation to pay the Per Share Amount for each Share outstanding
immediately prior to the Effective Time.
(b) Promptly after the Effective Time, PHI shall cause the Surviving
Corporation to mail to each person who was, at the Effective Time, a holder of
record of Shares entitled to receive the Merger Consideration pursuant to
Section 2.6(a) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
evidencing such Shares (the "CERTIFICATES") shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and instructions for use in
effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, and such other documents as may be required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share formerly
-7-
<PAGE>
evidenced by such Certificate, and such Certificate shall then be canceled. No
interest shall accrue or be paid on the Merger Consideration payable upon the
surrender of any Certificate for the benefit of the holder of such Certificate.
If payment of the Merger Consideration is to be made to a person other than the
person in whose name the surrendered Certificate is registered on the stock
transfer books of TPC, it shall be a condition of payment that the Certificate
so surrendered shall be endorsed properly or otherwise be in proper form for
transfer and that the person requesting such payment shall have paid all
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such taxes either have been paid or are not applicable. The
Surviving Corporation shall pay all charges and expenses, including those of the
Paying Agent, in connection with the distribution of the Merger Consideration.
(c) At any time following the third month after the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Shares (including, without limitation, all interest
and other income received by the Paying Agent in respect of all funds made
available to it) and, thereafter, such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat and other similar
laws) only as general creditors thereof with respect to any Merger Consideration
that may be payable upon due surrender of the Certificates held by them.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Share for any Merger Consideration
delivered in respect of such Share to a public official pursuant to any
abandoned property, escheat or other similar law.
(d) At the close of business on the day of the Effective Time, the
stock transfer books of TPC shall be closed and, thereafter, there shall be no
further registration of transfers of Shares on the records of TPC. From and
after the Effective Time, the holders of Shares outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such Shares
except as otherwise provided herein or by applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TPC
TPC hereby represents and warrants to PHI and ACo that:
3.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of TPC and
each entity in which TPC has an direct or indirect, equity or ownership interest
which represents twenty percent (20%) or more of the aggregate equity or
ownership interest in such entity (each, a "SUBSIDIARY," and collectively, the
"SUBSIDIARIES") has been duly organized and is validly existing and in good
standing under the laws of the jurisdiction of its organization and has the
requisite power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals would not,
individually
-8-
<PAGE>
or in the aggregate, have a Material Adverse Effect (as defined below). TPC
and each Subsidiary is duly qualified or licensed as a foreign corporation or
limited partnership to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated
by it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a Material
Adverse Effect. When used in connection with TPC or any Subsidiary, the term
"MATERIAL ADVERSE EFFECT" means any change or effect that is reasonably likely
to be materially adverse to the business, operations, properties, financial
condition, assets or liabilities (including, without limitation, contingent
liabilities) of TPC and the Subsidiaries taken as a whole. A true and
complete list of all the Subsidiaries, together with the jurisdiction of
incorporation of each Subsidiary and the percentage of the outstanding capital
stock of each Subsidiary owned by TPC and each other Subsidiary, is set forth
in SCHEDULE 3.1. Except as disclosed in SCHEDULE 3.1, TPC does not directly
or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity, other than indirect equity and similar interests held
for investment which are not, in the aggregate, material to TPC. The term
"MATERIAL SUBSIDIARIES" means those Subsidiaries indicated as material on
SCHEDULE 3.1. Except for the Material Subsidiaries, no Subsidiary is material
to the business, operations or financial condition of TPC or has any material
assets or liabilities.
3.2. CHARTER AND BYLAWS. TPC has heretofore furnished to PHI a
complete and correct copy of the charter and the bylaws or equivalent
organizational documents, each as amended to date, of TPC and each Material
Subsidiary. Such charter, bylaws and equivalent organization documents are in
full force and effect. Neither TPC nor any Material Subsidiary is in violation
of any provision of its charter, bylaws or equivalent organizational documents.
3.3. CAPITALIZATION. The authorized capital stock of TPC consists of
25,000,000 shares of Class A Common Stock, par value $.01 per share, 5,000,000
shares of Class B Common Stock, par value $.01 per share, and 26,000 shares of
Preferred Stock, par value $.01 per share ("TPC PREFERRED STOCK"). As of
December 31, 1996, (i) 17,424,252 shares of Class A Common Stock and 579,963
shares of Class B Common Stock were issued and outstanding, all of which were
validly issued, fully paid and nonassessable, (ii) 470,000 shares of Class A
Common Stock were held in treasury, (iii) 3,800,479 shares of Common Stock were
reserved for issuance pursuant to Options and (iv) 579,963 shares of Common
Stock were reserved for issuance as shares of Class A Common Stock upon
conversion of shares of Class B Common Stock. As of the date hereof, no shares
of TPC Preferred Stock were issued and outstanding. As of December 31, 1996,
options covering 3,508,818 shares of Common Stock were outstanding. Since
December 31, 1996 to the date of this Agreement, TPC has not issued any shares
of capital stock or granted any options covering, or other rights to purchase
directly or indirectly, shares of capital stock. Except as set forth in this
Section 3.3 or on SCHEDULE 3.3, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character obligating TPC or any
Subsidiary to issue or sell any shares of capital stock of, or other equity
interests in, TPC or any Subsidiary. All shares subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. Except as
-9-
<PAGE>
set forth in SCHEDULE 3.3, there are no outstanding contractual obligations of
TPC or any Subsidiary to repurchase, redeem or otherwise acquire any shares of
capital stock of TPC or any Subsidiary or to provide funds to, or make any
investment, (in the form of a loan, capital contribution or otherwise) in, any
Subsidiary or any other person. Each outstanding share of capital stock of
each Material Subsidiary that is a corporation is duly authorized, validly
issued, fully paid and nonassessable and, except as set forth in SCHEDULE 3.3,
each such share and the partnership interests owned by TPC or any Subsidiary
are owned free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, limitations on TPC's or such
other Subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever, except for Permitted Encumbrances (as defined in Section 9.4).
3.4. AUTHORITY; DUE AUTHORIZATION; BINDING AGREEMENT.
(a) TPC has all requisite corporate power and authority to carry on
its business as presently conducted, to enter into this Agreement and to perform
its obligations under this Agreement subject, with respect to the Merger, to
stockholder approval if required under applicable law.
(b) The execution, delivery and performance of this Agreement and the
consummation of the Transactions have been duly and validly authorized by all
requisite corporate action on the part of TPC (other than, with respect to the
Merger, the approval and adoption of this Agreement by the affirmative vote of
the stockholders of TPC to the extent required by Delaware Law and the filing
and recordation of appropriate merger documents as required by Delaware Law).
(c) This Agreement has been duly executed and delivered by TPC and
all documents and instruments required hereunder to be executed and delivered by
TPC at the Closing will be duly executed and delivered by TPC. This Agreement
and all such documents and instruments constitute legal, valid and binding
obligations of TPC enforceable in accordance with their terms, subject, however,
to the effects of bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting creditors' rights generally and to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
3.5. NO VIOLATION; CONSENTS.
(a) Except as set forth on SCHEDULE 3.5, the consummation of the
Transactions will not violate or cause a default under (i) any provision of the
governing documents of TPC or a Subsidiary, (ii) any provision of any material
contract or agreement or of any bank loan, indenture or credit agreement, in
each case to which TPC or a Subsidiary is a party, (iii) assuming the
governmental filings, approvals, consents and authorizations referred to in
Section 3.5(b) are duly and timely made or obtained and that the approval of the
Merger and this Agreement by the stockholders of TPC in accordance with Delaware
law is duly obtained, any applicable law, ordinance, rule or regulation of any
governmental authority or (iv) any applicable order, writ, judgment or decree of
any court or other competent authority, except for such violations, defaults or
other occurrences which do not, individually or in the aggregate, have a
Material Adverse Effect.
-10-
<PAGE>
(b) Except for (i) any required filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR ACT"), and filing and recordation of appropriate merger
documents as required by Delaware Law, (ii) any governmental consents necessary
for transfers of permits and licenses, and (iii) as otherwise set forth on
SCHEDULE 3.5, no authorization, consent or approval of or filing with any
governmental authority is required to be obtained or made by TPC or a Subsidiary
for the execution and delivery by TPC of this Agreement or the consummation by
TPC of the Transactions. Except as set forth in SCHEDULE 3.5, no authorization,
consent or approval of any nongovernmental third party is required to be
obtained by TPC or any Subsidiary for the execution and delivery by TPC of this
Agreement or the consummation by TPC of the Transactions, except where failure
to obtain such consents, approvals or authorizations would not prevent or delay
consummation of the Offer or the Merger, or otherwise prevent TPC from
performing its obligations under this Agreement, and would not, individually or
in the aggregate, have a Material Adverse Effect.
3.6. COMPLIANCE. Neither TPC nor any Subsidiary is in conflict with,
or in default or violation of, (a) except with respect to Environmental Laws,
which are addressed exclusively in Section 3.14, any applicable law, rule,
regulation, order, judgment or decree or (b) except as set forth in SCHEDULE
3.6, any material note, bond, mortgage, indenture, contract, or agreement to
which TPC or any Subsidiary is a party, except for any such conflicts, defaults
or violations that do not, individually or in the aggregate, have a Material
Adverse Effect. TPC and each of the Subsidiaries has all permits, licenses,
certificates of authority, orders and approvals of, and has made all filings,
applications, and registrations with, federal, state, local or foreign
government or regulatory bodies that are required in order to permit it to carry
on its business as presently conducted, the absence of which individually or in
the aggregate would reasonably be expected to have a Material Adverse Effect.
3.7. SEC FILINGS; FINANCIAL STATEMENTS. (a) TPC has filed in a timely
manner all forms, reports and documents required to be filed by it with the SEC
since January 1, 1995 (collectively, the "TPC SEC REPORTS"). The TPC SEC
Reports were prepared in all material respects in accordance with the
requirements of the Securities Act of 1933, as amended (the "SECURITIES ACT"),
or the Exchange Act, as the case may be, and the rules and regulations
thereunder, and none of the TPC SEC Reports, as of the date it was filed with
the SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. No Subsidiary is currently required to file any form, report or
other document with the SEC under Section 12 of the Exchange Act.
(b) The consolidated financial statements (including, any notes
thereto) contained in the TPC SEC Reports were prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis ("GAAP") throughout the periods indicated (except as may be indicated in
the notes thereto and except that financial statements included with quarterly
reports on Form 10-Q do not contain all GAAP notes to such financial statements)
and each fairly presented the consolidated financial position, results of
operations and changes in stockholders' equity and cash flows of TPC and the
consolidated Subsidiaries as at the respective
-11-
<PAGE>
dates thereof and for the respective periods indicated therein (subject, in
the case of unaudited statements, to normal and recurring year-end
adjustments). The financial statements of TPC and its Subsidiaries as of and
for the month ended January 31, 1997 heretofore delivered to PHI were prepared
in accordance with TPC's past practices and procedures for monthly financial
statements, consistent with the accounting methods, principles and practices
in effect at December 31, 1996.
3.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1996,
TPC and the Subsidiaries have conducted their businesses only in the ordinary
course and in a manner consistent with past practice and, since such date,
except as expressly contemplated by this Agreement or disclosed in any TPC SEC
Report filed since such date and prior to the date of this Agreement or as set
forth in SCHEDULE 3.8, there has not been (a) any event having, individually or
in the aggregate, a Material Adverse Effect except for changes that affect the
industries in which TPC and the Subsidiaries operate generally, (b) any change
by TPC in its accounting methods, principles or practices, (c) any declaration,
setting aside or payment of any dividend or distribution in respect of any
capital stock of TPC or any redemption, purchase or other acquisition of any of
its securities, or (d) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officers or key employees of
TPC or any Subsidiary.
3.9. LITIGATION. Except as disclosed in SCHEDULE 3.9, (a) there is
no action, administrative proceeding, lawsuit or governmental inquiry directed
against TPC or any Subsidiary pending and publicly filed, or, to TPC's
knowledge, threatened, except for such matters as individually or in the
aggregate if determined adversely to TPC and the Subsidiaries, would not have
a Material Adverse Effect, (b) there is no action, administrative proceeding,
lawsuit or governmental inquiry pending and publicly filed or, to TPC's
knowledge, threatened against TPC or any Subsidiary that could materially
hinder or impede the consummation of the Transactions, and (c) there is no
judgment or settlement obligation outstanding that is directed specifically
against TPC or the Subsidiaries that would have the effect referred to in
clauses (a) or (b).
3.10. EMPLOYEE BENEFIT PLANS.
(a) Except for the plan (the "TPC 401(k) PLAN") maintained by TPC
pursuant to Section 401(k) of the Internal Revenue Code of 1986 (the "Code") and
the employee stock ownership plan maintained by TPC (the "TPC ESOP"), neither
TPC nor any Subsidiary or any trade or business (whether or not incorporated)
which is under common control, or which is treated as a single employer, with
TPC under 414(b), (c), (m) or (o) of the Code ("TPC ERISA AFFILIATE") maintains
any "employee pension plan" as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The TPC 401(k)
Plan and the TPC ESOP have been determined by the IRS to be exempt from federal
income taxation under Section 501 of the Code, and nothing has occurred with
respect to the operation of the TPC 401(k) Plan or the TPC ESOP that could
reasonably be expected to cause the loss of such qualification or exemption or
the imposition of any material liability, penalty, or tax under ERISA or the
Code.
-12-
<PAGE>
(b) Neither TPC nor any Subsidiary nor any TPC ERISA Affiliate
maintains or contributes to any plan that is (i) covered by Title IV of ERISA,
(ii) subject to the minimum funding requirements of Section 412 of the Code,
(iii) a "multi-employer plan" as defined in Section 3(37) of ERISA, (iv) subject
to Section 4063 OR 4064 of ERISA, or (v) funded by a voluntary employees'
beneficiary association within the meaning of Code Section 501(c)(9).
(c) SCHEDULE 3.10(c) lists all the "employee benefit plans," as
defined in Section 3(3) of ERISA and all other material employee compensation
and benefit arrangements or payroll practices, including, without limitation,
severance pay, sick leave, vacation pay, salary continuation for disability,
consulting or other compensation agreements, retirement, deferred compensation,
bonus, long-term incentive, stock option, stock purchase, hospitalization,
medical insurance, life insurance and scholarship programs maintained by TPC or
any Subsidiary or to which TPC or any Subsidiary has contributed or is obligated
to contribute thereunder (all such plans, other than the TPC 401(k) Plan and the
TPC ESOP, being hereinafter referred to as the "TPC EMPLOYEE BENEFIT PLANS").
SCHEDULE 3.10(c) also lists all Options outstanding as of the date hereof,
together with the names of the holders thereof and the exercise prices thereof.
(d) The TPC Employee Benefit Plans, the TPC 401(k) Plan and the TPC
ESOP have been maintained, in all material respects, in accordance with their
terms and with all provisions of ERISA (including rules and regulations
thereunder) and other applicable federal and state law, and neither TPC nor any
Subsidiary nor any "party in interest" or "disqualified person" with respect to
the TPC Employee Benefit Plans, the TPC 401(k) Plan or the TPC ESOP has engaged
in a "prohibited transaction" within the meaning of Section 4975 of the Code or
Section 406 of ERISA, except where any of the foregoing would not reasonably be
expected to have a Material Adverse Effect.
(e) Except as disclosed in SCHEDULE 3.10(e) or set forth in Sections
2.7 or 6.10, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment becoming due to any employee or group of employees of TPC; (ii) increase
any benefits otherwise payable under any TPC Employee Benefit Plan, the TPC
401(k) Plan or the TPC ESOP or (iii) result in the acceleration of the time of
payment, accrual or vesting of any such benefits. Except as disclosed on
SCHEDULE 3.10(e), there are no severance agreements or employment agreements
between TPC or any Subsidiary and any employee of TPC or such Subsidiary.
(f) No stock or other security issued by TPC or any Subsidiary forms
or has formed a material part of the assets of the TPC 401(k) Plan or any TPC
Employee Benefit Plan.
(g) TPC and the Subsidiaries have not incurred any liability under,
and have complied in all respects with, the Worker Adjustment Retraining
Notification Act and the regulations promulgated thereunder and do not
reasonably expect to incur any such liability as a result of actions taken or
not taken prior to the consummation of the Offer.
-13-
<PAGE>
(h) Except as disclosed in SCHEDULE 3.10(h), neither TPC nor any of
the Subsidiaries is a party to an agreement that provides for the payment of any
amount that would constitute an "excess parachute payment" within the meaning of
Section 280G of the Code.
3.11. OFFER DOCUMENTS; SCHEDULE 14D-9. Neither the Schedule 14D-9
nor any information supplied by TPC for inclusion in the Offer Documents shall,
at the respective times the Schedule 14D-9, the Offer Documents, or any
amendments or supplements thereto are filed with the SEC or are first published,
sent or given to stockholders of TPC, as the case may be, 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 made therein, in the
light of the circumstances under which they are made, not misleading, except
that no representation or warranty is made by TPC with respect to information
supplied by ACo or PHI for inclusion in the Schedule 14D-9. The Schedule 14D-9
shall comply in all material respects as to form with the requirements of the
Exchange Act and the rules and regulations thereunder.
3.12. PROPERTIES.
(a) TPC and the Subsidiaries have sufficient title or leasehold
interests to all properties and assets which they purport to own, including,
without limitation, all assets and properties reflected in the December 31, 1996
financial statements and TPC SEC Reports, to conduct their respective businesses
as currently conducted, and hold such properties and assets free and clear of
all liens and encumbrances except for Permitted Encumbrances or except where the
failure so to have such title or interests or so to hold such properties and
assets would not, individually or in the aggregate, have a Material Adverse
Effect. Without limiting the generality of the foregoing, TPC and the
Subsidiaries own sufficient title or leasehold interests in real property free
and clear of liens and encumbrances except for Permitted Encumbrances, to (i)
expand the Egan Storage facility to a total working storage Capacity of 12BCF of
gas, (ii) expand the Moss Bluff storage facility to a total working storage
capacity of 10BCF of gas, and (iii) develop the proposed Tioga storage facility
with a total working storage capacity of 10BCF of gas.
(b) With respect to any water rights owned by TPC or any Subsidiary
which are material to operations or development of the property of TPC and the
Subsidiaries, such water rights are adequate to continue operations as presently
conducted.
(c) All personal property of TPC or any Subsidiary has been
maintained in an operable state of repair adequate to maintain normal operations
in a manner consistent with past practices, except such failures to maintain as
would not, individually or in the aggregate, have a Material Adverse Effect.
Except as provided in this Section 3.12 or in Section 3.14, TPC MAKES NO AND
DISCLAIMS ANY REPRESENTATION OR WARRANTY, WHETHER EXPRESS OR IMPLIED, AND
WHETHER BY COMMON LAW, STATUTE OR OTHERWISE, AS TO (I) THE QUALITY, CONDITION OR
OPERABILITY OF ANY PERSONAL PROPERTY OR EQUIPMENT, (II) ITS MERCHANTABILITY,
(III) ITS FITNESS FOR ANY PARTICULAR PURPOSE OR (IV) ITS CONFORMITY TO MODELS OR
SAMPLES OF MATERIALS AND, EXCEPT AS PROVIDED IN THIS SECTION 3.12 OR IN SECTION
3.14, ALL PERSONAL
-14-
<PAGE>
PROPERTY AND EQUIPMENT IS DELIVERED "AS IS, WHERE IS" IN THE CONDITION IN
WHICH THE SAME EXISTS.
3.13. TAXES.
(a) Except as set forth on SCHEDULE 3.13(a), (i) each of TPC, each of
the Subsidiaries and any affiliated, combined or unitary group of which any such
entity is or was a member has timely (taking into account any extensions) filed
all federal and all material state, local and foreign returns, declarations,
reports, estimates, information returns and statements ("RETURNS") required to
be filed in respect of any Taxes (as defined below), and has timely paid all
Taxes that are shown by such Returns to be due and payable, (ii) each of TPC and
the Subsidiaries has established reserves that are adequate in the aggregate for
the payment of all material Taxes not yet due and payable with respect to the
results of operations of TPC and the Subsidiaries through the date hereof, and
complied in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes.
(b) SCHEDULE 3.13(b) sets forth the last taxable period through which
the federal income Tax Returns of TPC and the Subsidiaries have been examined by
the Internal Revenue Service ("IRS") or otherwise closed. Except to the extent
being contested in good faith, all material deficiencies asserted as a result of
such examinations and any examination by any applicable state or local taxing
authority have been paid, fully settled or adequately provided for in TPC's most
recent audited financial statements. Except as provided for in the TPC SEC
Reports, no material federal, state or local income or franchise tax audits or
other administrative proceedings or court proceedings are presently pending with
regard to any Taxes for which TPC or any of the Subsidiaries would be liable,
and no material deficiency which has not yet been paid for any such Taxes has
been proposed, asserted or assessed against TPC or any of the Subsidiaries with
respect to any period other than as set forth in SCHEDULE 3.13(b).
(c) Except as disclosed on SCHEDULE 3.13(c), neither TPC nor any of
the Subsidiaries has executed or entered into (or prior to the close of business
on the Closing Date will execute or enter into) with the IRS or any taxing
authority (i) any agreement or other document extending or having the effect of
extending the period for assessment or collection of any Tax for which TPC or
any of the Subsidiaries would be liable or (ii) a closing agreement pursuant to
Section 7121 of the Code or any similar provision of state or local income tax
law that relates to TPC or any of the Subsidiaries.
(d) Neither TPC nor any of the Subsidiaries has made an election
under Section 341(f) of the Code or has agreed to have Section 341(f)(2) of the
Code apply to any disposition of a subsection (f) asset (as such term is defined
in Section 341(f)(4) of the Code) owned by TPC or any of the Subsidiaries.
(e) Except as set forth in TPC SEC Reports or as disclosed on
SCHEDULE 3.13(e), neither TPC nor any of the Subsidiaries is a party to, is
bound by or has any obligation under any tax sharing agreement or similar
agreement or arrangement.
-15-
<PAGE>
For purposes of this Agreement, "Taxes" shall mean all federal, state,
local, foreign and other taxes, charges, fees, levies, imposts, duties, licenses
or other assessments, together with any interest, penalties, additions to tax or
additional amounts imposed by any taxing authority.
3.14. ENVIRONMENTAL MATTERS. Except as described in SCHEDULE 3.14:
(a) Each of TPC and the Subsidiaries is in compliance with all
applicable federal, state and local laws (including common law), ordinances,
rules and regulations relating to the environment including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, 42 U.S.C. Section 9601, ET SEQ., as amended, the Resource Conservation and
Recovery Act of 1976, as amended, 42 U.S.C. Section 6901, ET SEQ., the Clean Air
Act, 42 U.S.C. Section 7401, ET SEQ., as amended, the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251, ET SEQ., as amended, and the Oil Pollution
Act of 1990, 33 U.S.C. Section 2701, ET SEQ. (collectively, the "ENVIRONMENTAL
LAWS"), except for such instances of noncompliance that individually or in the
aggregate do not have a Material Adverse Effect.
(b) Each of TPC and the Subsidiaries has obtained all permits,
licenses, franchise authorities, consents and approvals, made all filings and
maintained all material data, documentation and records necessary for owning and
operating its assets and business as it is presently conducted under all
applicable Environmental Laws, and all such permits, licenses, franchises,
authorities, consents, approvals and filings remain in full force and effect,
except for such matters that individually or in the aggregate do not have a
Material Adverse Effect.
(c) There are no pending or, to TPC's knowledge, threatened claims,
demands, actions, administrative proceedings, lawsuits or, to TPC's knowledge,
investigations against TPC or the Subsidiaries under any Environmental Laws.
(d) TPC has provided access to PHI to complete copies of any and all
environmental reports prepared by third parties for TPC or its Subsidiaries
whether or not such reports are otherwise subject to an applicable privilege.
(e) None of TPC or the Subsidiaries has transported or arranged for
the transportation of any Hazardous Substances to any location which is: (i)
listed on the EPA's National Priorities List of Hazardous Waste Sites (the
"National Priorities List") or on any similar state list; (ii) listed for
possible inclusion on the National Priorities List or on any similar state list;
or (iii) to the knowledge of TPC, the subject of any regulatory action which may
lead to claims against TPC or any of the Subsidiaries under any Environmental
Law which could in the case of clauses (i), (ii) or (iii), individually or in
the aggregate, a Material Adverse Effect.
(f) None of the real property owned or operated by TPC or any
Subsidiary is: (i) listed on the National Priorities List or on any similar
state list; (ii) listed for possible inclusion on the National Priorities list
or on any similar state list; or (iii) to the knowledge of TPC, the subject of
any regulatory action which may lead to claims against TPC or any of the
Subsidiaries under any Environmental Law.
-16-
<PAGE>
(g) No part of any of the real property owned or operated by TPC or
any Subsidiary is now being used, or has been used, by TPC or any Subsidiaries,
as a landfill, dump or other disposal, storage, transfer or handling area for
Hazardous Substances, excepting, however, for the storage, transfer, handling
and use of Hazardous Substances, and the disposal of brine, in the ordinary
course of business of TPC and its Subsidiaries and in material compliance with
Environmental Laws.
(h) There is not now present any Contamination of any of the real
property owned or operated by TPC or any Subsidiary which could have a Material
Adverse Effect.
TPC makes no representation in this Agreement regarding any compliance
or failure to comply with, or any actual or contingent liability under, any
Environmental Law, except as set forth in this Section 3.14.
3.15. BROKERS. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of TPC, except for the
fees of Lehman Brothers, Inc. specified on Schedule 3.15.
3.16. REGULATORY STATUS. Except as set forth on SCHEDULE 3.16,
neither TPC nor any Subsidiary is (a) 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)(7), 2(a)(8) or 2(a)(11) of the
Public Utility Holding Company Act of 1935, as amended (the "1935 ACT") or
(b) subject to regulation as a natural gas company, public utility company or
public service company (or similar designation) by the Federal Energy Regulatory
Commission or any other federal, state or foreign governmental agency or
authority.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PHI AND ACO
PHI and ACo hereby, jointly and severally, represent and warrant to
TPC that:
4.1. CORPORATE ORGANIZATION. (a) Each of Parent, PHI and ACo is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to have such power, authority and governmental approvals would
not, individually or in the aggregate, have a material adverse effect on the
ability of PHI and ACo to perform their obligations hereunder and to consummate
the Transactions.
(b) The authorized capital stock of ACo consists of 100 shares of
common stock, per value $.01 per share, 100 shares of which are issued and
outstanding. All of such issued and
-17-
<PAGE>
outstanding shares are owned by PHI or by a wholly owned Subsidiary of PHI. All
issued and outstanding capital stock of PHI is owned by Parent.
4.2. AUTHORITY; DUE AUTHORIZATION; BINDING AGREEMENT.
(a) Each of PHI and ACo has all requisite corporate power and
authority to carry on its business as presently conducted, to enter into this
Agreement and to perform its obligations under this Agreement.
(b) The execution, delivery and performance of this Agreement and the
consummation of the Transactions have been duly and validly authorized by all
requisite corporate action on the part of each of Parent, PHI and ACo (other
than, with respect to the Merger, the filing and recordation of appropriate
merger documents as required by Delaware Law).
(c) This Agreement has been duly executed and delivered by each of
PHI and ACo. This Agreement and all such documents and instruments delivered in
connection herewith constitute legal, valid and binding obligations of each of
PHI and ACo enforceable in accordance with their terms, subject, however, to the
effects of bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting creditors' rights generally and to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.3. NO VIOLATION; CONSENTS.
(a) The consummation of the Transactions will not violate, or cause a
default under (i) any provision of the governing documents of Parent, PHI or
ACo, (ii) any material provision of any material contract or agreement or of any
bank loan, indenture or credit agreement, in each case to which Parent, PHI or
ACo is a party, (iii) assuming the governmental filings, approvals, consents and
authorizations referred to Section 4.3(b) are duly and timely made or obtained,
any applicable law, ordinance, rule or regulation of any governmental authority
or (iv) any applicable order, writ, judgment or decree of any court or other
competent authority, except for such defaults or other occurrences which,
individually or in the aggregate, would not prevent PHI and ACo from performing
their respective obligations under this Agreement and consummating the
Transactions.
(b) Except for (i) any required filings under the HSR Act and the
Exchange Act and filing and recordation of appropriate merger documents as
required by Delaware Law, and (ii) any governmental consents necessary for
transfers of permits and licenses, no authorization, consent or approval of or
filing with any governmental authority is required to be obtained or made by
Parent, PHI or ACo for the execution and delivery by PHI and ACo of this
Agreement or the consummation by PHI and ACo of the Transactions. No
authorization, consent or approval of any nongovernmental third party is
required to be obtained by Parent, PHI or ACo for the execution and delivery by
PHI and ACo of this Agreement or the consummation by PHI and ACo of the
Transactions, except where failure to obtain such consents, approvals or
authorizations would not
-18-
<PAGE>
prevent or delay consummation of the Offer or the Merger, or otherwise prevent
PHI or ACo from performing its obligations under this Agreement.
4.4. OFFER DOCUMENTS; PROXY STATEMENT. The Offer Documents will not,
at the time the Offer Documents are filed with the SEC or are first published,
sent or given to stockholders of TPC, as the case may be, 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 made therein, in
light of the circumstances under which they are made, not misleading. The
information supplied by PHI for inclusion in the proxy statement to be sent to
the stockholders of TPC in connection with the Stockholders Meeting (as defined
below) (such proxy statement, as amended and supplemented, being referred to
herein as the "PROXY STATEMENT") and Schedule 14D-9 will not, on the date the
Proxy Statement or Schedule 14D-9 (or any amendment or supplement thereto) is
first mailed to stockholders of TPC, at the time of the Stockholders Meeting,
contain any statement which, at such time and in light of the circumstances
under which it is made, is false or misleading with respect to any material
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not false or misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Stockholders Meeting which shall have become
false or misleading; PROVIDED, HOWEVER, that PHI or ACo makes no representation
or warranty with respect to information supplied by TPC for inclusion in any of
the foregoing documents or the Offer Documents. The Offer Documents shall
comply in all material respects as to form with the requirements of the Exchange
Act and the rules and regulations thereunder.
4.5. BROKERS. No broker, finder or investment banker (other than New
Harbor, Incorporated) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of Parent, PHI or ACo.
4.6. FINANCING. PHI has, or will have available to it at the time
ACo is required to pay for Shares under the terms of the Offer, and will make
available to ACo, sufficient funds to permit ACo to acquire all the
outstanding Shares in the Offer and the Merger. PHI has obtained commitments
for such funds to the extent available cash is not expected to be sufficient.
4.7. REGULATORY STATUS. Parent is not a "holding company" within the
meaning of Section 2(a)(7) of the 1935 Act. Neither PHI nor ACo is (a) a
"public utility company," a "holding company," or a "subsidiary company" within
the meaning of Section 2(a)(5), 2(a)(7) or 2(a)(8) of the 1935 Act or
(b) subject to regulation as a public utility company or public service company
(or similar designation) by the Federal Energy Regulatory Commission or any
other federal, state or foreign governmental agency or authority.
4.8. OWNERSHIP OF SHARES. Neither Parent, PHI, ACo nor any of the
other subsidiaries of Parent beneficially owns any Shares.
4.9. FINANCIAL STATEMENTS. The consolidated financial statements
(including, any notes thereto) of PHI as of and for the period ended September
30, 1996, heretofore delivered to TPC, were prepared in accordance with GAAP
throughout the periods indicated (except as may be
-19-
<PAGE>
indicated in the notes thereto and except that such financial statements do
not contain all GAAP notes to such financial statements) and fairly present
the consolidated financial position, results of operations and changes in
stockholders' equity and cash flows of PHI and its consolidated Subsidiaries
as at the dates thereof and for the periods indicated therein (subject to
normal and recurring year-end adjustments).
ARTICLE V
CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME
TPC covenants and agrees that, between the date of this Agreement and
the Effective Time, unless PHI shall otherwise agree in writing: (a) the
businesses of TPC and the Subsidiaries shall be conducted only in, and TPC and
the Subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice; (b) TPC shall use its
best efforts to preserve substantially intact the business organization of TPC
and the Subsidiaries, to keep available the services of the current officers,
employees and consultants of TPC and the Subsidiaries and to preserve the
current relationships of TPC and the Subsidiaries with customers, suppliers and
other persons with which TPC or any Subsidiary has significant business
relations; and (c) TPC shall maintain the assets of TPC and the Subsidiaries in
good condition and repair, reasonable wear and tear accepted, and in material
compliance with applicable governmental and regulatory agency requirements, and
shall use its best efforts to maintain insurance with respect thereto of the
same types and amounts currently in force. By way of amplification and not
limitation, except as expressly contemplated or permitted by this Agreement or
SCHEDULE 5, or to the extent that PHI shall otherwise consent in writing,
neither TPC nor any Material Subsidiary shall, between the date of this
Agreement and the Effective Time, directly or indirectly do, or propose to do,
any of the following:
(a) amend or otherwise change its charter or bylaws or equivalent
organizational documents;
(b) issue, sell, pledge, dispose of, grant, encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares
of capital stock of any class of TPC or any Subsidiary, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest), of TPC or any Subsidiary (except for
the issuance of Shares issuable pursuant to stock options outstanding on the
date hereof or upon conversion of shares of Class B Common Stock) or (ii) any
assets and properties material to TPC and the Subsidiaries, taken as a whole,
except for (i) sales of natural gas, in the ordinary course of business and in a
manner consistent with past practice, by the marketing business of TPC or (ii)
pledges of assets and properties required by any financing document to which TPC
or a Subsidiary is a party on the date hereof;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock (except for such declarations, set-asides, dividends and
other distributions made from any Subsidiary to TPC);
-20-
<PAGE>
(d) reclassify, combine, split or subdivide, or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e)(i) acquire (including, without limitation, by merger,
consolidation or acquisition of stock or assets) any corporation, partnership or
other business organization or any division thereof or any material amount of
assets, except for acquisitions of natural gas, in the ordinary course of
business, by the marketing business of TPC; (ii) incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations of any
person, or make any loans or advances, except borrowing in the ordinary course
of business pursuant to any existing revolving credit agreement of TPC; or (iii)
enter into or amend any contract, agreement, commitment or arrangement with
respect to any matter set forth in this paragraph (e);
(f) increase the compensation payable or to become payable to, or
grant any severance or termination pay to, its officers, employees, directors or
consultants, except pursuant to existing contractual arrangements, or enter into
any employment, consulting or severance agreement with, any director, officer or
other employee or consultant of TPC or any Subsidiary, or establish, adopt,
enter into or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer,
employee or consultant;
(g) pay, discharge or satisfy any claim, liability or obligation
(absolute or 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 consolidated balance sheet of TPC and the consolidated Subsidiaries as at
December 31, 1996, including the notes thereto, or subsequently incurred in the
ordinary course of business and consistent with past practice; or
(h) enter into any collective bargaining agreements or change
accounting practices;
(i) make any contribution to the TPC ESOP in excess of the amount
necessary to amortize existing loans from TPC over the remaining portion of the
original seven year period of such loans;
(j) amend in any material respect any contract or agreement material
to TPC and the Subsidiaries, taken as a whole, or terminate any such material
contract or agreement prior to the expiration of the term thereof; or
(k) agree to take in writing, or otherwise, any of the actions
described in paragraphs (a) through (j) of this Article V or any action which
would result in any of the conditions to the Offer not being satisfied (other
than as contemplated by this Agreement).
-21-
<PAGE>
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1. STOCKHOLDERS MEETING. If TPC Stockholder Approval (as
hereinafter defined) is required by law, then, subject to the fiduciary duties
of the TPC Board of Directors under applicable law, TPC, acting through the TPC
Board of Directors, shall, in accordance with applicable law and TPC's
Certificate of Incorporation and Bylaws, (a) duly call, give notice of, convene
and hold an annual or special meeting of its stockholders (the "STOCKHOLDERS
MEETING") as soon as practicable following consummation of the Offer for the
purpose of approving and adopting this Agreement and the Transactions,
including, without limitation, the Merger (the "TPC STOCKHOLDER APPROVAL") and
(b) include in the Proxy Statement the recommendation of the TPC Board of
Directors that the stockholders of TPC approve and adopt this Agreement and the
Transactions, including, without limitation, the Merger, and use its best
efforts to obtain such approval and adoption. Notwithstanding the foregoing, if
ACo or any other Subsidiary of Parent shall acquire at least 90% of the
outstanding Shares, the parties shall, at PHI's request, take all necessary and
appropriate actions to cause the Merger to become effective as soon as
practicable after the consummation of the Offer without a Stockholders Meeting
in accordance with Section 253 of Delaware Law. PHI agrees to cause all Shares
purchased pursuant to the Offer and all other Shares beneficially owned by
Parent, ACo or any other Subsidiary of Parent, to be voted in favor of the TPC
Stockholder Approval.
6.2. PROXY STATEMENT. If TPC Stockholder Approval is required by
law, then as soon as practicable following the purchase of all Shares validly
tendered and not withdrawn pursuant to the Offer, TPC shall file the Proxy
Statement with the SEC under the Exchange Act, and shall use its best efforts
to have the Proxy Statement cleared by the SEC. PHI, ACo and TPC shall
cooperate with each other in the preparation of the Proxy Statement, and TPC
shall notify PHI of the receipt of any comments of the SEC with respect to the
Proxy Statement and of any requests by the SEC for any amendment or supplement
thereto or for additional information and shall provide to Parent promptly
copies of all correspondence between TPC or any representative of TPC and the
SEC. TPC shall give PHI and its counsel the opportunity to review the Proxy
Statement prior to its being filed with the SEC and shall give PHI and its
counsel the opportunity to review all amendments and supplements to the Proxy
Statement and all responses to requests for additional information and replies
to comments prior to their being filed with, or sent to, the SEC, and shall
make any revisions to such documents reasonably requested by PHI. Each of
TPC, PHI and ACo agrees to use its best efforts, after consultation with the
other parties hereto, to respond promptly to all such comments of and requests
by the SEC and to cause the Proxy Statement and all required amendments and
supplements thereto to be mailed to the holders of Shares entitled to vote at
the Stockholders Meeting at the earliest practicable time with the intent
being to complete the Merger as soon as practicable following consummation of
the Offer.
-22-
<PAGE>
6.3. ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) To the extent not restricted by third-party agreement or
applicable law, the PHI Parties and their employees, representatives,
consultants, attorneys, agents, lenders and other advisors shall, subject to any
necessary third-party approvals, and at their sole risk and expense, be given
reasonable access during normal business hours to all facilities, properties,
personnel, books and records of TPC and the Subsidiaries. The PHI Parties'
investigation shall be conducted in a manner that minimizes any interference
with TPC's or the Subsidiaries' operations. The PHI Parties may photocopy
information they review at their own expense, subject to applicable third- party
approvals. The PHI Parties agree to indemnify and hold TPC and the Subsidiaries
harmless from any and all claims and liabilities, including costs and expenses
for loss, injury to or death of any representative of the PHI Parties, and any
loss, damage to or destruction of any property owned by TPC or the Subsidiaries
or others (including claims or liabilities for loss of use of any property)
resulting directly or indirectly from the action or inaction of any of the PHI
Parties' representatives during any visit to the business or property sites of
TPC or the Subsidiaries prior to the completion of the Offer, whether pursuant
to this Section 6.3 or otherwise. None of the PHI Parties nor any of their
employees, representatives, consultants, attorneys, agents, lenders or other
advisors, shall conduct any environmental testing or sampling on any of the
business or property sites of TPC or the Subsidiaries prior to the completion of
the Offer without the prior written consent of TPC.
(b) To the extent permitted by applicable law, in order to facilitate
the continuing operation of TPC by PHI and ACo without disruption and to assist
in an achievement of an orderly transition in the ownership and management of
TPC, after completion of the Offer and until the Effective Time, TPC, PHI and
ACo shall cooperate reasonably with each other to effect an orderly transition
including, without limitation, with respect to communications with employees.
(c) TPC shall, between the date hereof and the Effective Date,
deliver to PHI complete copies of internal monthly financial and management
report packages as published by TPC to include, but not limited to, statement of
income, cash flow, balance sheet, capital expenditures, and administrative
expenses. These statements are to be provided for TPC on a "consolidated basis"
and for Market Hub Partners on a "combined basis." These statements shall be
provided as soon as practicable, but no later than the 30th working day after
the end of the reporting month.
(d) TPC shall notify PHI in advance of TPC or its Subsidiaries
entering into any material transactions, contracts or commitments (regardless of
whether such transactions, contracts or commitments are otherwise permitted by
this Agreement), and consult with PHI with regard to such transactions,
contracts or commitments.
(e) Any information obtained by the PHI Parties or their employees,
representatives, consultants, attorneys, agents, lenders and other advisors
under this Section 6.3 shall be subject to the confidentiality and use
restrictions contained in that certain letter agreement between TPC and
PacifiCorp Power Marketing dated October 23, 1996 (the "CONFIDENTIALITY
AGREEMENT").
-23-
<PAGE>
6.4. ALTERNATIVE PROPOSALS.
(a) After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, TPC shall not, and shall not permit any of its
Subsidiaries to, initiate, solicit or encourage, and TPC shall, and shall cause
each of its Subsidiaries to, cause any officer, director or employee of, or any
attorney, accountant, investment banker, financial advisor or other agent
retained by it, not to initiate, solicit or encourage, any proposal or offer to
acquire all or any substantial part of the business and properties of TPC or any
capital stock of TPC whether by merger, purchase of assets, tender offer or
otherwise, whether for cash, securities or any other consideration or
combination thereof (any such transaction being referred to herein as an
"Alternative Transaction"), or any inquiries with respect to an Alternative
Transaction. TPC will immediately cease and cause to be terminated any existing
discussions or negotiations with parties other than PHI and ACo commenced
heretofore with respect to Alternative Transactions. Except to the extent
permitted by Section 6.4(b) or 8.1(d) of this Agreement, TPC will not (i) grant
its consent to any party other than PHI and ACo to take any action such party
has agreed not to take pursuant to any "standstill" restrictions applicable to
such party that are equivalent to the standstill provisions set forth in the
second full paragraph on page 3 of the Confidentiality Agreement, or
(ii) provide any confidential or non-public information concerning TPC or its
Subsidiaries to, or have any discussions with, any person relating to an
Alternative Transaction.
(b) Notwithstanding the provisions of paragraph (a) above, in
response to an unsolicited proposal or indication of interest for or with
respect to a potential or proposed Alternative Transaction (an "Alternative
Proposal"), (i) TPC may (x) engage in discussions or negotiations regarding such
Alternative Proposal with the person who makes such Alternative Proposal, and
(y) furnish to any such person (subject to the execution of a confidentiality
agreement containing confidentiality provisions substantially similar to those
of the Confidentiality Agreement), confidential or non-public information
concerning TPC or its Subsidiaries if, in any such case described in clause (x)
or (y), in the reasonable, good faith judgment of the TPC Board of Directors,
taking into account the advice of outside counsel, the failure to do so would
violate its fiduciary duties to the holders of TPC Common Stock under applicable
law and (ii) if such Alternative Proposal is a tender offer, the TPC Board of
Directors may take and disclose to TPC's stockholders a position contemplated by
Rule 14e-2 under the Exchange Act.
(c) TPC shall immediately notify PHI of receipt of any Alternative
Proposal or any request for confidential or nonpublic information relating to
TPC or its Subsidiaries in connection with an Alternative Proposal or for access
to the properties, books or records of TPC or any Subsidiary by any person or
entity that informs the TPC Board of Directors that it is considering making, or
has made, an Alternative Proposal, and (unless the TPC Board of Directors
concludes that it is inconsistent with its fiduciary duties under applicable
law) shall keep PHI fully informed of the status and details of any such
Acquisition Proposal, indication or request.
-24-
<PAGE>
6.5. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) The Certificate of Incorporation of the Surviving Corporation and
each of its Subsidiaries shall contain provisions no less favorable with respect
to indemnification and advancement of expenses than are set forth in the
Certificate of Incorporation of TPC as of the date of this Agreement, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would affect adversely the
rights thereunder of individuals who at any time from and after the date of this
Agreement and to and including the Effective Time were directors, officers,
employees, fiduciaries or agents of TPC or any of its Subsidiaries in respect of
actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the matters contemplated by this Agreement), unless such
modification is required by law.
(b) TPC shall, to the fullest extent permitted under applicable law
and regardless of whether the Merger becomes effective, indemnify and hold
harmless, and, after the Effective Time, the Surviving Corporation shall, to the
fullest extent permitted under applicable law, indemnify and hold harmless, each
present and former director, officer, employee, fiduciary and agent of TPC and
each Subsidiary (collectively, the "INDEMNIFIED PARTIES") against all costs and
expenses (including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and settlement amounts paid in connection with any threatened or
actual claim, action, suit, proceeding or investigation (whether arising before
or after the Effective Time), whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or omission in their
capacity as an officer, director, employee, fiduciary or agent (including,
without limitation, any claim arising out of this Agreement or any of the
transactions contemplated hereby), whether occurring before or after the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, for a period of six years after the later of the date of this Agreement or
the Effective Time, in each case to the fullest extent permitted under Delaware
Law (and shall pay any expenses in advance of the final disposition of any such
action or proceeding to each Indemnified Party to the fullest extent permitted
under Delaware Law, upon receipt from the Indemnified Party to whom expenses are
advanced of any undertaking to repay such advances required under Delaware Law);
provided, however, that neither TPC nor the Surviving Corporation shall be
liable for any indemnification hereunder if the costs, expenses, judgment,
fines, losses, claims, damages, liabilities or settlement amounts paid by an
Indemnified Party arise out of or relate to (i) a situation in which the
Indemnified Party did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of TPC or the Subsidiary,
(ii) intentional misconduct or (iii) with respect to any criminal action or
proceeding, the Indemnified Party had no reasonable cause to believe his conduct
was unlawful. In the event of any such claim, action, suit, proceeding or
investigation with respect to which indemnification is provided under the
previous sentence, (i) the Indemnified Parties may retain counsel (including
local counsel) satisfactory to them and TPC or the Surviving Corporation, as the
case may be, shall pay the reasonable fees and expenses of such counsel,
promptly after statements therefor are received and (ii) TPC and the Surviving
Corporation shall use all reasonable efforts in the vigorous defense of any such
matter; PROVIDED, HOWEVER, that neither TPC nor the Surviving Corporation shall
be liable for any settlement effected without its written consent; and PROVIDED
FURTHER that neither TPC nor the Surviving Corporation shall be obligated
pursuant to this
-25-
<PAGE>
Section 6.5(b) to pay the fees and expenses of more than one counsel (plus
appropriate local counsel) for all Indemnified Parties in any single action
unless there is, as determined by counsel to the Indemnified Parties, under
applicable standards of professional conduct, a conflict or a reasonable
likelihood of a conflict on any significant issue between the positions of any
two or more Indemnified Parties, in which case such additional counsel
(including local counsel) as may be required to avoid any such conflict or
likely conflict may be retained by the Indemnified Parties at the expense of
TPC or the Surviving Corporation; and PROVIDED FURTHER that, in the event that
any claim for indemnification is asserted or made within such six-year period,
all rights to indemnification in respect of such claim shall continue until
the disposition of such claim.
(c) TPC shall, from and after the date of this Agreement and to and
including the Effective Time, and the Surviving Corporation shall, for six years
from the Effective Time, maintain in effect the current directors' and officers'
liability insurance policies maintained by TPC (PROVIDED that the Surviving
Corporation may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are no less advantageous to such
officers and directors so long as substitution does not result in gaps or lapses
in coverage) with respect to matters occurring prior to the Effective Time;
PROVIDED, HOWEVER, that in no event shall the Surviving Corporation be required
to expend pursuant to this Section 6.5(c) more than an amount per year equal to
200% of current annual premiums paid by TPC for such insurance and, in the event
the cost of such coverage shall exceed that amount, the Surviving Corporation
shall purchase as much coverage as possible for such amount.
(d) In the event TPC or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of TPC or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 6.5.
(e) The Bylaws of the Surviving Corporation and each of its
Subsidiaries shall contain the provisions with respect to indemnification and
advancement of expenses at least as favorable, from the point of view of the
indemnified parties, set forth in the Bylaws of TPC on the date of this
Agreement, and such provisions shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner that
would affect adversely the rights thereunder of individuals who at any time from
and after the date of this Agreement and to and including the Effective Time
were directors, officers, employees, fiduciaries or agents of TPC or any of its
Subsidiaries in respect of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the transactions contemplated by
this Agreement), unless such modification is required by law.
(f) The Surviving Corporation shall pay all reasonable expenses,
including attorneys' fees, that may be incurred by any Indemnified Party in
enforcing the indemnity and other obligations provided in this Section 6.5.
-26-
<PAGE>
(g) In the event that TPC or the Surviving Corporation should fail,
at any time from and after the Effective Time, to comply with any of the
foregoing obligations set forth in this Section 6.5, for any reason, PHI shall
be responsible therefor and hereby agrees to perform such obligations
unconditionally without regard to any defense or other basis for nonperformance
which TPC or the Surviving Corporation may have or claim (except as would be
prohibited by applicable Delaware Law), it being the intention of this
subsection (g) that the officers, directors, employees, fiduciaries and agents
of TPC and its Subsidiaries shall be fully indemnified, to the extent provided
in this Section 6.5, and that the provisions of this subsection (g) be a primary
obligation of PHI and not merely a guarantee by PHI of the obligations of TPC or
ACo.
(h) The obligations of TPC, PHI and/or the Surviving Corporation
under this Section 6.5 shall not be terminated or modified in such a manner as
to adversely affect any director, officer, employee, fiduciary and agent to whom
this Section 6.5 applies without the consent of each affected director, officer,
employee, fiduciary and agent (it being expressly agreed that the directors,
officers, employees, fiduciaries and agents to whom this Section 6.5 applies
shall be third-party beneficiaries of this Section 6.5). The rights of each
Indemnified Party hereunder shall be in addition to any other rights such
Indemnified Party may have under the charter or bylaws of TPC, under the
Delaware Law or otherwise.
6.6. NOTIFICATION OF CERTAIN MATTERS. TPC shall give prompt notice to
PHI, and PHI shall give prompt notice to TPC, of (i) the occurrence, or
nonoccurrence, of any event the occurrence, or nonoccurrence, of which would be
likely to cause any representation or warranty contained in this Agreement to be
materially untrue or inaccurate and (ii) any failure of TPC, PHI or ACo, as the
case may be, to comply with or satisfy in any material respect any covenant,
condition or agreement required to be complied with or satisfied by it
hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this
Section 6.6 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
6.7. FURTHER ACTION; BEST EFFORTS. Upon the terms and subject to the
conditions hereof, and subject, in the case of TPC, to the fiduciary duties of
its Board of Directors, each of the parties hereto shall (i) make promptly its
respective filings, and thereafter make any other required submissions, under
the HSR Act with respect to the Transactions, (ii) use its best efforts to take,
or cause to be taken, all appropriate action, and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the Transactions, including, without
limitation, using its best efforts to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and parties to contracts with TPC and the Subsidiaries as are necessary for the
consummation of the Transactions and to fulfill the conditions to the Offer and
the Merger and (iii) except as contemplated by this Agreement, use its best
efforts not to take any action, or enter into any transaction, that would cause
any of its representations or warranties contained in this Agreement to be
untrue or result in a breach of any covenant made by it in this Agreement. In
addition, TPC will use its best efforts to obtain prior to Closing all consents
and waivers of the lenders under the loans referenced on Schedule 3.5 that are
necessary to avoid the consummation of the Transactions (i) triggering an
acceleration of such loans or a default under such loans or (ii) causing a
breach of the covenants in
-27-
<PAGE>
the agreements governing such loans. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement then in office shall use their best efforts to take all such action.
6.8. PUBLIC ANNOUNCEMENTS. PHI and TPC shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to this Agreement or the Transactions and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or any listing agreement with a national securities
exchange to which Parent, PHI or TPC is a party.
6.9. PHI GUARANTEE. PHI agrees to take all action necessary to cause
ACo to perform all of ACo's, and the Surviving Corporation to perform all of the
Surviving Corporation's, agreements, covenants and obligations under this
Agreement and to consummate the Offer and the Merger on the terms and subject to
the conditions set forth in this Agreement. PHI shall be liable for any breach
of any representation, warranty, covenant or agreement of ACo and for any breach
of this covenant.
6.10. EMPLOYEE MATTERS.
(a) PHI and TPC agree that all employees of TPC and its Subsidiaries
immediately prior to the Effective Time shall be employed by the Surviving
Corporation immediately after the Effective Time, it being understood that PHI
and the Surviving Corporation shall have no obligations to continue employing
such employees for any length of time thereafter except pursuant to any
agreements disclosed on SCHEDULE 3.10(e). PHI shall deem, and shall cause the
Surviving Corporation to deem, the period of employment with TPC and
Subsidiaries (and with predecessor employers with respect to which TPC and its
Subsidiaries shall have granted service credit) to have been employment and
service with PHI and the Surviving Corporation for benefit plan eligibility and
vesting purposes for all of PHI's and the Surviving Corporation's employee
benefit plans, programs, policies or arrangements to the extent service with PHI
or the Surviving Corporation is recognized under any such plan, program, policy
or arrangement.
(b) For one year after the Effective Time, PHI will cause the
Surviving Corporation to continue or cause to be continued without significant
adverse change to any employee or former employee of TPC and its Subsidiaries
all TPC Employee Benefit Plans and the TPC 401(k) Plan, except that PHI or the
Surviving Corporation may, during such period, replace any of the TPC Employee
Benefit Plans or the TPC 401(k) Plan with a plan that is substantially
equivalent to or more favorable than the plan it replaces. The use of a
matching contribution feature through the TPC ESOP as provided in (c) below
shall be deemed to satisfy the requirement for continuation of the matching
contribution feature of the TPC 401(k) Plan without adverse change. If the TPC
and Subsidiary employees are covered by medical and dental plans of PHI or the
Surviving Corporation, PHI shall waive, or cause the Surviving Corporation to
waive, and shall cause the relevant insurance carriers and other third parties
to waive, all restrictions and limitations for any medical condition existing as
of the Effective Time of any of such employees and their eligible dependents for
the
-28-
<PAGE>
purpose of any such plans, but only to the extent that such condition would
be covered by the relevant TPC Employee Benefit Plan if it were not a pre-
existing condition and only to the extent of comparable coverage in effect
immediately prior to the Effective Time. Further, PHI shall offer to each TPC
and Subsidiary employee coverage under a group health plan which credits such
employee towards the deductibles imposed under the group medical and dental plan
of PHI or the Surviving Corporation, for the year during which the Effective
Time occurs, with any deductibles already incurred during such year under the
relevant TPC Employee Benefit Plan.
(c) To the extent permitted under Sections 401(a) and 410(b)(1)(A) or
(B) of the Code, PHI shall maintain or shall cause Parent or an affiliate of
Parent to maintain the TPC ESOP as a separate qualified plan or a separate
benefit feature in a qualified plan solely for the benefit of TPC ESOP
participants and the employees of the business (the "TPC BUSINESS") that is
conducted by TPC before the Effective Time as follows:
(i) The separate plan or feature shall be maintained until the
notes issued by the TPC ESOP (the "ESOP NOTES") are paid in full. Parent or a
delegate may designate contributions to the separate plan or feature to be used
to prepay the ESOP Notes in full or in part from time to time before maturity.
(ii) The accounts of participants in the TPC ESOP or ESOP feature
and the TPC ESOP suspense account shall be invested in employer securities
within the meaning of Section 409(l) of the Code; provided, however that the
participants in the TPC ESOP or ESOP feature shall be given a one-time election
to redirect the investment of their accounts to investments other than employer
securities, effective during the period beginning on the date all shares from
the TPC ESOP suspense account have been allocated and ending on the date six
months thereafter.
(iii) Persons hired in normal course by the TPC Business
after the Effective Time shall participate under substantially the same terms as
employees of TPC before the Effective Time, except that (iv) below shall not
apply to new hires.
(iv) Participants before the Effective Time whose employment by
the TPC Business and its affiliates is involuntarily terminated after the
Effective Time for any reason other than for cause (as defined in Section
6.10(d)), (a) shall become fully vested on termination, and (b) shall be
entitled to an allocation for the year of termination notwithstanding the hours
of service requirement.
(v) Parent or a delegate may elect to use matching contributions
for the benefit of employees of the TPC Business under a qualified plan feature
subject to section 401(m) of the Code to repay the ESOP Notes. Shares released
from the ESOP suspense account relating to such matching contributions shall be
allocated to matching contribution accounts of the employees of the TPC
Business. If matching contributions are used to repay ESOP notes, the Parent or
an affiliate shall make an additional contribution of not less than two percent
of eligible compensation of employees of the TPC Business for the plan year.
-29-
<PAGE>
If the requirements of section 401(a) or section 410(b)(1)(A) or (B) of the Code
prevent Parent or an affiliate from maintaining the TPC ESOP as a separate
qualified plan or a separate benefit feature in a qualified plan solely for the
benefit of TPC ESOP participants and the employees of the TPC Business, PHI
shall or shall cause Parent or an affiliate to effect the matching contribution
and minimum two percent of eligible compensation contribution described in
clause (v) above prior to the last date that the separate qualified plan or
benefit feature may be maintained and as soon as practicable after Parent
determines that the TPC ESOP cannot be maintained solely for the benefit of
employees of the TPC Business. Parent shall determine annually whether the ESOP
feature may continue to be maintained under section 410(b)(1)(A) or (B). In
lieu of making the matching contributions, Parent or a delegate may elect to
prepay the ESOP Notes in full on or before the end of the last year that the
ESOP feature can be maintained solely for the benefit of the employees of the
TPC business.
(d) PHI agrees that, if any of the employees of TPC or its
Subsidiaries is terminated from employment by the Surviving Corporation within
12 months after the Effective Time for any reason other than cause, or is
required to transfer to a job location that is more than 50 miles from his or
her current job location or to take a reduction in base rate of pay, but refuses
such transfer or reduction and terminates his or her employment with the
Surviving Corporation, then Parent shall provide, or shall cause the Surviving
Corporation to provide, the employee with (i) a lump sum cash severance payment
equal to two weeks' base pay in lieu of notice, plus three weeks' base pay for
each year of service with TPC and its Subsidiaries (taking into account all
service with predecessor employers that is considered by TPC and its
Subsidiaries under its existing severance programs and rounding up any partial
year of at least six months to one full year of service), with a total severance
payment of not less than 12 weeks' base pay, and (ii) continued health insurance
coverage for the employee and his or her dependents under Part 6 of Title I of
ERISA (COBRA) at a cost to the employee that is not in excess of the cost of
coverage for active employees of the Surviving Corporation who were formerly
employed by TPC or its Subsidiaries. Such severance benefits may be conditioned
on receipt of such forms, waivers and releases as PHI normally applies in such
circumstances. Severance benefits under this Section 6.10(d) shall be in lieu
of, and not in addition to, any severance benefits under existing TPC severance
packages for employees attached as EXHIBIT 3.10(c)(1) to SCHEDULE 3.10(c), but
shall not apply to employees that have severance benefits under individual
agreements with TPC disclosed on SCHEDULE 3.10(e). For purposes of this
Section 6.10(d), termination shall be for cause if it is for conduct such as
fraud, embezzlement, theft, commission of a felony, or any other criminal act
against PHI or the Surviving Corporation, or deliberate and substantial
disregard of assigned duties and responsibilities.
6.11. DIRECTORS. Promptly upon the acceptance for payment of, and
payment for, Shares by ACo pursuant to the Offer, ACo shall be entitled to
designate such number of directors on the TPC Board of Directors as will give
ACo, subject to compliance with Section 14(f) of the Exchange Act, a majority of
such directors, and TPC shall, at such time, cause ACo's designees to be so
elected by its existing Board of Directors; PROVIDED, HOWEVER, that in the event
that ACo's designees are elected to the TPC Board of Directors, until the
Effective Time such Board of Directors shall have at least three directors who
are directors of TPC on the date of this Agreement (the "INDEPENDENT
DIRECTORS"); and PROVIDED FURTHER that, in such event, if the number of
Independent
-30-
<PAGE>
Directors shall be reduced below three for any reason whatsoever,
the remaining Independent Directors or Director shall designate a person to fill
such vacancy who shall be deemed to be an Independent Director for purposes of
this Agreement or, if no Independent Directors then remain, the other directors
shall designate three persons to fill such vacancies who shall not be officers
or affiliates of TPC or any of its Subsidiaries or of PHI or any of its
Subsidiaries, and such persons shall be deemed to be Independent Directors for
purposes of this Agreement. Subject to applicable law, TPC shall take all
action requested by PHI necessary to effect any such election, including mailing
to its stockholders an Information Statement containing the information required
by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and
TPC agrees to make such mailing with the mailing of the Schedule 14D-9 (provided
that ACo shall have provided to the Company on a timely basis all information
required to be included in the Information Statement with respect to ACo's
designees). In connection with the foregoing, TPC will promptly, at the option
of PHI, either increase the size of TPC's Board of Directors and/or obtain the
resignation of such number of its current directors as is necessary to enable
ACo's designees to be elected or appointed to TPC's Board of Directors as
provided above.
ARTICLE VII
CONDITIONS TO THE MERGER
7.1. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have
been approved and adopted by the affirmative vote of the stockholders of TPC to
the extent required by Delaware Law and the Certificate of Incorporation of TPC;
(b) HSR ACT. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated;
(c) NO ORDER. No foreign, United States or state governmental
authority or other agency or commission or foreign, United States or state court
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is then in effect and
has the effect of making the acquisition of Shares by PHI or ACo or any
affiliate of either of them illegal or otherwise preventing or prohibiting
consummation of the Transactions; and
(d) OFFER. ACo or its permitted assignee shall have purchased all
Shares validly tendered and not withdrawn pursuant to the Offer; PROVIDED,
HOWEVER, that neither PHI nor ACo shall be entitled to assert the failure of
this condition if, in breach of this Agreement or the terms of the Offer, ACo
fails to purchase any Shares validly tendered and not withdrawn pursuant to the
Offer.
-31-
<PAGE>
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1. TERMINATION. This Agreement may be terminated and the Merger and
the other Transactions may be abandoned at any time prior to the Effective Time,
notwithstanding any requisite approval and adoption of this Agreement and the
transactions contemplated hereby by the stockholders of TPC:
(a) by mutual agreement of PHI, ACo and TPC;
(b) by the PHI Parties or TPC if the Effective Time shall not have
occurred on or before the first anniversary of the date hereof; PROVIDED,
HOWEVER, that no party shall be entitled to terminate this Agreement under this
Section 8.1(b) if the Effective Time has failed to occur on or before such date
because such party negligently or willfully failed or refused to perform or
observe in any material respect its covenants and agreements hereunder;
(c) by PHI if (i) due to an occurrence or circumstance that results
in a failure to satisfy any condition set forth in ANNEX A hereto, ACo shall
have (A) failed to commence the Offer within ten days following the date of this
Agreement, (B) terminated the Offer without having accepted any Shares for
payment thereunder or (C) failed to pay for Shares pursuant to the Offer within
90 days following the commencement of the Offer, unless any such failure listed
above shall have been caused by or resulted from the failure of PHI or ACo to
perform in any material respect any material covenant or agreement of either of
them contained in this Agreement or the material breach by PHI or ACo of any
material representation or warranty of either of them contained in this
Agreement or (ii) prior to the purchase of Shares pursuant to the Offer, the TPC
Board of Directors or any committee thereof shall have withdrawn or modified in
a manner adverse to ACo or PHI its approval or recommendation of the Offer, this
Agreement or the Merger or shall have recommended another merger, consolidation,
business combination with, or acquisition of, TPC or all or substantially all
its assets or another tender offer or exchange offer for Shares, or shall have
resolved to do any of the foregoing; or
(d) by TPC, upon approval of the TPC Board of Directors, if (i) ACo
shall have (A) failed to commence the Offer within ten days following the date
of this Agreement, (B) terminated the Offer without having accepted any Shares
for payment thereunder or (C) failed to pay for Shares pursuant to the Offer
within 90 days following the commencement of the Offer, unless such failure to
pay for Shares shall have been caused by or resulted from the failure of TPC to
satisfy the conditions set forth in paragraph (f) or (g) of ANNEX A or (ii)
prior to the purchase of Shares pursuant to the Offer, the TPC Board of
Directors shall have withdrawn or modified in a manner adverse to ACo or PHI its
approval or recommendation of the Offer, this Agreement or the Merger in order
to approve the execution by TPC of a definitive agreement providing for an
Alternative Transaction or in order to approve a tender offer or exchange offer
for Shares by a third party, in either case on terms more favorable to TPC's
stockholders from a financial point of view than the Offer and the Merger taken
together, as determined by the TPC Board of Directors in the
-32-
<PAGE>
exercise of its good faith judgment and after consultation with its legal
counsel and financial advisors; PROVIDED, HOWEVER, that such termination
under this clause (ii) shall not be effective until TPC has made payment to
PHI of the fee required to be paid pursuant to Section 8.3(a).
8.2. EFFECT OF TERMINATION. In the event that the Effective Time does
not occur as a result of any party hereto exercising its rights to terminate
pursuant to this Article VIII, then this Agreement shall be null and void and,
except as provided in Sections 8.3 and 9.1 or as otherwise expressly provided
herein, no party shall have any rights or obligations under this Agreement,
except that nothing herein shall relieve any party from liability for any
willful or negligent failure or refusal to perform or observe in any material
respect any agreement or covenant contained herein. In the event the
termination of this Agreement results from the willful or negligent failure or
refusal of any party to perform in any material respect any agreement or
covenant herein or in the Offer, then the other party shall be entitled to all
remedies available at law or in equity and shall be entitled to recover court
costs and reasonable attorneys' fees in addition to any other relief to which
such party may be entitled.
8.3. FEES AND EXPENSES.
(a) If this Agreement is terminated pursuant to Section 8.1(c)(ii) or
8.1(d)(ii) then, in any such event, TPC shall pay PHI a fee of $9 million. Any
such amount shall be paid in cash by wire transfer in immediately available
funds not later than one business day after the occurrence of the termination
event giving rise thereto.
(b) All costs and expenses incurred in connection with this Agreement
and the Transactions shall be paid by the party incurring such expenses, whether
or not any Transaction is consummated.
8.4. AMENDMENT. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time. After the election or appointment of ACo's
designees to the TPC Board of Directors pursuant to Section 6.11 and prior to
the Effective Time, the affirmative vote of a majority of the Independent
Directors then in office shall be required to (i) amend or terminate this
Agreement by TPC, (ii) exercise or waive any of TPC's rights or remedies
hereunder or (iii) waive or extend the time for performance of any obligation of
PHI or ACo hereunder. This Agreement may not be amended except by an instrument
in writing signed by the parties hereto.
8.5. WAIVER. At any time prior to the Effective Time, any party
hereto may (i) extend the time for the performance of any obligation or other
act of any other party hereto, (ii) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
-33-
<PAGE>
ARTICLE IX
GENERAL PROVISIONS
9.1. SURVIVAL. The agreements in Articles II and IX and Section 6.5
and 6.10 of this Agreement shall survive the Effective Time indefinitely. The
agreements made by the parties in Sections 6.3(e) and 8.3 of this Agreement
shall survive termination indefinitely. The remainder of the representations,
warranties and agreements in this Agreement shall terminate at the Effective
Time or upon termination of this Agreement pursuant to Section 8.1.
9.2. SCOPE OF REPRESENTATIONS AND WARRANTIES.
(a) Except as and to the extent expressly set forth in this
Agreement, TPC makes no, and disclaims any, representations or warranties
whatsoever, whether express or implied. TPC disclaims all liability or
responsibility for any other statement or information made or communicated
(orally or in writing) to ACo, PHI, their affiliates or any stockholder,
officer, director, employee, representative, consultant, attorney, agent, lender
or other advisor of ACo, PHI or their affiliates (including, but not limited to,
any opinion, information or advice which may have been provided to any such
person by any representative of TPC or any other person or contained in the
files or records of TPC), wherever and however made.
(b) Except as and to the extent expressly set forth in this
Agreement, neither ACo nor PHI makes, and each disclaims, any representations or
warranties whatsoever, whether express or implied. Each of ACo and PHI
disclaims all liability and responsibility for any other statement or
information made or communicated (orally or in writing) to TPC, its affiliates
or any stockholder, officer, director, employee, representative, consultant,
attorney, agent, lender or other advisor of TPC or its affiliates (including,
but not limited to, any opinion, information or advice which may have been
provided to any such person by any representative of ACo or Parent, PHI or any
other person), wherever and however made.
(c) Any representation "to the knowledge" or "to the best knowledge"
of a party or phrases of similar wording shall be limited to matters within the
actual conscious awareness of the executive officers of such party and any
manager or managers of such party who have primary responsibility for the
substantive area or operations in question and who report directly to such
executive officers.
9.3. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, facsimile, telegram or telex or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 9.3):
-34-
<PAGE>
if to PHI or ACo:
PacifiCorp Holdings, Inc.
700 NE Multnomah, Suite 1600
Portland, OR 97232
Attention: Dennis P. Steinberg
Telephone: 503-731-2157
Telecopy: 503-731-2136
with a copy, which shall not constitute notice, to:
Stoel Rives LLP
900 SW 5th, Suite 2300
Portland, OR 97204
Attention: Mark Norby
Telephone: 503-224-3380
Telecopy: 503-220-2480
if to TPC:
TPC Corporation
200 WestLake Park Boulevard
Suite 1000
Houston, Texas 77079
Attention: J. Chris Jones, Senior Vice President
and Chief Operating Officer
Telephone: (281) 597-6200
Telecopy: (281) 597-6500
with a copy, which shall not constitute notice, to:
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Attention: Stephen A. Massad
Telephone: (713) 229-1234
Telecopy: (713) 229-1522
-35-
<PAGE>
9.4. CERTAIN DEFINITIONS. For purposes of this Agreement:
(a) "AFFILIATE" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, such specified person;
(b) "BEST EFFORTS" means a party's efforts in accordance with
reasonable commercial practice and without incurrence of unreasonable expense;
(c) a person shall be the "BENEFICIAL OWNER" of Shares (i) which such
person or any of its affiliates or associates (as such term is defined in Rule
12b-2 promulgated under the Exchange Act) beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or associates has,
directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of consideration
rights, exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates or person with whom such person or
any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
Shares;
(d) "BUSINESS DAY" means any day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any weekday other than Saturday or
Sunday on which banking institutions in Houston, Texas are required to be open;
(e) "CONTAMINATION" shall mean the presence on, under, from or to any
of the real property owned or operated by TPC or any Subsidiary of any Hazardous
Substance, except the storage, transport, handling and use of Hazardous
Substances, or the disposal of brine, in the ordinary course of business and in
material compliance with Environmental Laws.
(f) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise;
(g) "HAZARDOUS SUBSTANCE(S)" shall mean any dangerous, toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous substance in quantity or concentration which is
regulated by any Environmental Law, including, but not limited to, petroleum and
its fractions.
-36-
<PAGE>
(h) "PERMITTED ENCUMBRANCES" means:
(i) preferential purchase rights, rights of first refusal and
similar rights which are not triggered by the Transactions;
(ii) mechanics' and materialmens' liens and liens for Taxes or
assessments that are not yet delinquent or, if delinquent, that are being
contested in good faith in the ordinary course of business;
(iii) liens arising under operating agreements, sales,
processing, gathering, storage and transportation contracts securing amounts not
yet delinquent, or if delinquent, that are being contested in good faith in the
ordinary course of business;
(iv) easements, rights-of-way, servitudes, permits, surface
leases and other rights in respect of surface operations which do not materially
interfere with the use of the property in the manner in which TPC or the
Subsidiaries have historically used, or intended to use, the property or assets;
(v) such title defects as PHI may have expressly waived in
writing;
(vi) rights reserved to or vested in any governmental, statutory,
municipal or public authority to control or regulate any of TPC's or any
Subsidiary's properties or assets in any manner, and all applicable laws, rules
and orders of any governmental authority; and
(vii) liens, charges and encumbrances listed on Schedule 9.4(h);
(viii) all other liens, charges, encumbrances, defects and
irregularities that individually or in the aggregate are not such as to
materially interfere with the operation, value or use of the property or asset
affected;
(i) "PERSON" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person" as
defined in Section 13(d)(3) of the Exchange Act), trust, association or entity
or government, political subdivision, agency or instrumentality of a government;
and
(j) "SUBSIDIARY" or "SUBSIDIARIES" of TPC, the Surviving Corporation,
PHI or any other person means an entity in which such person, directly or
indirectly, has a direct or indirect equity or ownership interest which
represents twenty percent (20%) or more of the aggregate equity or ownership
interest in such entity.
9.5. SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the Transactions is not affected in any manner materially adverse to
-37-
<PAGE>
any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner
in order that the Transactions be consummated as originally contemplated to
the fullest extent possible.
9.6. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof, except
that the Confidentiality Agreement shall remain in full force and effect. This
Agreement shall not be assigned by operation of law or otherwise, except that
PHI and ACo may assign all or any of their rights and obligations hereunder to
any wholly owned Subsidiary of Parent; PROVIDED, HOWEVER, that no such
assignment shall relieve the assigning party of its obligations hereunder if
such assignee does not perform such obligations.
9.7. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Sections 2.7, 6.5 and 6.10 (which are intended to be for
the benefit of the persons covered thereby and may be enforced by such persons).
9.8. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
9.9. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware.
9.10. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
9.11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
-38-
<PAGE>
IN WITNESS WHEREOF, PHI, ACo and TPC have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
PACIFICORP HOLDINGS, INC.
By: /s/ REYNOLD ROEDER
-----------------------------------
Name: Reynold Roeder
Title: Vice President, Finance
POWER ACQUISITION COMPANY
By: /s/ DENNIS P. STEINBERG
-----------------------------------
Name: Dennis P. Steinberg
Title: President
TPC CORPORATION
By: /s/ LARRY W. BICKLE
-----------------------------------
Name: Larry W. Bickle
Title: Chairman & CEO
-39-
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, ACo shall not be
required to accept for payment or pay for any Shares tendered pursuant to the
Offer unless (i) the Minimum Condition shall have been satisfied and (ii) any
applicable waiting period under the HSR Act shall have expired or been
terminated. Furthermore, ACo may terminate or amend the Offer and may
postpone the acceptance for payment of and payment for Shares tendered, if at
any time on or after the date of this Agreement, and prior to the acceptance
for payment of Shares, any of the following conditions shall exist:
(a) there shall have been issued and shall remain in effect any
injunction, order or decree by any court or governmental, administrative or
regulatory authority or agency, domestic or foreign, which (i) restrains or
prohibits the making of the Offer or the consummation of the Merger, (ii)
prohibits or limits ownership or operation by TPC, PHI or ACo of all or any
material portion of the business or assets of TPC and its Subsidiaries, taken
as a whole, or PHI and its Subsidiaries, taken as a whole, or compels TPC,
PHI or any of their Subsidiaries to dispose of or hold separate all or any
material portion of the business or assets of TPC and its Subsidiaries, taken
as a whole, or PHI and its Subsidiaries, taken as a whole, in each case as a
result of the Transactions; (iii) imposes material limitations on the ability
of PHI or ACo to exercise effectively full rights of ownership of any Shares,
including, without limitation, the right to vote any Shares acquired by ACo
pursuant to the Offer, or otherwise on all matters properly presented to
TPC's stockholders, including, without limitation, the approval and adoption
of this Agreement and the Transactions; or (iv) requires divestiture by PHI
or ACo of any material portion of the Shares;
(b) there shall have been any action taken, or any statute, rule,
regulation, order or injunction enacted, entered, enforced, promulgated,
amended, issued or deemed applicable to (i) PHI, TPC or any Subsidiary or
affiliate of PHI or TPC or (ii) any Transaction, by any legislative body,
court, government or governmental, administrative or regulatory authority or
agency, domestic or foreign (other than, in the case of both (i) and (ii),
the application of the waiting period provisions of the HSR Act to the Offer
or the Merger), which results in any of the consequences referred to in
clauses (i) through (iv) of paragraph (a) above;
(c) there shall have occurred and be continuing (i) any general
suspension of trading in, or limitation on prices for, securities on the New
York Stock Exchange or in the over-the-counter market, (ii) a declaration of
a banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) a commencement of a war or armed hostilities involving
the United States, (iv) any limitation (whether or not mandatory) by any
governmental authority on the extension of credit by banks or other financial
institutions, (v) in the case of any of the foregoing existing at the time of
the commencement of the Offer, in the reasonable judgment of PHI, a material
worsening thereof;
A-1
<PAGE>
(d) a tender offer or exchange offer for more than fifty percent
(50%) of the Shares shall have been made or publicly proposed by a third party
for a price in excess of the Per Share Amount;
(e) the TPC Board of Directors or any committee thereof shall have
withdrawn or modified in a manner adverse to PHI or ACo its approval or
recommendation of the Offer, the Merger or this Agreement or shall have approved
or recommended another merger, consolidation, business combination with, or
acquisition of TPC or all or substantially all its assets or another tender
offer or exchange offer for Shares, or shall have resolved to do any of the
foregoing;
(f) TPC shall have failed to perform in any material respect any of
its covenants in this Agreement and shall not have cured such default (provided
5 days written notice of such default shall have been given to TPC by PHI);
(g) the representations and warranties of TPC shall fail to be true
and correct in all material respects on and as of the date made or, except as
otherwise expressly contemplated hereby, on and as of any subsequent date as if
made at and as of such subsequent date and such failure shall not have been
cured in all material respects (provided 5 days written notice of such failure
shall have been given to TPC by PHI);
(h) this Agreement shall have been terminated in accordance with its
terms;
(i) ACo and TPC shall have agreed that ACo shall terminate the Offer
or postpone the acceptance for payment of or payment for Shares thereunder; or
(j) since December 31, 1996, except as (i) expressly contemplated by
the Agreement, (ii) disclosed in any TPC SEC Report filed since such date and
prior to the date of the Agreement or (iii) set forth in SCHEDULE 3.8 to the
Agreement, there shall have been any event having, individually or in the
aggregate, a change or effect that is reasonably likely to be materially
adverse to the business, operations, properties, financial condition, assets or
liabilities (including, without limitation, contingent liabilities) of TPC and
the Subsidiaries taken as a whole, except for changes that affect the industries
in which TPC and the Subsidiaries operate generally.
The foregoing conditions are for the sole benefit of ACo and PHI and
may be asserted by ACo or PHI regardless of the circumstances giving rise to any
such condition or may be waived by ACo or PHI in whole or in part at any time
and from time to time in its sole discretion. The failure by PHI or ACo at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right; the waiver of any such right with respect to particular facts and
other circumstances shall not be deemed a waiver with respect to any other facts
and circumstances; and each such right shall be deemed an ongoing right that may
be asserted at any time and from time to time.
A-2
<PAGE>
STOCKHOLDER AGREEMENT dated as of March 11, 1997. among PACIFICORP
HOLDINGS, INC., a Delaware corporation ("PHI"), POWER ACQUISITION COMPANY., a
Delaware corporation and a direct or indirect wholly owned subsidiary of PHI
("ACo"), and the other parties identified on Schedule A hereto (each, a
"Stockholder").
WHEREAS, each Stockholder desires that TPC Corporation, a Delaware
corporation (the "Company"), PHI and ACo enter into an Agreement and Plan of
Merger dated as of the date hereof (as the same may be amended or supplemented,
the "Merger Agreement") with respect to the merger of ACo with and into the
Company (the "Merger"); and
WHEREAS, each Stockholder is executing this Agreement as an inducement
to PHI and ACo to enter into and execute the Merger Agreement.
NOW, THEREFORE, in consideration of the execution and delivery by PHI
and ACo of the Merger Agreement and the mutual covenants, conditions and
agreements contained herein and therein, the parties agree as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES. Each Stockholder
severally, and not jointly, represents and warrants to PHI and ACo as follows:
(a) Such Stockholder is the record or beneficial owner of the number
of shares of Class A Common Stock, par value $0.01 per share, and Class B
Common Stock, par value $0.01 per share, of the Company (the "Company
Common Stock"), and holds options for shares of Company Common Stock, each
as set forth opposite such Stockholder's name in Schedule A hereto (as may
be adjusted from time to time pursuant to Section 4, such Stockholder's
"Shares"). Except for such Stockholder's Shares, such Stockholder is not
the record or beneficial owner of any shares of Company Common Stock. Any
of such Shares which are described on Schedule A as option shares shall be
deemed "Option Shares" for the purposes of this Agreement. All other
shares shall be deemed "Owned Shares." Any Option Shares which are
exercised prior to the termination of this Agreement shall be deemed to be
"Owned Shares."
(b) This Agreement has been duly authorized, executed and delivered
by such Stockholder and constitutes the legal, valid and binding obligation
of such Stockholder, enforceable against such Stockholder in accordance
with its terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies. Neither the execution and delivery of this
Agreement nor the consummation by such Stockholder of the transactions
contemplated hereby will result in a violation of, or a default under, or
conflict with, any contract, trust, commitment,
<PAGE>
agreement, understanding, arrangement or restriction of any kind to
which such Stockholder is a party or bound or to which such
Stockholder's Shares are subject. To the best of such Stockholder's
knowledge, consummation by such Stockholder of the transactions
contemplated hereby will not violate, or require any consent, approval,
or notice under, any provision of any judgment, order, decree, statute,
law, rule or regulation applicable to such Stockholder or such
Stockholder's Shares, except for any necessary filing under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), or state takeover laws.
(c) Such Stockholder's Owned Shares and the certificates representing
such Owned Shares are now and at all times during the term hereof will be
held by such Stockholder, or by a nominee or custodian for the benefit of
such Stockholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any such encumbrances arising
hereunder.
(d) Such Stockholder understands and acknowledges that PHI is
entering into, and causing ACo to enter into, the Merger Agreement in
reliance upon such Stockholder's execution and delivery of this Agreement.
SECTION 2. PURCHASE AND SALE OF SHARES. So long as the Per Share
Amount in the Offer is not less than $13.41 in cash (net to the seller), each
Stockholder hereby severally agrees that it shall tender its Shares into the
Offer prior to the expiration of the Offer and that it shall not withdraw any
Shares so tendered (it being understood that the obligation contained in this
sentence is unconditional). In addition, each Stockholder hereby severally
agrees to sell to ACo, and ACo hereby agrees to purchase, all such
Stockholder's Owned Shares at a price per Share equal to $13.41, or such
higher price per Share as may be offered by ACo in the Offer, provided that
such obligations to purchase and sell are both subject to (i) ACo having
accepted Shares for payment under the Offer and the Minimum Condition (as
defined in the Merger Agreement) (minus any Shares which are the subject of
this Agreement but are not purchased in the Offer) having been satisfied, and
(ii) the expiration or termination of any applicable waiting period under the
HSR Act.
SECTION 3. COVENANTS. Each Stockholder severally, and not
jointly, agrees with, and covenants to, PHI and ACo as follows: such
Stockholder shall not, except as contemplated by the terms of this Agreement,
during the term of this Agreement, (i) transfer (which term shall include,
without limitation, for the purposes of this Agreement, any sale, gift, pledge
or other disposition), or consent to any transfer of, any or all of such
Stockholder's Shares or any interest therein, (ii) enter into any contract,
option or other agreement or understanding with respect to any transfer of any
or all of such Shares or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization or consent in or with respect to such
Shares, (iv) deposit such Shares into a voting trust or enter into a voting
agreement or arrangement with respect to such Shares or (v) take any other
action that would in any way restrict, limit or
-2-
<PAGE>
interfere with the performance of its obligations hereunder or the
transactions contemplated hereby; provided that each Stockholder shall be
entitled to transfer all or any portion of such Shareholder's Shares to any
person or entity which agrees in writing to be bound by the provisions of
this Agreement.
SECTION 4. CERTAIN EVENTS. Each Stockholder agrees that this
Agreement and the obligations hereunder shall attach to such Stockholder's
Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of such Shares shall pass, whether by operation of law
or otherwise, including without limitation such Stockholder's heirs,
guardians, administrators or successors. In the event of any stock split,
stock dividend, merger, reorganization, recapitalization or other change in
the capital structure of the Company affecting the Company Common Stock, or
the acquisition of additional shares of Company Common Stock or other
securities or rights of the Company by any Stockholder, the number of Owned
Shares and Option Shares listed on Schedule A beside the name of such
Stockholder shall be adjusted appropriately and this Agreement and the
obligations hereunder shall attach to any additional shares of Company Common
Stock or other securities or rights of the Company issued to or acquired by
such Stockholder.
SECTION 5. TRANSFER. Each Stockholder agrees with and covenants to
PHI that such Stockholder shall not request that the Company register the
transfer (booked as entry or otherwise) of any certificated or uncertificated
interest representing any of the securities of the Company, unless such
transfer is made in compliance with this Agreement.
SECTION 6. VOIDABILITY. If prior to the execution hereof, the
Board of Directors of the Company shall not have duly and validly authorized
and approved by all necessary corporate action the acquisition of Company
Common Stock by PHI and ACo and other transactions contemplated by this
Agreement and the Merger Agreement, so that by the execution and delivery
hereof PHI or ACo would become, or could reasonably be expected to become, an
"interested stockholder" with whom the Company would be prevented for any
period pursuant to Section 203 of the DGCL from engaging in any "business
combination" (as such terms are defined in Section 203 of the DGCL), then
this Agreement shall be void and unenforceable until such time as such
authorization and approval shall have been duly and validly obtained.
SECTION 7. STOCKHOLDER CAPACITY. No person executing this
Agreement who is or becomes during the term hereof a director or officer of
the Company makes any agreement or understanding herein in his or her
capacity as such director or officer. Each Stockholder signs solely in his
or her capacity as the record holder and beneficial owner of such
Stockholder's Shares and nothing herein shall limit or affect any actions
taken by a Stockholder in its capacity as an officer or director for the
Company to the extent specifically permitted by the Merger Agreement.
SECTION 8. FURTHER ASSURANCES. Each Stockholder shall, upon
request of PHI
-3-
<PAGE>
or ACo, execute and deliver any additional documents and take such further
actions as may reasonably be deemed by PHI or ACo to be necessary or
desirable to carry out the provisions hereof.
SECTION 9. TERMINATION. This Agreement, and all rights and
obligations of the parties hereunder, shall terminate upon the earlier of (a)
the date upon which the Merger Agreement is terminated by the Company, PHI
or ACo for any reason in accordance with its terms or (b) the date that PHI
or ACo shall have purchased and paid for the Shares of each Stockholder
pursuant to Section 2.
SECTION 10. MISCELLANEOUS.
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices, requests, claims, demands and other communications
under this Agreement shall be in writing and shall be deemed given if
delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or such other address
for a party as shall be specified by like notice): (i) if to PHI or ACo, to
the address set forth in Section 9.3 of the Merger Agreement; and (ii) if
to a Stockholder, to the address set forth on Schedule A hereto, or such
other address as may be specified in writing by such Stockholder.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of this Agreement.
(d) This Agreement may be executed in two or more counterparts, all
of which shall be considered one and the same agreement, and shall become
effective (even without the signature of any other Stockholder) as to any
Stockholder when one or more counterparts have been signed by each of PHI,
ACo and such Stockholder and delivered to PHI, ACo and such Stockholder.
(e) This Agreement (including the documents and instruments referred
to herein) constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts or laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in party,
by operation of law or otherwise,
-4-
<PAGE>
by any of the parties without the prior written consent of the other
parties, except by laws of descent. Any assignment in violation of the
foregoing shall be void.
(h) If any term, provision, covenant or restriction herein, or the
application thereof to any circumstance, shall, to any event, be held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and
the application thereof to any other circumstances, shall remain in full
force and effect, shall not in any way be affected, impaired or
invalidated, and shall be enforced to the fullest extent permitted by law.
(i) Each Stockholder agrees that irreparable damage would occur and
that PHI and ACo would not have any adequate remedy at law in the event
that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that PHI and ACo shall be entitled to an injunction or
injunctions to prevent breaches by any Stockholder of this Agreement and to
enforce specifically the terms and provisions of this Agreement.
(j) No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and
signed by such party.
-5-
<PAGE>
IN WITNESS WHEREOF, PHI, ACo and the Stockholders have caused this
Agreement to be duly executed and delivered as of the date first written above.
PACIFICORP HOLDINGS, INC.
By /s/ REYNOLD ROEDER
-----------------------------------
Name: Reynold Roeder
Title: Vice President, Finance
POWER ACQUISITION COMPANY
By /s/ DENNIS P. STEINBERG
-----------------------------------
Name: Dennis P. Steinberg
Title: President
/s/ LARRY W. BICKLE
--------------------------------------
Larry W. Bickle
/s/ JOHN A. STROM
--------------------------------------
John A. Strom
/s/ J. CHRIS JONES
--------------------------------------
J. Chris Jones
-6-
<PAGE>
SCHEDULE A
<TABLE>
Number of Shares
Number of Shares of Class A Common Number of Shares
of Class A Stock Issuable upon of Class B
Common Stock Exercise of Common Stock
Stockholder (including address) Owned Options Owned
- ------------------------------- -------------- ---------------- -----------
<S> <C> <C> <C>
Larry W. Bickle 12,985 634,813 ---
200 WestLake Park Boulevard
Suite 1000
Houston, Texas 77079
John A. Strom 164,629 634,813 ---
200 WestLake Park Boulevard
Suite 1000
Houston, Texas 77079
J. Chris Jones 66,827 634,813 ---
200 WestLake Park Boulevard
Suite 1000
Houston, Texas 77079
</TABLE>
-7-
<PAGE>
[LETTERHEAD]
October 23, 1996
Pacificorp Power Marketing, Inc.
700 N.E. Multnomah Street
Suite 500
Portland, Oregon 73232-4116
Attention: Don Furman
President
In connection with your consideration of a possible transaction with TPC
Corporation and/or its subsidiaries or affiliates (collectively, with such
subsidiaries or affiliates, the "Company") the Company is prepared to make
available to you certain information concerning the business, financial
condition, operations, assets and liabilities of the Company. As a condition
to such information being furnished to you and your directors, officers,
employees, agents or advisors (including, without limitation, attorneys,
accountants, consultants, bankers and financial advisors) (collectively,
"Representatives"), you agree to treat any information concerning the Company
(whether prepared by the Company, its advisors or otherwise and irrespective
of the form of communication) which has been or will be furnished to you or
to your Representatives by or on behalf of the Company (herein collectively
referred to as the "Evaluation Material") in accordance with the provisions
of this letter agreement, and to take or abstain from taking certain other
actions hereinafter set forth.
The term "Evaluation Material" shall be deemed to include all notes,
analyses, compilations, studies, interpretations or other documents prepared
by you or your Representatives which contain, reflect or are based upon, in
whole or in part, the information furnished to you or your Representatives
pursuant hereto. The term "Evaluation Material" does not include information
which (i) is or becomes generally available to the public other than as a
result of a disclosure by you or your Representatives, (ii) was within your
possession prior to its being furnished to you by or on behalf of the Company
pursuant hereto, provided that the source of such information was not known
by you to be bound by a confidentiality agreement with or other contractual,
legal or fiduciary obligation of confidentiality to the Company or any other
party with respect to such information or (iii) becomes available to you on a
non-confidential basis from a source other than the Company or any of its
Representatives, provided that such source is not bound by a confidentiality
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the Company or any other party with respect to such
information.
You hereby agree that you and your Representatives shall use the Evaluation
Material solely for the purpose of evaluating a possible transaction between
the Company and you, that the Evaluation Material will be kept confidential
and that you and your Representatives will not disclose any of the Evaluation
Material in any manner whatsoever; provided, however, that (i) you may make
any disclosure of such information to which the Company gives its prior
written consent and (ii) any of such information may be disclosed to your
Representatives who need to know such information for the sole purpose of
evaluating a possible transaction with the Company, who agree to keep such
information confidential and who are provided with a copy of this letter
agreement and agree to be bound by the terms hereof to the
<PAGE>
same extent as if they were parties hereto. In any event, you shall be
responsible for any breach of this letter agreement by any of your
Representatives and you agree, at your sole expense, to take all reasonable
measures (including but not limited to court proceedings) to restrain your
Representatives from prohibited or unauthorized disclosure or use of the
Evaluation Material.
In addition, you agree that, without the prior written consent of the
Company, you and your Representatives will not disclose to any other person
the fact that the Evaluation Material has been made available to you, that
discussions or negotiations are taking place concerning a possible
transaction involving the Company or any of the terms, conditions or other
facts with respect thereto (including the status thereof), unless in the
written opinion of your counsel such disclosure is required by law and then
only with as much prior written notice to the Company as is practical under
the circumstances. Without limiting the generality of the foregoing, you
further agree that, without the prior written consent of the Company, you
will not, directly or indirectly, enter into any agreement, arrangement or
understanding, or any discussions which might lead to such agreement,
arrangement or understanding, with any other person regarding a possible
transaction involving the Company. The term "person" as used in this letter
agreement shall be broadly interpreted to include the media and any
corporation, partnership, group, individual or other entity.
You further agree that, without the prior consent of Lehman Brothers, all
communications regarding the proposed transaction, requests for additional
information, and discussions or questions regarding procedures, will be
submitted or directed only to Lehman Brothers and not to the Company or any
of its affiliates or any of their respective directors, officers or employees.
In the event that you or any of your Representatives are requested or
required (by deposition, interrogatories, requests for information or
documents in legal proceedings, subpoena, civil investigative demand or other
similar process) to disclose any of the Evaluation Material, you shall
provide the Company with prompt written notice of any such request or
requirement so that the Company may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this letter
agreement. If, in the absence of a protective order or other remedy or the
receipt of a waiver by the Company, you or any of your Representatives are
nonetheless, in the written opinion of your counsel, legally compelled to
disclose Evaluation Material to any tribunal or else stand liable for
contempt or suffer other censure or penalty, you or your Representative may,
without liability hereunder, disclose to such tribunal only that portion of
the Evaluation Material which such counsel advises you is legally required to
be disclosed, provided that you exercise your best efforts to preserve the
confidentiality of the Evaluation Material, including, without limitation, by
cooperating with the Company to obtain an appropriate protective order or
other reliable assurance that confidential treatment will be accorded the
Evaluation Material by such tribunal.
If you decide that you do not wish to proceed with a transaction with the
Company, you will promptly inform the Company of that decision. In that
case, or at any time upon the request of the Company for any reason, you will
promptly deliver to the Company all documents (and all copies thereof)
furnished to you or your Representatives by or on behalf of the Company
pursuant hereto. In the event of such a decision or request, all other
Evaluation Material prepared by you or your Representatives shall be
destroyed and no copy thereof shall be retained. Notwithstanding the return
or destruction of the Evaluation Material, you and your Representatives will
continue to be bound by your obligations of confidentiality and other
obligations hereunder.
You understand and acknowledge that neither the Company nor any of its
Representatives (including without limitation Lehman Brothers Inc.) make any
representation or warranty, express or implied, as to
<PAGE>
the accuracy or completeness of the Evaluation Material. You agree that
neither the Company nor any of its Representatives (including without
limitation Lehman Brothers Inc.) shall have any liability to you or to any of
your Representatives relating to or resulting from the use of the Evaluation
Material. Only those representations or warranties which are made in a final
definitive agreement regarding the transactions contemplated hereby, when, as
and if executed, and subject to such limitations and restrictions as may be
specified therein, will have any legal effect.
In consideration of the Evaluation Material being furnished to you, you
hereby agree that, for a period of two (2) years from the date hereof,
neither you nor any of your affiliates will solicit to employ any of the
current officers or employees of the Company so long as they are employed by
the Company without obtaining the prior written consent of the Company.
Until the expiration of three (3) years from the date hereof, neither you nor
any of your affiliates (as such term is defined in Rule 12b-2 of the
Securities Exchange Act of 1934, as amended) shall, without prior written
consent or invitation of the Board of Directors of the Company, directly or
indirectly, (a) effect or seek, offer or propose (whether publicly or
otherwise) to effect, or cause or participate in or in any way assist any
other person to effect or seek, offer or propose (whether publicly or
otherwise) to effect or participate in, (i) any acquisition of any securities
or rights to acquire any securities (or any other beneficial ownership
thereof) or assets of the Company or any of its subsidiaries; (ii) any merger
or other business combination or tender or exchange offer involving the
Company or any of its subsidiaries; (iii) any recapitalization,
restructuring, liquidation, dissolution or other extraordinary transaction
with respect to the Company or any of its subsidiaries; or (iv) any
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
Securities and Exchange Commission) or consents to vote or otherwise with
respect to any voting securities of the Company; (b) form, join or in any way
participate in a "group" (as defined under the Securities Exchange Act of
1934) with respect to the Company; (c) otherwise act, alone or in concert
with others, to seek to control or influence the management, Board of
Directors or policies of the Company; (d) take any action which might cause
or require the Company to make a public announcement regarding any of the
types of matters set forth in (a) above; (e) disclose any intention, plan or
arrangement inconsistent with the foregoing; or (f) enter into any
discussions or arrangements with any third party with respect to any of the
foregoing. You agree during such period not to request the Company (or its
Representatives), directly or indirectly, to amend or waive any provision of
this paragraph (including this sentence).
You agree that unless and until a final definitive agreement regarding a
transaction between the Company and you has been executed and delivered,
neither the Company nor you will be under any legal obligation of any kind
whatsoever with respect to such a transaction by virtue of this letter
agreement except for the matters specifically agreed to herein. You further
acknowledge and agree that the Company reserves the right, in its sole
discretion, to reject any and all proposals made by you or any of your
Representatives with regard to a transaction between the Company and you, and
to terminate discussions and negotiations with you at any time.
The Company reserves the right to assign all of its rights, powers and
privileges under this letter agreement (including, without limitation, the
right to enforce all of the terms of this letter agreement) to any person who
enters into the transactions contemplated by this letter agreement.
It is understood and agreed that no failure or delay by the Company in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege hereunder.
<PAGE>
It is further understood and agreed that money damages would not be a
sufficient remedy for any breach of this letter agreement by you or any of
your Representatives and that the Company shall be entitled to equitable
relief, including injunction and specific performance, as a remedy for any
such breach. Such remedies shall not be deemed to be the exclusive remedies
for a breach by you of this letter agreement but shall be in addition to all
other remedies available at law or equity to the Company. In the event of
litigation relating to this letter agreement, if a court of competent
jurisdiction determines that you or any of your Representatives have breached
this letter agreement, then you shall be liable and pay to the Company the
reasonable legal fees and expenses incurred by the Company in connection with
such litigation, including any appeal therefrom.
The term of this letter agreement shall be for a period of three (3) years
from the date hereof, after which time the provisions hereof will be of no
further force and effect.
This letter agreement shall be governed by and construed in accordance with
the laws of the State of New York.
Please confirm your agreement with the foregoing by signing and returning one
copy of this letter to the undersigned, whereupon this letter agreement shall
become a binding agreement between you and the Company.
Very truly yours,
TPC CORPORATION
/s/ H.E. MCGEE III
-------------------------------------------
By: Lehman Brothers Inc.
as financial advisor to, and on behalf
of, TPC Corporation
Accepted and agreed as of
the date first written above:
By: /s/ DON FURMAN
-------------------------------
Name: Don Furman
Title: President
<PAGE>
RESOLUTIONS
RESOLVED, that Larry W. Bickle, John A. Strom, and J. Chris Jones (the
"Senior Executive") be granted a bonus (the "Performance Bonus") to be
earned upon and measured by the Senior Executives performance in obtaining a
premium to the market price of the Corporation's Class A Common Stock on the
date of adoption of this resolution through a sale of the entire Corporation
consummated on or before June 30, 1997, such Performance Bonus to include the
terms and conditions on SCHEDULE I hereto; and it is further
RESOLVED, that the Senior Executives also be entitled to receive
continuing medical and dental health benefits coverage for two years
following any transaction resulting in a change of control (for all purposes
of these resolutions, a "change of control" being as defined in EXHIBIT A
attached hereto); and it is further
SCHEDULE I
- - A Performance Bonus is payable to each of the Senior Executives upon the
consummation of a sale of the entire Corporation on or before June 30,
1997.
- - If the per share price is less than or equal to $10.50, no amount is due.
- - If the per share price is equal to $15.50, an amount equal to two times
the respective base amount (as of the date of consummation of the sale as
determined in accordance with Section 280G of the Internal Revenue Code
of 1986, as amended) is due.
- - Any per share price between these two end points will result in the
interpolated value being due; I.E., four-tenths of the base amount is due
for each dollar of per share value between $10.50 and $15.50. For
example, a per share sales price of $12.00 results in a Performance Bonus
equal to six-tenths of the respective base amount.
- - If a per share price in excess of $15.50 is obtained, the multiple
increase to one-half of the base amount for each dollar of share value in
excess of $15.50. For example, a per share sales price of $16.00 results
in a Performance Bonus equal to 2.25 times the respective base amount.
- - The Performance Bonus to be paid shall be subject to reduction if it
would constitute a "parachute payment" within the meaning of Code Section
280G to the Senior Executive in accordance with the method specified in
the Change of Control Agreement being approved by the Board of Directors
on the date of adoption of this Performance Bonus program.
<PAGE>
RESOLUTION #2
APPROVE AMENDMENT TO PERFORMANCE BONUS
WHEREAS, the Compensation Committee has recommended an amendment to the
Performance Bonus recently approved by the Board of Directors, it is
therefore
RESOLVED, that the Board of Directors deems it necessary and advisable
and in the best interests of the Corporation that the Performance Bonus
previously instituted at the Board's November 1, 1996, special meeting be
amended to provide that the Performance Bonus shall be payable if a sale
of the entire Corporation is consummated on or before December 31, 1997;
and it is further
RESOLVED, that the appropriate officers of the Corporation be, and
each of them is hereby, authorized and empowered, in the name and on
behalf of the Corporation, to take or cause to be taken any and all other
action, to enter into, execute, and deliver any and all certificates,
agreements, applications, affidavits, acknowledgments, instruments,
contracts, statements, and other documents, and to do any and all things
that, in the judgment of the officer taking such action, are necessary to
advisable to effectuate and carry out the purposes and intent of the
foregoing resolutions, the taking of any such action, the execution of
any such documents, and the doing of any such other things by any such
officers conclusively to evidence the due authorization and approval
thereof by this Board of Directors; and it is further
RESOLVED, that any and all acts, transactions, or agreements
undertaken prior to the date of these resolutions by any officer or
representative of the Corporation in the name and on behalf of the
Corporation in connection with any of the foregoing matters, are hereby
ratified, confirmed, adopted, and approved in all respects by the
Corporation.
<PAGE>
CHANGE IN CONTROL
AGREEMENT
This Agreement ("Agreement"), dated as of November 8, 1996, is made by and
between TPC Corporation, a Delaware corporation (the "Company"), and Michael E.
Calderone (the "Executive").
RECITALS
The Board of Directors of the Company (the "Board") has determined that it
is in the best interest of the Company and its shareholders to ensure that the
Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat, or occurrence of a Change in Control (as defined
below) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by any pending or threatened Change in Control and to
encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change in Control, and
to provide the Executive with compensation arrangements upon a Change in
Control that ensure that the compensation expectations of the Executive will be
satisfied and that are competitive with those of other corporations.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, and for other good and valuable consideration, the Company and the
Executive hereby agree as follows:
1. DEFINITIONS
1.1 BASE AMOUNT means the Executive's base amount on the date of the
Change in Control, as determined in accordance with Code Section 280G.
1.2 BOARD means the Board of Directors of the Company.
1.3 CHANGE IN CONTROL shall mean any of the following events that occur
during the Term of this Agreement:
<PAGE>
(a) The acquisition by any individual, entity, or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) a
percentage of the then outstanding shares of common stock (assuming, for
purposes of this definition, that all shares of Class B Common Stock have been
converted into the same number of shares of Class A Common Stock) of the
Company (the "Outstanding Company Common Stock") that, when added to the
beneficial ownership previously held by that Person, and to the largest holding
of beneficial ownership in Outstanding Company Common Stock by any other
Person, equals or exceeds 50%, or (ii) a percentage of the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities") that, when added to the beneficial ownership previously held by
that Person, and to the largest holding of beneficial ownership in Outstanding
Company Voting Securities by any other Person, equals or exceeds 50%; provided,
however, that for purposes of this subparagraph (a), the following acquisitions
shall not in and of themselves constitute a Change in Control hereunder: (x)
any acquisition of securities of the Company made directly from the Company and
approved by a majority of the directors then comprising the Incumbent Board (as
defined below), (y) any acquisition of beneficial ownership of a higher
percentage of the Outstanding Company Common Stock or the Outstanding Company
Voting Securities that results solely from the acquisition, purchase, or
redemption of securities of the Company by the Company so long as such action
by the Company was approved by a majority of the directors then comprising the
Incumbent Board, or (z) any acquisition by any Company pursuant to a
transaction that complies with clauses (i), (ii), and (iii) of subparagraph (c)
hereof; or
(b) Individuals who, as of November 8, 1996, constituted the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to November 8, 1996 whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger, or consolidation or
sale or other disposition of all or substantially all the assets of the
Company (a
2
<PAGE>
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities
that were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially owned, directly or indirectly, more
than 75% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
company resulting from such Business Combination (including, without
limitation, a company which as a result of such transaction owns the Company
or all or substantially all the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case
may be, (ii) no Person (excluding any company resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the company
resulting from such Business Combination (including, without limitation, a
company which as a result of such transaction owns the Company or all or
substantially all the Company's assets either directly or through one or more
subsidiaries) or the combined voting power of the then outstanding voting
securities of such company except to the extent that such ownership existed
prior to the Business Combination, and (iii) at least a majority of the
members of the board of directors of the company resulting from such Business
Combination were members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
1.4 CODE means the Internal Revenue Code of 1986, as amended.
1.5 COMPANY means TPC Corporation and any successor thereto.
1.6 DIRECTOR means a member of the Board.
1.7 DISABILITY has the same meaning as the definition of disability under
the Company's long-term disability plan.
1.8 GOOD REASON shall mean any of the following:
(a) the assignment to the Executive of any duties inconsistent with
the Executive's duties at the time of a Change in Control or a change in the
3
<PAGE>
Executive's reporting responsibilities as in effect immediately prior to the
Change in Control, without the Executive's express written consent; or any
removal of the Executive from or any failure to reelect the Executive to
positions held by the Executive immediately prior to the Change in Control,
except in connection with promotions to higher office;
(b) a reduction in the Executive's total compensation as in effect
immediately prior to the Change in Control;
(c) the failure of the Company substantially to maintain and
continue the Executive's relative level of participation in the same or
substantially comparable bonus, stock incentive programs, and retirement and
welfare benefit plans as provided immediately prior to the Change in Control;
(d) the failure of the Company substantially to provide and continue
for the Executive the same or substantially comparable fringe benefits; or
(e) the Company's requiring the Executive to be based anywhere other
than in or within 20 miles of the Executive's principal place of employment at
the time of the Change in Control, except for required travel on the Company's
business to an extent substantially consistent with the Executive's prior
business travel obligations or, in the event the Executive consents to
relocation, the failure of the Company to pay (or reimburse the Executive for)
all reasonable moving expenses incurred by the Executive relating to a change
in the Executive's principal residence in connection with such relocation.
1.9 HOLDOVER PERIOD means the period following a Change in Control that
(a) begins on the date that the Company provides the Executive with written
notice that the Company requires the services of the Executive and (b) ends on
the date specified in the notice but no later than six months after the date of
the Change in Control.
1.10 PROTECTED PERIOD shall be the period of time beginning upon the later
of (a) the date of a Change in Control or (b) the last day of the Executive's
Holdover Period, and ending two years after such date.
1.11 RETENTION BONUS means the Executive's benefit, as described in
Subsection 2.1 of this Agreement.
4
<PAGE>
1.12 SEVERANCE COMPENSATION means the Executive's severance benefit, as
described in Subsection 2.2 of this Agreement.
1.13 TERM has the meaning set forth in Section 8 of this Agreement.
1.14 TERMINATION OF EMPLOYMENT shall be deemed to have occurred for
purposes of this Agreement and the Executive shall be entitled to the Severance
Compensation hereunder if following a Change in Control that occurs during the
Term of this Agreement, the Executive (a) is terminated by the Company during
the Holdover Period or the Protected Period for any reason other than willful
dishonesty or the commission of a felony for which he is convicted and which,
in either case, may cause material harm to the Company, (b) terminates
employment during the Protected Period where such termination in any way
follows or results from a Good Reason, or (c) terminates employment during the
Holdover Period where such termination in any way follows or results from a
Good Reason described in Subsection 1.8(b)-(e) of this Agreement. The Executive
is not entitled to benefits under this Agreement if he terminates service
during the Holdover Period for a Good Reason described in Subsection 1.8(a) of
this Agreement; provided, however, that immediately following the end of the
Holdover Period, the Executive may have a Termination of Employment for a Good
Reason described in Subsection 1.8(a) based on events that occurred during the
Holdover Period.
2. BENEFITS
2.1 RETENTION BONUS. Upon a Change in Control, the Executive shall be
entitled to a cash payment equal to the Base Amount as a Retention Bonus. The
Retention Bonus shall be paid within three business days after the Change in
Control.
2.2 SEVERANCE COMPENSATION. Upon Termination of Employment, the
Executive shall be entitled to receive a cash payment equal to two times the
Base Amount. The Severance Compensation shall be paid within three business
days after the Termination of Employment.
2.3 HEALTH COVERAGE. Upon Termination of Employment, the Executive shall
be entitled to receive continuing group medical and dental insurance coverage
for a period of 24 months after Termination of Employment, at no cost to the
Executive.
2.4 EXCEPTION TO BENEFIT ELIGIBILITY. The Executive shall not be
entitled to receive any of the benefits under this Agreement if the Executive
is one of the "Persons" (or a member of a group within the meaning of Section
13(d)(3) of the Exchange Act that constitutes the "Person") whose beneficial
ownership results in a "Change in Control" under Subsection 1.3(a) or clause
(ii) of Subsection 1.3(c) or if the Executive is (i) a general partner,
executive officer, or director of any such
5
<PAGE>
Person, (ii) a person controlling any such Person, (iii) a general partner ,
executive officer, or director of any person controlling any such person, or
(iv) a beneficial owner of (x) any equity interest in any such Person or
controlling person, if such Person or controlling person was formed for the
purpose of engaging in the transaction resulting in the Change in Control or
(y) more than 5% of the outstanding equity interest therein, if not so formed.
3. DEATH BENEFITS
If the Executive's employment with the Company is terminated after a
Change in Control and during the Protected Period due to death, the Executive
shall receive no Severance Compensation under Subsection 2.2 of this Agreement;
provided however, that if the Executive dies either (a) during the Holdover
Period or (b) after a Termination of Employment, but prior to payment of all
benefits under Section 2 of this Agreement, then the Executive's surviving
spouse (or if no spouse survives the Executive, the Executive's estate) shall
be entitled to the Severance Compensation. For purposes of this Section 3, the
Executive will be deemed to be in a Holdover Period for the six-month period
immediately following a Change in Control unless the Executive has received
written notice from the Company stating that a Holdover Period is not
applicable to the Executive or unless the time period prescribed by the Company
for the Holdover Period has expired. The benefits prescribed herein are in
addition to those available under applicable law and under the terms of the
Company's benefit plans and programs.
4. DISABILITY BENEFITS
If the Executive's employment with the Company is terminated after a
Change in Control and during the Protected Period due to Disability, the
Executive shall receive no Severance Compensation under Subsection 2.2 of this
Agreement; provided, however, that if the Executive terminates employment due
to Disability during the Holdover Period, the Executive shall receive Severance
Compensation as if the date of termination due to Disability were the date of a
Termination of Employment. For purposes of this Section 4, the Executive will
be deemed to be in a Holdover Period for the six-month period immediately
following a Change in Control unless the Executive has received written notice
from the Company stating that a Holdover Period is not applicable to the
Executive or unless the time period prescribed by the Company for the Holdover
Period has expired. The Executive shall also be eligible for disability
benefits available under applicable law and under the terms of the Company's
benefit plans and programs.
6
<PAGE>
5. CERTAIN REDUCTION IN PAYMENTS
Notwithstanding anything to the contrary in this Agreement, the
provisions of this Section 5 shall apply in the event that any payment or
distribution (whether paid or payable, or distributed or distributable,
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any reductions in payments required under this Section 5 (a
"Payment")) to the Executive would constitute a "parachute payment" within the
meaning of Code Section 280G; this Section 5 shall not be applicable if no such
Payment to the Executive constitutes a parachute payment under Code
Section 280G.
In the event that a nationally recognized accounting firm chosen by
the Company (the "Accounting Firm") shall determine that receipt of all
Payments would subject the Executive to the excise tax imposed by Code
Section 4999, then the aggregate present value of all Payments shall be reduced
(but not below zero) such that such aggregate present value of Payments equals
the Reduced Amount. If the Accounting Firm determines that some amount of
Payments would result in a Reduced Amount, the Company shall promptly notify
the Executive of the Accounting Firm's decision and further provide a copy of
the detailed computations, and the Executive shall be entitled solely to the
Reduced Amount. The Executive may then elect which of the Payments shall be
eliminated or reduced (as long as after such election the present value, as
determined in accordance with Code Section 280G(d)(4) ("Present Value"), of the
aggregate Payments equals the Reduced Amount). The Executive shall advise the
Company in writing of such election within 20 days of his receipt of notice.
If no such election is made by the Executive within the 20-day period, the
Company may elect which of such Payments shall be eliminated or reduced (as
long as after such election the Present Value of the aggregate Payments equals
the Reduced Amount) and shall promptly notify the Executive of such election.
All fees and expenses of the Accounting Firm shall be borne solely by the
Company.
The "Reduced Amount" shall be an amount expressed in present value
which maximizes the aggregate present value of Payments without causing any
Payment to be nondeductible by the Company because of Code Section 280G or
subject to an excise tax on the Executive under Code Section 4999. For
purposes of this Section 5, Present Value shall be determined in accordance
with Code Section 280G(d)(4).
7
<PAGE>
6. NO CONTRACT OF EMPLOYMENT
This Agreement shall not be construed so as to create a contract,
promise, or guarantee of employment for any particular term or duration, in any
particular position or assignment, or at any particular level of compensation
or benefits.
7. NON-ALIENATION OF BENEFITS
No right or benefit at any time under the Agreement shall be subject
to alienation, sale, transfer, assignment, pledge, or any encumbrance of any
kind. If the Executive shall attempt to or shall alienate, sell, transfer,
assign, pledge, or otherwise encumber his or her rights, benefits, or amounts
payable under the Agreement, or any part thereof, or if by reason of his
bankruptcy or other events happening at any time, such benefits would otherwise
be received by anyone else, the Company in its sole discretion may terminate
his interest in any such right or benefit and hold or pay it to, or for the
benefit of, such person, his spouse, children, or other dependents, or any of
them as the Company may determine.
8. TERM OF THIS AGREEMENT
The Term of this Agreement shall commence on the date of this
Agreement and end on the first anniversary of that date; PROVIDED, HOWEVER,
that the Term shall automatically be extended without further action by the
parties for additional one-year periods, unless written notice of the Company's
intention not to extend has been given to the Executive at least six months
prior to the expiration of the then effective Term. This Agreement shall be
void and of no effect if (i) a Change in Control occurs after the expiration of
the Term, or (ii) the Executive's employment with the Company and its
subsidiaries is terminated for any reason prior to a Change in Control.
9. RESOLUTION OF DISPUTES
(a) Any disputes arising under or in connection with this Agreement
shall be resolved, in the Executive's discretion, either (i) by arbitration, to
be held in Houston, Texas in accordance with the rules and procedures of the
American Arbitration Association, or (ii) by litigation.
(b) All costs, fees, and expenses of any arbitration or litigation
in connection with this Agreement that results in any decision or settlement
requiring the Company to make a payment to the Executive, including, without
limitation, attorneys' fees of both the Executive and the Company, shall be
borne by, and be
8
<PAGE>
the obligation of, the Company. In no event shall the Executive be required
to reimburse the Company for any of the costs and expenses incurred by the
Company relating to arbitration or litigation.
10. MISCELLANEOUS
10.1 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to principles of
conflict of laws.
10.2 AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or
modified otherwise than by a written agreement executed by the parties to this
Agreement or their respective successors and legal representatives. No waiver
by any party to this Agreement of any breach of any term, provision, or
condition of this Agreement by the other party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same time, or any prior or
subsequent time.
10.3 NOTICES. All notices and other communications hereunder shall be in
writing and shall be given by hand-delivery to the other party, by facsimile
transmission, by overnight courier, or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive: Michael E. Calderone
20631 Laurel Lock Dr.
Katy, Texas 77450
If to the Company: TPC Corporation
200 West Lake Park Boulevard
Suite 1000
Houston, Texas 77079.
10.4 PAYMENT OBLIGATION ABSOLUTE. Subject to Section 5 and to Subsection
2.4, the obligations of the Company to pay the benefits described in Section 2
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense, or other right which the Company may have against the
Executive. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, nor shall the
amount of any payment hereunder be reduced by any compensation earned by the
Executive as a result of employment by another employer.
9
<PAGE>
10.5 TAX WITHHOLDING. The Company may withhold from any benefits payable
under this Agreement all federal, state, city, or other taxes that are required
by any law or governmental regulation or ruling.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and the Company has caused this Agreement to be executed in its name and
on its behalf, all as of the day and year first above written.
TPC CORPORATION
By: /s/ John A. Strom
------------------------------
John A. Strom, President
/s/ Michael E. Calderone
------------------------------
Michael E. Calderone
10
<PAGE>
CHANGE IN CONTROL
AGREEMENT
This Agreement ("Agreement"), dated as of November 8, 1996, is made by and
between TPC Corporation, a Delaware corporation (the "Company"), and Ronald H.
Benson (the "Executive").
RECITALS
The Board of Directors of the Company (the "Board") has determined that it
is in the best interest of the Company and its shareholders to ensure that the
Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat, or occurrence of a Change in Control (as defined
below) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by any pending or threatened Change in Control and to
encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change in Control, and
to provide the Executive with compensation arrangements upon a Change in
Control that ensure that the compensation expectations of the Executive will be
satisfied and that are competitive with those of other corporations.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, and for other good and valuable consideration, the Company and the
Executive hereby agree as follows:
1. DEFINITIONS
1.1 BASE AMOUNT means the Executive's base amount on the date of the
Change in Control, as determined in accordance with Code Section 280G.
1.2 BOARD means the Board of Directors of the Company.
1.3 CHANGE IN CONTROL shall mean any of the following events that occur
during the Term of this Agreement:
<PAGE>
(a) The acquisition by any individual, entity, or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) a
percentage of the then outstanding shares of common stock (assuming, for
purposes of this definition, that all shares of Class B Common Stock have been
converted into the same number of shares of Class A Common Stock) of the
Company (the "Outstanding Company Common Stock") that, when added to the
beneficial ownership previously held by that Person, and to the largest holding
of beneficial ownership in Outstanding Company Common Stock by any other
Person, equals or exceeds 50%, or (ii) a percentage of the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities") that, when added to the beneficial ownership previously held by
that Person, and to the largest holding of beneficial ownership in Outstanding
Company Voting Securities by any other Person, equals or exceeds 50%; provided,
however, that for purposes of this subparagraph (a), the following acquisitions
shall not in and of themselves constitute a Change in Control hereunder: (x)
any acquisition of securities of the Company made directly from the Company and
approved by a majority of the directors then comprising the Incumbent Board (as
defined below), (y) any acquisition of beneficial ownership of a higher
percentage of the Outstanding Company Common Stock or the Outstanding Company
Voting Securities that results solely from the acquisition, purchase, or
redemption of securities of the Company by the Company so long as such action
by the Company was approved by a majority of the directors then comprising the
Incumbent Board, or (z) any acquisition by any Company pursuant to a
transaction that complies with clauses (i), (ii), and (iii) of subparagraph (c)
hereof; or
(b) Individuals who, as of November 8, 1996, constituted the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to November 8, 1996 whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger, or consolidation or
sale or other disposition of all or substantially all the assets of the
Company (a
2
<PAGE>
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities
that were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially owned, directly or indirectly, more
than 75% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
company resulting from such Business Combination (including, without
limitation, a company which as a result of such transaction owns the Company
or all or substantially all the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case
may be, (ii) no Person (excluding any company resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the company
resulting from such Business Combination (including, without limitation, a
company which as a result of such transaction owns the Company or all or
substantially all the Company's assets either directly or through one or more
subsidiaries) or the combined voting power of the then outstanding voting
securities of such company except to the extent that such ownership existed
prior to the Business Combination, and (iii) at least a majority of the
members of the board of directors of the company resulting from such Business
Combination were members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
1.4 CODE means the Internal Revenue Code of 1986, as amended.
1.5 COMPANY means TPC Corporation and any successor thereto.
1.6 DIRECTOR means a member of the Board.
1.7 DISABILITY has the same meaning as the definition of disability under
the Company's long-term disability plan.
1.8 GOOD REASON shall mean any of the following:
3
<PAGE>
(a) the assignment to the Executive of any duties inconsistent with
the Executive's duties at the time of a Change in Control or a change in the
Executive's reporting responsibilities as in effect immediately prior to the
Change in Control, without the Executive's express written consent; or any
removal of the Executive from or any failure to reelect the Executive to
positions held by the Executive immediately prior to the Change in Control,
except in connection with promotions to higher office;
(b) a reduction in the Executive's total compensation as in effect
immediately prior to the Change in Control;
(c) the failure of the Company substantially to maintain and
continue the Executive's relative level of participation in the same or
substantially comparable bonus, stock incentive programs, and retirement and
welfare benefit plans as provided immediately prior to the Change in Control;
(d) the failure of the Company substantially to provide and continue
for the Executive the same or substantially comparable fringe benefits; or
(e) the Company's requiring the Executive to be based anywhere other
than in or within 20 miles of the Executive's principal place of employment at
the time of the Change in Control, except for required travel on the Company's
business to an extent substantially consistent with the Executive's prior
business travel obligations or, in the event the Executive consents to
relocation, the failure of the Company to pay (or reimburse the Executive for)
all reasonable moving expenses incurred by the Executive relating to a change
in the Executive's principal residence in connection with such relocation.
1.9 HOLDOVER PERIOD means the period following a Change in Control that
(a) begins on the date that the Company provides the Executive with written
notice that the Company requires the services of the Executive and (b) ends on
the date specified in the notice but no later than six months after the date of
the Change in Control.
1.10 PROTECTED PERIOD shall be the period of time beginning upon the later
of (a) the date of a Change in Control or (b) the last day of the Executive's
Holdover Period, and ending two years after such date.
1.11 RETENTION BONUS means the Executive's benefit, as described in
Subsection 2.1 of this Agreement.
4
<PAGE>
1.12 SEVERANCE COMPENSATION means the Executive's severance benefit, as
described in Subsection 2.2 of this Agreement.
1.13 TERM has the meaning set forth in Section 8 of this Agreement.
1.14 TERMINATION OF EMPLOYMENT shall be deemed to have occurred for
purposes of this Agreement and the Executive shall be entitled to the Severance
Compensation hereunder if following a Change in Control that occurs during the
Term of this Agreement, the Executive (a) is terminated by the Company during
the Holdover Period or the Protected Period for any reason other than willful
dishonesty or the commission of a felony for which he is convicted and which,
in either case, may cause material harm to the Company, (b) terminates
employment during the Protected Period where such termination in any way
follows or results from a Good Reason, or (c) terminates employment during the
Holdover Period where such termination in any way follows or results from a
Good Reason described in Subsection 1.8(b)-(e) of this Agreement. The Executive
is not entitled to benefits under this Agreement if he terminates service
during the Holdover Period for a Good Reason described in Subsection 1.8(a) of
this Agreement; provided, however, that immediately following the end of the
Holdover Period, the Executive may have a Termination of Employment for a Good
Reason described in Subsection 1.8(a) based on events that occurred during the
Holdover Period.
2. BENEFITS
2.1 RETENTION BONUS. Upon a Change in Control, the Executive shall be
entitled to a cash payment equal to two-thirds times the Base Amount as a
Retention Bonus. The Retention Bonus shall be paid within three business days
after the Change in Control.
2.2 SEVERANCE COMPENSATION. Upon Termination of Employment, the
Executive shall be entitled to receive a cash payment equal to four-thirds
times the Base Amount. The Severance Compensation shall be paid within three
business days after the Termination of Employment.
2.3 HEALTH COVERAGE. Upon Termination of Employment, the Executive shall
be entitled to receive continuing group medical and dental insurance coverage
for a period of 24 months after Termination of Employment, at no cost to the
Executive.
2.4 EXCEPTION TO BENEFIT ELIGIBILITY. The Executive shall not be
entitled to receive any of the benefits under this Agreement if the Executive
is one of the "Persons" (or a member of a group within the meaning of Section
13(d)(3) of the Exchange Act that constitutes the "Person") whose beneficial
ownership results in a "Change in Control" under Subsection 1.3(a) or clause
(ii) of Subsection 1.3(c) or if the Executive is (i) a general partner,
executive officer, or director of any such
5
<PAGE>
Person, (ii) a person controlling any such Person, (iii) a general partner,
executive officer, or director of any person controlling any such person, or
(iv) a beneficial owner of (x) any equity interest in any such Person or
controlling person, if such Person or controlling person was formed for the
purpose of engaging in the transaction resulting in the Change in Control or
(y) more than 5% of the outstanding equity interest therein, if not so formed.
3. DEATH BENEFITS
If the Executive's employment with the Company is terminated after a
Change in Control and during the Protected Period due to death, the Executive
shall receive no Severance Compensation under Subsection 2.2 of this Agreement;
provided however, that if the Executive dies either (a) during the Holdover
Period or (b) after a Termination of Employment, but prior to payment of all
benefits under Section 2 of this Agreement, then the Executive's surviving
spouse (or if no spouse survives the Executive, the Executive's estate) shall
be entitled to the Severance Compensation. For purposes of this Section 3, the
Executive will be deemed to be in a Holdover Period for the six-month period
immediately following a Change in Control unless the Executive has received
written notice from the Company stating that a Holdover Period is not
applicable to the Executive or unless the time period prescribed by the Company
for the Holdover Period has expired. The benefits prescribed herein are in
addition to those available under applicable law and under the terms of the
Company's benefit plans and programs.
4. DISABILITY BENEFITS
If the Executive's employment with the Company is terminated after a
Change in Control and during the Protected Period due to Disability, the
Executive shall receive no Severance Compensation under Subsection 2.2 of this
Agreement; provided, however, that if the Executive terminates employment due
to Disability during the Holdover Period, the Executive shall receive Severance
Compensation as if the date of termination due to Disability were the date of a
Termination of Employment. For purposes of this Section 4, the Executive will
be deemed to be in a Holdover Period for the six-month period immediately
following a Change in Control unless the Executive has received written notice
from the Company stating that a Holdover Period is not applicable to the
Executive or unless the time period prescribed by the Company for the Holdover
Period has expired. The Executive shall also be eligible for disability
benefits available under applicable law and under the terms of the Company's
benefit plans and programs.
6
<PAGE>
5. CERTAIN REDUCTION IN PAYMENTS
Notwithstanding anything to the contrary in this Agreement, the
provisions of this Section 5 shall apply in the event that any payment or
distribution (whether paid or payable, or distributed or distributable,
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any reductions in payments required under this Section 5 (a
"Payment")) to the Executive would constitute a "parachute payment" within the
meaning of Code Section 280G; this Section 5 shall not be applicable if no such
Payment to the Executive constitutes a parachute payment under Code
Section 280G.
In the event that a nationally recognized accounting firm chosen by
the Company (the "Accounting Firm") shall determine that receipt of all
Payments would subject the Executive to the excise tax imposed by Code
Section 4999, then the aggregate present value of all Payments shall be reduced
(but not below zero) such that such aggregate present value of Payments equals
the Reduced Amount. If the Accounting Firm determines that some amount of
Payments would result in a Reduced Amount, the Company shall promptly notify
the Executive of the Accounting Firm's decision and further provide a copy of
the detailed computations, and the Executive shall be entitled solely to the
Reduced Amount. The Executive may then elect which of the Payments shall be
eliminated or reduced (as long as after such election the present value, as
determined in accordance with Code Section 280G(d)(4) ("Present Value"), of the
aggregate Payments equals the Reduced Amount). The Executive shall advise the
Company in writing of such election within 20 days of his receipt of notice.
If no such election is made by the Executive within the 20-day period, the
Company may elect which of such Payments shall be eliminated or reduced (as
long as after such election the Present Value of the aggregate Payments equals
the Reduced Amount) and shall promptly notify the Executive of such election.
All fees and expenses of the Accounting Firm shall be borne solely by the
Company.
The "Reduced Amount" shall be an amount expressed in present value
which maximizes the aggregate present value of Payments without causing any
Payment to be nondeductible by the Company because of Code Section 280G or
subject to an excise tax on the Executive under Code Section 4999. For
purposes of this Section 5, Present Value shall be determined in accordance
with Code Section 280G(d)(4).
7
<PAGE>
6. NO CONTRACT OF EMPLOYMENT
This Agreement shall not be construed so as to create a contract,
promise, or guarantee of employment for any particular term or duration, in any
particular position or assignment, or at any particular level of compensation
or benefits.
7. NON-ALIENATION OF BENEFITS
No right or benefit at any time under the Agreement shall be subject
to alienation, sale, transfer, assignment, pledge, or any encumbrance of any
kind. If the Executive shall attempt to or shall alienate, sell, transfer,
assign, pledge, or otherwise encumber his or her rights, benefits, or amounts
payable under the Agreement, or any part thereof, or if by reason of his
bankruptcy or other events happening at any time, such benefits would otherwise
be received by anyone else, the Company in its sole discretion may terminate
his interest in any such right or benefit and hold or pay it to, or for the
benefit of, such person, his spouse, children, or other dependents, or any of
them as the Company may determine.
8. TERM OF THIS AGREEMENT
The Term of this Agreement shall commence on the date of this
Agreement and end on the first anniversary of that date; PROVIDED, HOWEVER,
that the Term shall automatically be extended without further action by the
parties for additional one-year periods, unless written notice of the Company's
intention not to extend has been given to the Executive at least six months
prior to the expiration of the then effective Term. This Agreement shall be
void and of no effect if (i) a Change in Control occurs after the expiration of
the Term, or (ii) the Executive's employment with the Company and its
subsidiaries is terminated for any reason prior to a Change in Control.
9. RESOLUTION OF DISPUTES
(a) Any disputes arising under or in connection with this Agreement
shall be resolved, in the Executive's discretion, either (i) by arbitration, to
be held in Houston, Texas in accordance with the rules and procedures of the
American Arbitration Association, or (ii) by litigation.
(b) All costs, fees, and expenses of any arbitration or litigation
in connection with this Agreement that results in any decision or settlement
requiring the Company to make a payment to the Executive, including, without
limitation, attorneys' fees of both the Executive and the Company, shall be
borne by, and be
8
<PAGE>
the obligation of, the Company. In no event shall the Executive be required
to reimburse the Company for any of the costs and expenses incurred by the
Company relating to arbitration or litigation.
10. MISCELLANEOUS
10.1 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to principles of
conflict of laws.
10.2 AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or
modified otherwise than by a written agreement executed by the parties to this
Agreement or their respective successors and legal representatives. No waiver
by any party to this Agreement of any breach of any term, provision, or
condition of this Agreement by the other party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same time, or any prior or
subsequent time.
10.3 NOTICES. All notices and other communications hereunder shall be in
writing and shall be given by hand-delivery to the other party, by facsimile
transmission, by overnight courier, or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive: Ronald H. Benson
13618 Winter Creek Court
Houston, Texas 77077
If to the Company: TPC Corporation
200 West Lake Park Boulevard
Suite 1000
Houston, Texas 77079.
10.4 PAYMENT OBLIGATION ABSOLUTE. Subject to Section 5 and to Subsection
2.4, the obligations of the Company to pay the benefits described in Section 2
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense, or other right which the Company may have against the
Executive. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, nor shall the
amount of any payment hereunder be reduced by any compensation earned by the
Executive as a result of employment by another employer.
9
<PAGE>
10.5 TAX WITHHOLDING. The Company may withhold from any benefits payable
under this Agreement all federal, state, city, or other taxes that are required
by any law or governmental regulation or ruling.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and the Company has caused this Agreement to be executed in its name and
on its behalf, all as of the day and year first above written.
TPC CORPORATION
By: /s/ JOHN S. STROM
--------------------------------------
John A. Strom, President
/s/ RONALD H. BENSON
--------------------------------------
Ronald H. Benson
10
<PAGE>
CHANGE IN CONTROL
AGREEMENT
This Agreement ("Agreement"), dated as of November 8, 1996, is made by and
between TPC Corporation, a Delaware corporation (the "Company"), and M. Scott
Jones (the "Executive").
RECITALS
The Board of Directors of the Company (the "Board") has determined that it
is in the best interest of the Company and its shareholders to ensure that the
Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat, or occurrence of a Change in Control (as defined
below) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by any pending or threatened Change in Control and to
encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change in Control, and
to provide the Executive with compensation arrangements upon a Change in
Control that ensure that the compensation expectations of the Executive will be
satisfied and that are competitive with those of other corporations.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, and for other good and valuable consideration, the Company and the
Executive hereby agree as follows:
1. DEFINITIONS
1.1 BASE AMOUNT means the Executive's base amount on the date of the
Change in Control, as determined in accordance with Code Section 280G.
1.2 BOARD means the Board of Directors of the Company.
1.3 CHANGE IN CONTROL shall mean any of the following events that occur
during the Term of this Agreement:
<PAGE>
(a) The acquisition by any individual, entity, or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) a
percentage of the then outstanding shares of common stock (assuming, for
purposes of this definition, that all shares of Class B Common Stock have been
converted into the same number of shares of Class A Common Stock) of the
Company (the "Outstanding Company Common Stock") that, when added to the
beneficial ownership previously held by that Person, and to the largest holding
of beneficial ownership in Outstanding Company Common Stock by any other
Person, equals or exceeds 50%, or (ii) a percentage of the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities") that, when added to the beneficial ownership previously held by
that Person, and to the largest holding of beneficial ownership in Outstanding
Company Voting Securities by any other Person, equals or exceeds 50%; provided,
however, that for purposes of this subparagraph (a), the following acquisitions
shall not in and of themselves constitute a Change in Control hereunder: (x)
any acquisition of securities of the Company made directly from the Company and
approved by a majority of the directors then comprising the Incumbent Board (as
defined below), (y) any acquisition of beneficial ownership of a higher
percentage of the Outstanding Company Common Stock or the Outstanding Company
Voting Securities that results solely from the acquisition, purchase, or
redemption of securities of the Company by the Company so long as such action
by the Company was approved by a majority of the directors then comprising the
Incumbent Board, or (z) any acquisition by any Company pursuant to a
transaction that complies with clauses (i), (ii), and (iii) of subparagraph (c)
hereof; or
(b) Individuals who, as of November 8, 1996, constituted the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to November 8, 1996 whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger, or consolidation or
sale or other disposition of all or substantially all the assets of the
Company (a
2
<PAGE>
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities that
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially owned, directly or indirectly, more than 75%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the company
resulting from such Business Combination (including, without limitation, a
company which as a result of such transaction owns the Company or all or
substantially all the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding any company resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the company
resulting from such Business Combination (including, without limitation, a
company which as a result of such transaction owns the Company or all or
substantially all the Company's assets either directly or through one or more
subsidiaries) or the combined voting power of the then outstanding voting
securities of such company except to the extent that such ownership existed
prior to the Business Combination, and (iii) at least a majority of the
members of the board of directors of the company resulting from such Business
Combination were members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
1.4 CODE means the Internal Revenue Code of 1986, as amended.
1.5 COMPANY means TPC Corporation and any successor thereto.
1.6 DIRECTOR means a member of the Board.
1.7 DISABILITY has the same meaning as the definition of disability under
the Company's long-term disability plan.
1.8 GOOD REASON shall mean any of the following:
3
<PAGE>
(a) the assignment to the Executive of any duties inconsistent with
the Executive's duties at the time of a Change in Control or a change in the
Executive's reporting responsibilities as in effect immediately prior to the
Change in Control, without the Executive's express written consent; or any
removal of the Executive from or any failure to reelect the Executive to
positions held by the Executive immediately prior to the Change in Control,
except in connection with promotions to higher office;
(b) a reduction in the Executive's total compensation as in effect
immediately prior to the Change in Control;
(c) the failure of the Company substantially to maintain and
continue the Executive's relative level of participation in the same or
substantially comparable bonus, stock incentive programs, and retirement and
welfare benefit plans as provided immediately prior to the Change in Control;
(d) the failure of the Company substantially to provide and continue
for the Executive the same or substantially comparable fringe benefits; or
(e) the Company's requiring the Executive to be based anywhere other
than in or within 20 miles of the Executive's principal place of employment at
the time of the Change in Control, except for required travel on the Company's
business to an extent substantially consistent with the Executive's prior
business travel obligations or, in the event the Executive consents to
relocation, the failure of the Company to pay (or reimburse the Executive for)
all reasonable moving expenses incurred by the Executive relating to a change
in the Executive's principal residence in connection with such relocation.
1.9 HOLDOVER PERIOD means the period following a Change in Control that
(a) begins on the date that the Company provides the Executive with written
notice that the Company requires the services of the Executive and (b) ends on
the date specified in the notice but no later than six months after the date of
the Change in Control.
1.10 PROTECTED PERIOD shall be the period of time beginning upon the later
of (a) the date of a Change in Control or (b) the last day of the Executive's
Holdover Period, and ending two years after such date.
1.11 RETENTION BONUS means the Executive's benefit, as described in
Subsection 2.1 of this Agreement.
4
<PAGE>
1.12 SEVERANCE COMPENSATION means the Executive's severance benefit, as
described in Subsection 2.2 of this Agreement.
1.13 TERM has the meaning set forth in Section 8 of this Agreement.
1.14 TERMINATION OF EMPLOYMENT shall be deemed to have occurred for
purposes of this Agreement and the Executive shall be entitled to the Severance
Compensation hereunder if following a Change in Control that occurs during the
Term of this Agreement, the Executive (a) is terminated by the Company during
the Holdover Period or the Protected Period for any reason other than willful
dishonesty or the commission of a felony for which he is convicted and which,
in either case, may cause material harm to the Company, (b) terminates
employment during the Protected Period where such termination in any way
follows or results from a Good Reason, or (c) terminates employment during the
Holdover Period where such termination in any way follows or results from a
Good Reason described in Subsection 1.8(b)-(e) of this Agreement. The Executive
is not entitled to benefits under this Agreement if he terminates service
during the Holdover Period for a Good Reason described in Subsection 1.8(a) of
this Agreement; provided, however, that immediately following the end of the
Holdover Period, the Executive may have a Termination of Employment for a Good
Reason described in Subsection 1.8(a) based on events that occurred during the
Holdover Period.
2. BENEFITS
2.1 RETENTION BONUS. Upon a Change in Control, the Executive shall be
entitled to a cash payment equal to the Base Amount as a Retention Bonus. The
Retention Bonus shall be paid within three business days after the Change in
Control.
2.2 SEVERANCE COMPENSATION. Upon Termination of Employment, the
Executive shall be entitled to receive a cash payment equal to two times the
Base Amount. The Severance Compensation shall be paid within three business
days after the Termination of Employment.
2.3 HEALTH COVERAGE. Upon Termination of Employment, the Executive shall
be entitled to receive continuing group medical and dental insurance coverage
for a period of 24 months after Termination of Employment, at no cost to the
Executive.
2.4 EXCEPTION TO BENEFIT ELIGIBILITY. The Executive shall not be
entitled to receive any of the benefits under this Agreement if the Executive
is one of the "Persons" (or a member of a group within the meaning of Section
13(d)(3) of the Exchange Act that constitutes the "Person") whose beneficial
ownership results in a "Change in Control" under Subsection 1.3(a) or clause
(ii) of Subsection 1.3(c) or if the Executive is (i) a general partner,
executive officer, or director of any such Person, (ii) a person controlling
any such
5
<PAGE>
Person, (iii) a general partner, executive officer, or director of any person
controlling any such person, or (iv) a beneficial owner of (x) any equity
interest in any such Person or controlling person, if such Person or
controlling person was formed for the purpose of engaging in the transaction
resulting in the Change in Control or (y) more than 5% of the outstanding
equity interest therein, if not so formed.
3. DEATH BENEFITS
If the Executive's employment with the Company is terminated after a
Change in Control and during the Protected Period due to death, the Executive
shall receive no Severance Compensation under Subsection 2.2 of this Agreement;
provided however, that if the Executive dies either (a) during the Holdover
Period or (b) after a Termination of Employment, but prior to payment of all
benefits under Section 2 of this Agreement, then the Executive's surviving
spouse (or if no spouse survives the Executive, the Executive's estate) shall
be entitled to the Severance Compensation. For purposes of this Section 3, the
Executive will be deemed to be in a Holdover Period for the six-month period
immediately following a Change in Control unless the Executive has received
written notice from the Company stating that a Holdover Period is not
applicable to the Executive or unless the time period prescribed by the Company
for the Holdover Period has expired. The benefits prescribed herein are in
addition to those available under applicable law and under the terms of the
Company's benefit plans and programs.
4. DISABILITY BENEFITS
If the Executive's employment with the Company is terminated after a
Change in Control and during the Protected Period due to Disability, the
Executive shall receive no Severance Compensation under Subsection 2.2 of this
Agreement; provided, however, that if the Executive terminates employment due
to Disability during the Holdover Period, the Executive shall receive Severance
Compensation as if the date of termination due to Disability were the date of a
Termination of Employment. For purposes of this Section 4, the Executive will
be deemed to be in a Holdover Period for the six-month period immediately
following a Change in Control unless the Executive has received written notice
from the Company stating that a Holdover Period is not applicable to the
Executive or unless the time period prescribed by the Company for the Holdover
Period has expired. The Executive shall also be eligible for disability
benefits available under applicable law and under the terms of the Company's
benefit plans and programs.
6
<PAGE>
5. CERTAIN REDUCTION IN PAYMENTS
Notwithstanding anything to the contrary in this Agreement, the
provisions of this Section 5 shall apply in the event that any payment or
distribution (whether paid or payable, or distributed or distributable,
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any reductions in payments required under this Section 5 (a
"Payment")) to the Executive would constitute a "parachute payment" within the
meaning of Code Section 280G; this Section 5 shall not be applicable if no such
Payment to the Executive constitutes a parachute payment under Code
Section 280G.
In the event that a nationally recognized accounting firm chosen by
the Company (the "Accounting Firm") shall determine that receipt of all
Payments would subject the Executive to the excise tax imposed by Code
Section 4999, then the aggregate present value of all Payments shall be reduced
(but not below zero) such that such aggregate present value of Payments equals
the Reduced Amount. If the Accounting Firm determines that some amount of
Payments would result in a Reduced Amount, the Company shall promptly notify
the Executive of the Accounting Firm's decision and further provide a copy of
the detailed computations, and the Executive shall be entitled solely to the
Reduced Amount. The Executive may then elect which of the Payments shall be
eliminated or reduced (as long as after such election the present value, as
determined in accordance with Code Section 280G(d)(4) ("Present Value"), of the
aggregate Payments equals the Reduced Amount). The Executive shall advise the
Company in writing of such election within 20 days of his receipt of notice.
If no such election is made by the Executive within the 20-day period, the
Company may elect which of such Payments shall be eliminated or reduced (as
long as after such election the Present Value of the aggregate Payments equals
the Reduced Amount) and shall promptly notify the Executive of such election.
All fees and expenses of the Accounting Firm shall be borne solely by the
Company.
The "Reduced Amount" shall be an amount expressed in present value
which maximizes the aggregate present value of Payments without causing any
Payment to be nondeductible by the Company because of Code Section 280G or
subject to an excise tax on the Executive under Code Section 4999. For
purposes of this Section 5, Present Value shall be determined in accordance
with Code Section 280G(d)(4).
7
<PAGE>
6. NO CONTRACT OF EMPLOYMENT
This Agreement shall not be construed so as to create a contract,
promise, or guarantee of employment for any particular term or duration, in any
particular position or assignment, or at any particular level of compensation
or benefits.
7. NON-ALIENATION OF BENEFITS
No right or benefit at any time under the Agreement shall be subject
to alienation, sale, transfer, assignment, pledge, or any encumbrance of any
kind. If the Executive shall attempt to or shall alienate, sell, transfer,
assign, pledge, or otherwise encumber his or her rights, benefits, or amounts
payable under the Agreement, or any part thereof, or if by reason of his
bankruptcy or other events happening at any time, such benefits would otherwise
be received by anyone else, the Company in its sole discretion may terminate
his interest in any such right or benefit and hold or pay it to, or for the
benefit of, such person, his spouse, children, or other dependents, or any of
them as the Company may determine.
8. TERM OF THIS AGREEMENT
The Term of this Agreement shall commence on the date of this
Agreement and end on the first anniversary of that date; PROVIDED, HOWEVER,
that the Term shall automatically be extended without further action by the
parties for additional one-year periods, unless written notice of the Company's
intention not to extend has been given to the Executive at least six months
prior to the expiration of the then effective Term. This Agreement shall be
void and of no effect if (i) a Change in Control occurs after the expiration of
the Term, or (ii) the Executive's employment with the Company and its
subsidiaries is terminated for any reason prior to a Change in Control.
9. RESOLUTION OF DISPUTES
(a) Any disputes arising under or in connection with this Agreement
shall be resolved, in the Executive's discretion, either (i) by arbitration, to
be held in Houston, Texas in accordance with the rules and procedures of the
American Arbitration Association, or (ii) by litigation.
(b) All costs, fees, and expenses of any arbitration or litigation
in connection with this Agreement that results in any decision or settlement
requiring the Company to make a payment to the Executive, including, without
limitation, attorneys' fees of both the Executive and the Company, shall be
borne by, and be
8
<PAGE>
the obligation of, the Company. In no event shall the Executive be required
to reimburse the Company for any of the costs and expenses incurred by the
Company relating to arbitration or litigation.
10. MISCELLANEOUS
10.1 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to principles of
conflict of laws.
10.2 AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or
modified otherwise than by a written agreement executed by the parties to this
Agreement or their respective successors and legal representatives. No waiver
by any party to this Agreement of any breach of any term, provision, or
condition of this Agreement by the other party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same time, or any prior or
subsequent time.
10.3 NOTICES. All notices and other communications hereunder shall be in
writing and shall be given by hand-delivery to the other party, by facsimile
transmission, by overnight courier, or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive: M. Scott Jones
3026 Tangley
Houston, Texas 77005
If to the Company: TPC Corporation
200 West Lake Park Boulevard
Suite 1000
Houston, Texas 77079.
10.4 PAYMENT OBLIGATION ABSOLUTE. Subject to Section 5 and to Subsection
2.4, the obligations of the Company to pay the benefits described in Section 2
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense, or other right which the Company may have against the
Executive. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, nor shall the
amount of any payment hereunder be reduced by any compensation earned by the
Executive as a result of employment by another employer.
9
<PAGE>
10.5 TAX WITHHOLDING. The Company may withhold from any benefits payable
under this Agreement all federal, state, city, or other taxes that are required
by any law or governmental regulation or ruling.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and the Company has caused this Agreement to be executed in its name and
on its behalf, all as of the day and year first above written.
TPC CORPORATION
By: /s/ JOHN A. STROM
---------------------------------
John A. Strom, President
/s/ M. SCOTT JONES
------------------------------------
M. Scott Jones
10
<PAGE>
CHANGE IN CONTROL
AGREEMENT
This Agreement ("Agreement"), dated as of November 8, 1996, is made by and
between TPC Corporation, a Delaware corporation (the "Company"), and Robert D.
Kincaid (the "Executive").
RECITALS
The Board of Directors of the Company (the "Board") has determined that it
is in the best interest of the Company and its shareholders to ensure that the
Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat, or occurrence of a Change in Control (as defined
below) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by any pending or threatened Change in Control and to
encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change in Control, and
to provide the Executive with compensation arrangements upon a Change in
Control that ensure that the compensation expectations of the Executive will be
satisfied and that are competitive with those of other corporations.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, and for other good and valuable consideration, the Company and the
Executive hereby agree as follows:
1. DEFINITIONS
1.1 BASE AMOUNT means the Executive's base amount on the date of the
Change in Control, as determined in accordance with Code Section 280G.
1.2 BOARD means the Board of Directors of the Company.
1.3 CHANGE IN CONTROL shall mean any of the following events that occur
during the Term of this Agreement:
<PAGE>
(a) The acquisition by any individual, entity, or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) a
percentage of the then outstanding shares of common stock (assuming, for
purposes of this definition, that all shares of Class B Common Stock have been
converted into the same number of shares of Class A Common Stock) of the
Company (the "Outstanding Company Common Stock") that, when added to the
beneficial ownership previously held by that Person, and to the largest holding
of beneficial ownership in Outstanding Company Common Stock by any other
Person, equals or exceeds 50%, or (ii) a percentage of the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities") that, when added to the beneficial ownership previously held by
that Person, and to the largest holding of beneficial ownership in Outstanding
Company Voting Securities by any other Person, equals or exceeds 50%; provided,
however, that for purposes of this subparagraph (a), the following acquisitions
shall not in and of themselves constitute a Change in Control hereunder: (x)
any acquisition of securities of the Company made directly from the Company and
approved by a majority of the directors then comprising the Incumbent Board (as
defined below), (y) any acquisition of beneficial ownership of a higher
percentage of the Outstanding Company Common Stock or the Outstanding Company
Voting Securities that results solely from the acquisition, purchase, or
redemption of securities of the Company by the Company so long as such action
by the Company was approved by a majority of the directors then comprising the
Incumbent Board, or (z) any acquisition by any Company pursuant to a
transaction that complies with clauses (i), (ii), and (iii) of subparagraph (c)
hereof; or
(b) Individuals who, as of November 8, 1996, constituted the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to November 8, 1996 whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger, or consolidation or
sale or other disposition of all or substantially all the assets of the
Company (a
2
<PAGE>
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities
that were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially owned, directly or indirectly, more
than 75% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
company resulting from such Business Combination (including, without
limitation, a company which as a result of such transaction owns the Company
or all or substantially all the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case
may be, (ii) no Person (excluding any company resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the company
resulting from such Business Combination (including, without limitation, a
company which as a result of such transaction owns the Company or all or
substantially all the Company's assets either directly or through one or more
subsidiaries) or the combined voting power of the then outstanding voting
securities of such company except to the extent that such ownership existed
prior to the Business Combination, and (iii) at least a majority of the
members of the board of directors of the company resulting from such Business
Combination were members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
1.4 CODE means the Internal Revenue Code of 1986, as amended.
1.5 COMPANY means TPC Corporation and any successor thereto.
1.6 DIRECTOR means a member of the Board.
1.7 DISABILITY has the same meaning as the definition of disability under
the Company's long-term disability plan.
1.8 GOOD REASON shall mean any of the following:
(a) the assignment to the Executive of any duties inconsistent with
the Executive's duties at the time of a Change in Control or a change in the
3
<PAGE>
Executive's reporting responsibilities as in effect immediately prior to the
Change in Control, without the Executive's express written consent; or any
removal of the Executive from or any failure to reelect the Executive to
positions held by the Executive immediately prior to the Change in Control,
except in connection with promotions to higher office;
(b) a reduction in the Executive's total compensation as in effect
immediately prior to the Change in Control;
(c) the failure of the Company substantially to maintain and
continue the Executive's relative level of participation in the same or
substantially comparable bonus, stock incentive programs, and retirement and
welfare benefit plans as provided immediately prior to the Change in Control;
(d) the failure of the Company substantially to provide and continue
for the Executive the same or substantially comparable fringe benefits; or
(e) the Company's requiring the Executive to be based anywhere other
than in or within 20 miles of the Executive's principal place of employment at
the time of the Change in Control, except for required travel on the Company's
business to an extent substantially consistent with the Executive's prior
business travel obligations or, in the event the Executive consents to
relocation, the failure of the Company to pay (or reimburse the Executive for)
all reasonable moving expenses incurred by the Executive relating to a change
in the Executive's principal residence in connection with such relocation.
1.9 HOLDOVER PERIOD means the period following a Change in Control that
(a) begins on the date that the Company provides the Executive with written
notice that the Company requires the services of the Executive and (b) ends on
the date specified in the notice but no later than six months after the date of
the Change in Control.
1.10 PROTECTED PERIOD shall be the period of time beginning upon the later
of (a) the date of a Change in Control or (b) the last day of the Executive's
Holdover Period, and ending two years after such date.
1.11 RETENTION BONUS means the Executive's benefit, as described in
Subsection 2.1 of this Agreement.
4
<PAGE>
1.12 SEVERANCE COMPENSATION means the Executive's severance benefit, as
described in Subsection 2.2 of this Agreement.
1.13 TERM has the meaning set forth in Section 8 of this Agreement.
1.14 TERMINATION OF EMPLOYMENT shall be deemed to have occurred for
purposes of this Agreement and the Executive shall be entitled to the Severance
Compensation hereunder if following a Change in Control that occurs during the
Term of this Agreement, the Executive (a) is terminated by the Company during
the Holdover Period or the Protected Period for any reason other than willful
dishonesty or the commission of a felony for which he is convicted and which,
in either case, may cause material harm to the Company, (b) terminates
employment during the Protected Period where such termination in any way
follows or results from a Good Reason, or (c) terminates employment during the
Holdover Period where such termination in any way follows or results from a
Good Reason described in Subsection 1.8(b)-(e) of this Agreement. The Executive
is not entitled to benefits under this Agreement if he terminates service
during the Holdover Period for a Good Reason described in Subsection 1.8(a) of
this Agreement; provided, however, that immediately following the end of the
Holdover Period, the Executive may have a Termination of Employment for a Good
Reason described in Subsection 1.8(a) based on events that occurred during the
Holdover Period.
2. BENEFITS
2.1 RETENTION BONUS. Upon a Change in Control, the Executive shall be
entitled to a cash payment equal to two-thirds times the Base Amount as a
Retention Bonus. The Retention Bonus shall be paid within three business days
after the Change in Control.
2.2 SEVERANCE COMPENSATION. Upon Termination of Employment, the
Executive shall be entitled to receive a cash payment equal to four-thirds
times the Base Amount. The Severance Compensation shall be paid within three
business days after the Termination of Employment.
2.3 HEALTH COVERAGE. Upon Termination of Employment, the Executive shall
be entitled to receive continuing group medical and dental insurance coverage
for a period of 24 months after Termination of Employment, at no cost to the
Executive.
2.4 EXCEPTION TO BENEFIT ELIGIBILITY. The Executive shall not be
entitled to receive any of the benefits under this Agreement if the Executive
is one of the "Persons" (or a member of a group within the meaning of Section
13(d)(3) of the Exchange Act that constitutes the "Person") whose beneficial
ownership results in a "Change in Control" under Subsection 1.3(a) or clause
(ii) of Subsection 1.3(c) or if the Executive is (i) a general partner,
executive officer, or director of any such
5
<PAGE>
Person, (ii) a person controlling any such Person, (iii) a general partner ,
executive officer, or director of any person controlling any such person, or
(iv) a beneficial owner of (x) any equity interest in any such Person or
controlling person, if such Person or controlling person was formed for the
purpose of engaging in the transaction resulting in the Change in Control or
(y) more than 5% of the outstanding equity interest therein, if not so formed.
3. DEATH BENEFITS
If the Executive's employment with the Company is terminated after a
Change in Control and during the Protected Period due to death, the Executive
shall receive no Severance Compensation under Subsection 2.2 of this Agreement;
provided however, that if the Executive dies either (a) during the Holdover
Period or (b) after a Termination of Employment, but prior to payment of all
benefits under Section 2 of this Agreement, then the Executive's surviving
spouse (or if no spouse survives the Executive, the Executive's estate) shall
be entitled to the Severance Compensation. For purposes of this Section 3, the
Executive will be deemed to be in a Holdover Period for the six-month period
immediately following a Change in Control unless the Executive has received
written notice from the Company stating that a Holdover Period is not
applicable to the Executive or unless the time period prescribed by the Company
for the Holdover Period has expired. The benefits prescribed herein are in
addition to those available under applicable law and under the terms of the
Company's benefit plans and programs.
4. DISABILITY BENEFITS
If the Executive's employment with the Company is terminated after a
Change in Control and during the Protected Period due to Disability, the
Executive shall receive no Severance Compensation under Subsection 2.2 of this
Agreement; provided, however, that if the Executive terminates employment due
to Disability during the Holdover Period, the Executive shall receive Severance
Compensation as if the date of termination due to Disability were the date of a
Termination of Employment. For purposes of this Section 4, the Executive will
be deemed to be in a Holdover Period for the six-month period immediately
following a Change in Control unless the Executive has received written notice
from the Company stating that a Holdover Period is not applicable to the
Executive or unless the time period prescribed by the Company for the Holdover
Period has expired. The Executive shall also be eligible for disability
benefits available under applicable law and under the terms of the Company's
benefit plans and programs.
6
<PAGE>
5. CERTAIN REDUCTION IN PAYMENTS
Notwithstanding anything to the contrary in this Agreement, the
provisions of this Section 5 shall apply in the event that any payment or
distribution (whether paid or payable, or distributed or distributable,
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any reductions in payments required under this Section 5 (a
"Payment")) to the Executive would constitute a "parachute payment" within the
meaning of Code Section 280G; this Section 5 shall not be applicable if no such
Payment to the Executive constitutes a parachute payment under Code
Section 280G.
In the event that a nationally recognized accounting firm chosen by
the Company (the "Accounting Firm") shall determine that receipt of all
Payments would subject the Executive to the excise tax imposed by Code
Section 4999, then the aggregate present value of all Payments shall be reduced
(but not below zero) such that such aggregate present value of Payments equals
the Reduced Amount. If the Accounting Firm determines that some amount of
Payments would result in a Reduced Amount, the Company shall promptly notify
the Executive of the Accounting Firm's decision and further provide a copy of
the detailed computations, and the Executive shall be entitled solely to the
Reduced Amount. The Executive may then elect which of the Payments shall be
eliminated or reduced (as long as after such election the present value, as
determined in accordance with Code Section 280G(d)(4) ("Present Value"), of the
aggregate Payments equals the Reduced Amount). The Executive shall advise the
Company in writing of such election within 20 days of his receipt of notice.
If no such election is made by the Executive within the 20-day period, the
Company may elect which of such Payments shall be eliminated or reduced (as
long as after such election the Present Value of the aggregate Payments equals
the Reduced Amount) and shall promptly notify the Executive of such election.
All fees and expenses of the Accounting Firm shall be borne solely by the
Company.
The "Reduced Amount" shall be an amount expressed in present value
which maximizes the aggregate present value of Payments without causing any
Payment to be nondeductible by the Company because of Code Section 280G or
subject to an excise tax on the Executive under Code Section 4999. For
purposes of this Section 5, Present Value shall be determined in accordance
with Code Section 280G(d)(4).
7
<PAGE>
6. NO CONTRACT OF EMPLOYMENT
This Agreement shall not be construed so as to create a contract,
promise, or guarantee of employment for any particular term or duration, in any
particular position or assignment, or at any particular level of compensation
or benefits.
7. NON-ALIENATION OF BENEFITS
No right or benefit at any time under the Agreement shall be subject
to alienation, sale, transfer, assignment, pledge, or any encumbrance of any
kind. If the Executive shall attempt to or shall alienate, sell, transfer,
assign, pledge, or otherwise encumber his or her rights, benefits, or amounts
payable under the Agreement, or any part thereof, or if by reason of his
bankruptcy or other events happening at any time, such benefits would otherwise
be received by anyone else, the Company in its sole discretion may terminate
his interest in any such right or benefit and hold or pay it to, or for the
benefit of, such person, his spouse, children, or other dependents, or any of
them as the Company may determine.
8. TERM OF THIS AGREEMENT
The Term of this Agreement shall commence on the date of this
Agreement and end on the first anniversary of that date; PROVIDED, HOWEVER,
that the Term shall automatically be extended without further action by the
parties for additional one-year periods, unless written notice of the Company's
intention not to extend has been given to the Executive at least six months
prior to the expiration of the then effective Term. This Agreement shall be
void and of no effect if (i) a Change in Control occurs after the expiration of
the Term, or (ii) the Executive's employment with the Company and its
subsidiaries is terminated for any reason prior to a Change in Control.
9. RESOLUTION OF DISPUTES
(a) Any disputes arising under or in connection with this Agreement
shall be resolved, in the Executive's discretion, either (i) by arbitration, to
be held in Houston, Texas in accordance with the rules and procedures of the
American Arbitration Association, or (ii) by litigation.
(b) All costs, fees, and expenses of any arbitration or litigation
in connection with this Agreement that results in any decision or settlement
requiring the Company to make a payment to the Executive, including, without
limitation, attorneys' fees of both the Executive and the Company, shall be
borne by, and be
8
<PAGE>
the obligation of, the Company. In no event shall the Executive be required
to reimburse the Company for any of the costs and expenses incurred by the
Company relating to arbitration or litigation.
10. MISCELLANEOUS
10.1 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to principles of
conflict of laws.
10.2 AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or
modified otherwise than by a written agreement executed by the parties to this
Agreement or their respective successors and legal representatives. No waiver
by any party to this Agreement of any breach of any term, provision, or
condition of this Agreement by the other party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same time, or any prior or
subsequent time.
10.3 NOTICES. All notices and other communications hereunder shall be in
writing and shall be given by hand-delivery to the other party, by facsimile
transmission, by overnight courier, or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive: Robert D. Kincaid
36 Rippling Creek Dr.
Sugar Land, Texas 77479
If to the Company: TPC Corporation
200 West Lake Park Boulevard
Suite 1000
Houston, Texas 77079.
10.4 PAYMENT OBLIGATION ABSOLUTE. Subject to Section 5 and to Subsection
2.4, the obligations of the Company to pay the benefits described in Section 2
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense, or other right which the Company may have against the
Executive. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, nor shall the
amount of any payment hereunder be reduced by any compensation earned by the
Executive as a result of employment by another employer.
9
<PAGE>
10.5 TAX WITHHOLDING. The Company may withhold from any benefits payable
under this Agreement all federal, state, city, or other taxes that are required
by any law or governmental regulation or ruling.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and the Company has caused this Agreement to be executed in its name and
on its behalf, all as of the day and year first above written.
TPC CORPORATION
By: /s/ JOHN A. STROM
------------------------------
John A. Strom, President
/s/ ROBERT D. KINCAID
----------------------------------
Robert D. Kincaid
10
<PAGE>
CHANGE IN CONTROL
AGREEMENT
This Agreement ("Agreement"), dated as of November 8, 1996, is made by and
between TPC Corporation, a Delaware corporation (the "Company"), and Joseph J.
DiNorscia (the "Executive").
RECITALS
The Board of Directors of the Company (the "Board") has determined that it
is in the best interest of the Company and its shareholders to ensure that the
Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat, or occurrence of a Change in Control (as defined
below) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by any pending or threatened Change in Control and to
encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change in Control, and
to provide the Executive with compensation arrangements upon a Change in
Control that ensure that the compensation expectations of the Executive will be
satisfied and that are competitive with those of other corporations.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, and for other good and valuable consideration, the Company and the
Executive hereby agree as follows:
1. DEFINITIONS
1.1 BASE AMOUNT means the Executive's base amount on the date of the
Change in Control, as determined in accordance with Code Section 280G.
1.2 BOARD means the Board of Directors of the Company.
1.3 CHANGE IN CONTROL shall mean any of the following events that occur
during the Term of this Agreement:
<PAGE>
(a) The acquisition by any individual, entity, or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) a
percentage of the then outstanding shares of common stock (assuming, for
purposes of this definition, that all shares of Class B Common Stock have been
converted into the same number of shares of Class A Common Stock) of the
Company (the "Outstanding Company Common Stock") that, when added to the
beneficial ownership previously held by that Person, and to the largest holding
of beneficial ownership in Outstanding Company Common Stock by any other
Person, equals or exceeds 50%, or (ii) a percentage of the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities") that, when added to the beneficial ownership previously held by
that Person, and to the largest holding of beneficial ownership in Outstanding
Company Voting Securities by any other Person, equals or exceeds 50%; provided,
however, that for purposes of this subparagraph (a), the following acquisitions
shall not in and of themselves constitute a Change in Control hereunder: (x)
any acquisition of securities of the Company made directly from the Company and
approved by a majority of the directors then comprising the Incumbent Board (as
defined below), (y) any acquisition of beneficial ownership of a higher
percentage of the Outstanding Company Common Stock or the Outstanding Company
Voting Securities that results solely from the acquisition, purchase, or
redemption of securities of the Company by the Company so long as such action
by the Company was approved by a majority of the directors then comprising the
Incumbent Board, or (z) any acquisition by any Company pursuant to a
transaction that complies with clauses (i), (ii), and (iii) of subparagraph (c)
hereof; or
(b) Individuals who, as of November 8, 1996, constituted the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to November 8, 1996 whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger, or consolidation or
sale or other disposition of all or substantially all the assets of the
Company (a
2
<PAGE>
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities that
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially owned, directly or indirectly, more than 75%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the company
resulting from such Business Combination (including, without limitation, a
company which as a result of such transaction owns the Company or all or
substantially all the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding any company resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the company
resulting from such Business Combination (including, without limitation, a
company which as a result of such transaction owns the Company or all or
substantially all the Company's assets either directly or through one or more
subsidiaries) or the combined voting power of the then outstanding voting
securities of such company except to the extent that such ownership existed
prior to the Business Combination, and (iii) at least a majority of the
members of the board of directors of the company resulting from such Business
Combination were members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
1.4 CODE means the Internal Revenue Code of 1986, as amended.
1.5 COMPANY means TPC Corporation and any successor thereto.
1.6 DIRECTOR means a member of the Board.
1.7 DISABILITY has the same meaning as the definition of disability under
the Company's long-term disability plan.
1.8 GOOD REASON shall mean any of the following:
3
<PAGE>
(a) the assignment to the Executive of any duties inconsistent with
the Executive's duties at the time of a Change in Control or a change in the
Executive's reporting responsibilities as in effect immediately prior to the
Change in Control, without the Executive's express written consent; or any
removal of the Executive from or any failure to reelect the Executive to
positions held by the Executive immediately prior to the Change in Control,
except in connection with promotions to higher office;
(b) a reduction in the Executive's total compensation as in effect
immediately prior to the Change in Control;
(c) the failure of the Company substantially to maintain and
continue the Executive's relative level of participation in the same or
substantially comparable bonus, stock incentive programs, and retirement and
welfare benefit plans as provided immediately prior to the Change in Control;
(d) the failure of the Company substantially to provide and continue
for the Executive the same or substantially comparable fringe benefits; or
(e) the Company's requiring the Executive to be based anywhere other
than in or within 20 miles of the Executive's principal place of employment at
the time of the Change in Control, except for required travel on the Company's
business to an extent substantially consistent with the Executive's prior
business travel obligations or, in the event the Executive consents to
relocation, the failure of the Company to pay (or reimburse the Executive for)
all reasonable moving expenses incurred by the Executive relating to a change
in the Executive's principal residence in connection with such relocation.
1.9 HOLDOVER PERIOD means the period following a Change in Control that
(a) begins on the date that the Company provides the Executive with written
notice that the Company requires the services of the Executive and (b) ends on
the date specified in the notice but no later than six months after the date of
the Change in Control.
1.10 PROTECTED PERIOD shall be the period of time beginning upon the later
of (a) the date of a Change in Control or (b) the last day of the Executive's
Holdover Period, and ending two years after such date.
1.11 RETENTION BONUS means the Executive's benefit, as described in
Subsection 2.1 of this Agreement.
4
<PAGE>
1.12 SEVERANCE COMPENSATION means the Executive's severance benefit, as
described in Subsection 2.2 of this Agreement.
1.13 TERM has the meaning set forth in Section 8 of this Agreement.
1.14 TERMINATION OF EMPLOYMENT shall be deemed to have occurred for
purposes of this Agreement and the Executive shall be entitled to the Severance
Compensation hereunder if following a Change in Control that occurs during the
Term of this Agreement, the Executive (a) is terminated by the Company during
the Holdover Period or the Protected Period for any reason other than willful
dishonesty or the commission of a felony for which he is convicted and which,
in either case, may cause material harm to the Company, (b) terminates
employment during the Protected Period where such termination in any way
follows or results from a Good Reason, or (c) terminates employment during the
Holdover Period where such termination in any way follows or results from a
Good Reason described in Subsection 1.8(b)-(e) of this Agreement. The Executive
is not entitled to benefits under this Agreement if he terminates service
during the Holdover Period for a Good Reason described in Subsection 1.8(a) of
this Agreement; provided, however, that immediately following the end of the
Holdover Period, the Executive may have a Termination of Employment for a Good
Reason described in Subsection 1.8(a) based on events that occurred during the
Holdover Period.
2. BENEFITS
2.1 RETENTION BONUS. Upon a Change in Control, the Executive shall be
entitled to a cash payment equal to the Base Amount as a Retention Bonus. The
Retention Bonus shall be paid within three business days after the Change in
Control.
2.2 SEVERANCE COMPENSATION. Upon Termination of Employment, the
Executive shall be entitled to receive a cash payment equal to two times the
Base Amount. The Severance Compensation shall be paid within three business
days after the Termination of Employment.
2.3 HEALTH COVERAGE. Upon Termination of Employment, the Executive shall
be entitled to receive continuing group medical and dental insurance coverage
for a period of 24 months after Termination of Employment, at no cost to the
Executive.
2.4 EXCEPTION TO BENEFIT ELIGIBILITY. The Executive shall not be
entitled to receive any of the benefits under this Agreement if the Executive
is one of the "Persons" (or a member of a group within the meaning of Section
13(d)(3) of the Exchange Act that constitutes the "Person") whose beneficial
ownership results in a "Change in Control" under Subsection 1.3(a) or clause
(ii) of Subsection 1.3(c) or if the Executive is (i) a general partner,
executive officer, or director of any such
5
<PAGE>
Person, (ii) a person controlling any such Person, (iii) a general partner,
executive officer, or director of any person controlling any such person, or
(iv) a beneficial owner of (x) any equity interest in any such Person or
controlling person, if such Person or controlling person was formed for the
purpose of engaging in the transaction resulting in the Change in Control or
(y) more than 5% of the outstanding equity interest therein, if not so formed.
3. DEATH BENEFITS
If the Executive's employment with the Company is terminated after a
Change in Control and during the Protected Period due to death, the Executive
shall receive no Severance Compensation under Subsection 2.2 of this Agreement;
provided however, that if the Executive dies either (a) during the Holdover
Period or (b) after a Termination of Employment, but prior to payment of all
benefits under Section 2 of this Agreement, then the Executive's surviving
spouse (or if no spouse survives the Executive, the Executive's estate) shall
be entitled to the Severance Compensation. For purposes of this Section 3, the
Executive will be deemed to be in a Holdover Period for the six-month period
immediately following a Change in Control unless the Executive has received
written notice from the Company stating that a Holdover Period is not
applicable to the Executive or unless the time period prescribed by the Company
for the Holdover Period has expired. The benefits prescribed herein are in
addition to those available under applicable law and under the terms of the
Company's benefit plans and programs.
4. DISABILITY BENEFITS
If the Executive's employment with the Company is terminated after a
Change in Control and during the Protected Period due to Disability, the
Executive shall receive no Severance Compensation under Subsection 2.2 of this
Agreement; provided, however, that if the Executive terminates employment due
to Disability during the Holdover Period, the Executive shall receive Severance
Compensation as if the date of termination due to Disability were the date of a
Termination of Employment. For purposes of this Section 4, the Executive will
be deemed to be in a Holdover Period for the six-month period immediately
following a Change in Control unless the Executive has received written notice
from the Company stating that a Holdover Period is not applicable to the
Executive or unless the time period prescribed by the Company for the Holdover
Period has expired. The Executive shall also be eligible for disability
benefits available under applicable law and under the terms of the Company's
benefit plans and programs.
6
<PAGE>
5. CERTAIN REDUCTION IN PAYMENTS
Notwithstanding anything to the contrary in this Agreement, the
provisions of this Section 5 shall apply in the event that any payment or
distribution (whether paid or payable, or distributed or distributable,
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any reductions in payments required under this Section 5 (a
"Payment")) to the Executive would constitute a "parachute payment" within the
meaning of Code Section 280G; this Section 5 shall not be applicable if no such
Payment to the Executive constitutes a parachute payment under Code
Section 280G.
In the event that a nationally recognized accounting firm chosen by
the Company (the "Accounting Firm") shall determine that receipt of all
Payments would subject the Executive to the excise tax imposed by Code
Section 4999, then the aggregate present value of all Payments shall be reduced
(but not below zero) such that such aggregate present value of Payments equals
the Reduced Amount. If the Accounting Firm determines that some amount of
Payments would result in a Reduced Amount, the Company shall promptly notify
the Executive of the Accounting Firm's decision and further provide a copy of
the detailed computations, and the Executive shall be entitled solely to the
Reduced Amount. The Executive may then elect which of the Payments shall be
eliminated or reduced (as long as after such election the present value, as
determined in accordance with Code Section 280G(d)(4) ("Present Value"), of the
aggregate Payments equals the Reduced Amount). The Executive shall advise the
Company in writing of such election within 20 days of his receipt of notice.
If no such election is made by the Executive within the 20-day period, the
Company may elect which of such Payments shall be eliminated or reduced (as
long as after such election the Present Value of the aggregate Payments equals
the Reduced Amount) and shall promptly notify the Executive of such election.
All fees and expenses of the Accounting Firm shall be borne solely by the
Company.
The "Reduced Amount" shall be an amount expressed in present value
which maximizes the aggregate present value of Payments without causing any
Payment to be nondeductible by the Company because of Code Section 280G or
subject to an excise tax on the Executive under Code Section 4999. For
purposes of this Section 5, Present Value shall be determined in accordance
with Code Section 280G(d)(4).
7
<PAGE>
6. NO CONTRACT OF EMPLOYMENT
This Agreement shall not be construed so as to create a contract,
promise, or guarantee of employment for any particular term or duration, in any
particular position or assignment, or at any particular level of compensation
or benefits.
7. NON-ALIENATION OF BENEFITS
No right or benefit at any time under the Agreement shall be subject
to alienation, sale, transfer, assignment, pledge, or any encumbrance of any
kind. If the Executive shall attempt to or shall alienate, sell, transfer,
assign, pledge, or otherwise encumber his or her rights, benefits, or amounts
payable under the Agreement, or any part thereof, or if by reason of his
bankruptcy or other events happening at any time, such benefits would otherwise
be received by anyone else, the Company in its sole discretion may terminate
his interest in any such right or benefit and hold or pay it to, or for the
benefit of, such person, his spouse, children, or other dependents, or any of
them as the Company may determine.
8. TERM OF THIS AGREEMENT
The Term of this Agreement shall commence on the date of this
Agreement and end on the first anniversary of that date; PROVIDED, HOWEVER,
that the Term shall automatically be extended without further action by the
parties for additional one-year periods, unless written notice of the Company's
intention not to extend has been given to the Executive at least six months
prior to the expiration of the then effective Term. This Agreement shall be
void and of no effect if (i) a Change in Control occurs after the expiration of
the Term, or (ii) the Executive's employment with the Company and its
subsidiaries is terminated for any reason prior to a Change in Control.
9. RESOLUTION OF DISPUTES
(a) Any disputes arising under or in connection with this Agreement
shall be resolved, in the Executive's discretion, either (i) by arbitration, to
be held in Houston, Texas in accordance with the rules and procedures of the
American Arbitration Association, or (ii) by litigation.
(b) All costs, fees, and expenses of any arbitration or litigation
in connection with this Agreement that results in any decision or settlement
requiring the Company to make a payment to the Executive, including, without
limitation, attorneys' fees of both the Executive and the Company, shall be
borne by, and be
8
<PAGE>
the obligation of, the Company. In no event shall the Executive be required
to reimburse the Company for any of the costs and expenses incurred by the
Company relating to arbitration or litigation.
10. MISCELLANEOUS
10.1 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to principles of
conflict of laws.
10.2 AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or
modified otherwise than by a written agreement executed by the parties to this
Agreement or their respective successors and legal representatives. No waiver
by any party to this Agreement of any breach of any term, provision, or
condition of this Agreement by the other party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same time, or any prior or
subsequent time.
10.3 NOTICES. All notices and other communications hereunder shall be in
writing and shall be given by hand-delivery to the other party, by facsimile
transmission, by overnight courier, or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive: Joseph J. DiNorscia
811 Thornvine Lane
Houston, Texas 77079
If to the Company: TPC Corporation
200 West Lake Park Boulevard
Suite 1000
Houston, Texas 77079.
10.4 PAYMENT OBLIGATION ABSOLUTE. Subject to Section 5 and to Subsection
2.4, the obligations of the Company to pay the benefits described in Section 2
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense, or other right which the Company may have against the
Executive. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, nor shall the
amount of any payment hereunder be reduced by any compensation earned by the
Executive as a result of employment by another employer.
9
<PAGE>
10.5 TAX WITHHOLDING. The Company may withhold from any benefits payable
under this Agreement all federal, state, city, or other taxes that are required
by any law or governmental regulation or ruling.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and the Company has caused this Agreement to be executed in its name and
on its behalf, all as of the day and year first above written.
TPC CORPORATION
By: /s/ JOHN A. STROM
------------------------------------
John A. Strom, President
/s/ JOSEPH J. DINORSCIA
---------------------------------------
Joseph J. DiNorscia
10
<PAGE>
CHANGE IN CONTROL
AGREEMENT
This Agreement ("Agreement"), dated as of November 8, 1996, is made by and
between TPC Corporation, a Delaware corporation (the "Company"), and Marilyn I.
Eckersley (the "Executive").
RECITALS
The Board of Directors of the Company (the "Board") has determined that it
is in the best interest of the Company and its shareholders to ensure that the
Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat, or occurrence of a Change in Control (as defined
below) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by any pending or threatened Change in Control and to
encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change in Control, and
to provide the Executive with compensation arrangements upon a Change in
Control that ensure that the compensation expectations of the Executive will be
satisfied and that are competitive with those of other corporations.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, and for other good and valuable consideration, the Company and the
Executive hereby agree as follows:
1. DEFINITIONS
1.1 BASE AMOUNT means the Executive's base amount on the date of the
Change in Control, as determined in accordance with Code Section 280G.
1.2 BOARD means the Board of Directors of the Company.
1.3 CHANGE IN CONTROL shall mean any of the following events that occur
during the Term of this Agreement:
<PAGE>
(a) The acquisition by any individual, entity, or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) a
percentage of the then outstanding shares of common stock (assuming, for
purposes of this definition, that all shares of Class B Common Stock have been
converted into the same number of shares of Class A Common Stock) of the
Company (the "Outstanding Company Common Stock") that, when added to the
beneficial ownership previously held by that Person, and to the largest holding
of beneficial ownership in Outstanding Company Common Stock by any other
Person, equals or exceeds 50%, or (ii) a percentage of the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities") that, when added to the beneficial ownership previously held by
that Person, and to the largest holding of beneficial ownership in Outstanding
Company Voting Securities by any other Person, equals or exceeds 50%; provided,
however, that for purposes of this subparagraph (a), the following acquisitions
shall not in and of themselves constitute a Change in Control hereunder: (x)
any acquisition of securities of the Company made directly from the Company and
approved by a majority of the directors then comprising the Incumbent Board (as
defined below), (y) any acquisition of beneficial ownership of a higher
percentage of the Outstanding Company Common Stock or the Outstanding Company
Voting Securities that results solely from the acquisition, purchase, or
redemption of securities of the Company by the Company so long as such action
by the Company was approved by a majority of the directors then comprising the
Incumbent Board, or (z) any acquisition by any Company pursuant to a
transaction that complies with clauses (i), (ii), and (iii) of subparagraph (c)
hereof; or
(b) Individuals who, as of November 8, 1996, constituted the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to November 8, 1996 whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger, or consolidation or
sale or other disposition of all or substantially all the assets of the
Company (a
2
<PAGE>
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities
that were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially owned, directly or indirectly, more
than 75% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
company resulting from such Business Combination (including, without
limitation, a company which as a result of such transaction owns the Company
or all or substantially all the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case
may be, (ii) no Person (excluding any company resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the company
resulting from such Business Combination (including, without limitation, a
company which as a result of such transaction owns the Company or all or
substantially all the Company's assets either directly or through one or more
subsidiaries) or the combined voting power of the then outstanding voting
securities of such company except to the extent that such ownership existed
prior to the Business Combination, and (iii) at least a majority of the
members of the board of directors of the company resulting from such Business
Combination were members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
1.4 CODE means the Internal Revenue Code of 1986, as amended.
1.5 COMPANY means TPC Corporation and any successor thereto.
1.6 DIRECTOR means a member of the Board.
1.7 DISABILITY has the same meaning as the definition of disability under
the Company's long-term disability plan.
1.8 GOOD REASON shall mean any of the following:
(a) the assignment to the Executive of any duties inconsistent with
the Executive's duties at the time of a Change in Control or a change in the
3
<PAGE>
Executive's reporting responsibilities as in effect immediately prior to the
Change in Control, without the Executive's express written consent; or any
removal of the Executive from or any failure to reelect the Executive to
positions held by the Executive immediately prior to the Change in Control,
except in connection with promotions to higher office;
(b) a reduction in the Executive's total compensation as in effect
immediately prior to the Change in Control;
(c) the failure of the Company substantially to maintain and
continue the Executive's relative level of participation in the same or
substantially comparable bonus, stock incentive programs, and retirement and
welfare benefit plans as provided immediately prior to the Change in Control;
(d) the failure of the Company substantially to provide and continue
for the Executive the same or substantially comparable fringe benefits; or
(e) the Company's requiring the Executive to be based anywhere other
than in or within 20 miles of the Executive's principal place of employment at
the time of the Change in Control, except for required travel on the Company's
business to an extent substantially consistent with the Executive's prior
business travel obligations or, in the event the Executive consents to
relocation, the failure of the Company to pay (or reimburse the Executive for)
all reasonable moving expenses incurred by the Executive relating to a change
in the Executive's principal residence in connection with such relocation.
1.9 HOLDOVER PERIOD means the period following a Change in Control that
(a) begins on the date that the Company provides the Executive with written
notice that the Company requires the services of the Executive and (b) ends on
the date specified in the notice but no later than six months after the date of
the Change in Control.
1.10 PROTECTED PERIOD shall be the period of time beginning upon the later
of (a) the date of a Change in Control or (b) the last day of the Executive's
Holdover Period, and ending two years after such date.
1.11 RETENTION BONUS means the Executive's benefit, as described in
Subsection 2.1 of this Agreement.
1.12 SEVERANCE COMPENSATION means the Executive's severance benefit, as
described in Subsection 2.2 of this Agreement.
4
<PAGE>
1.13 TERM has the meaning set forth in Section 8 of this Agreement.
1.14 TERMINATION OF EMPLOYMENT shall be deemed to have occurred for
purposes of this Agreement and the Executive shall be entitled to the Severance
Compensation hereunder if following a Change in Control that occurs during the
Term of this Agreement, the Executive (a) is terminated by the Company during
the Holdover Period or the Protected Period for any reason other than willful
dishonesty or the commission of a felony for which he is convicted and which,
in either case, may cause material harm to the Company, (b) terminates
employment during the Protected Period where such termination in any way
follows or results from a Good Reason, or (c) terminates employment during the
Holdover Period where such termination in any way follows or results from a
Good Reason described in Subsection 1.8(b)-(e) of this Agreement. The Executive
is not entitled to benefits under this Agreement if he terminates service
during the Holdover Period for a Good Reason described in Subsection 1.8(a) of
this Agreement; provided, however, that immediately following the end of the
Holdover Period, the Executive may have a Termination of Employment for a Good
Reason described in Subsection 1.8(a) based on events that occurred during the
Holdover Period.
2. BENEFITS
2.1 RETENTION BONUS. Upon a Change in Control, the Executive shall be
entitled to a cash payment equal to two-thirds times the Base Amount as a
Retention Bonus. The Retention Bonus shall be paid within three business days
after the Change in Control.
2.2 SEVERANCE COMPENSATION. Upon Termination of Employment, the
Executive shall be entitled to receive a cash payment equal to four-thirds
times the Base Amount. The Severance Compensation shall be paid within three
business days after the Termination of Employment.
2.3 HEALTH COVERAGE. Upon Termination of Employment, the Executive shall
be entitled to receive continuing group medical and dental insurance coverage
for a period of 24 months after Termination of Employment, at no cost to the
Executive.
2.4 EXCEPTION TO BENEFIT ELIGIBILITY. The Executive shall not be
entitled to receive any of the benefits under this Agreement if the Executive
is one of the "Persons" (or a member of a group within the meaning of Section
13(d)(3) of the Exchange Act that constitutes the "Person") whose beneficial
ownership results in a "Change in Control" under Subsection 1.3(a) or clause
(ii) of Subsection 1.3(c) or if the Executive is (i) a general partner,
executive officer, or director of any such
5
<PAGE>
Person, (ii) a person controlling any such Person, (iii) a general partner,
executive officer, or director of any person controlling any such person, or
(iv) a beneficial owner of (x) any equity interest in any such Person or
controlling person, if such Person or controlling person was formed for the
purpose of engaging in the transaction resulting in the Change in Control or
(y) more than 5% of the outstanding equity interest therein, if not so formed.
3. DEATH BENEFITS
If the Executive's employment with the Company is terminated after a
Change in Control and during the Protected Period due to death, the Executive
shall receive no Severance Compensation under Subsection 2.2 of this Agreement;
provided however, that if the Executive dies either (a) during the Holdover
Period or (b) after a Termination of Employment, but prior to payment of all
benefits under Section 2 of this Agreement, then the Executive's surviving
spouse (or if no spouse survives the Executive, the Executive's estate) shall
be entitled to the Severance Compensation. For purposes of this Section 3, the
Executive will be deemed to be in a Holdover Period for the six-month period
immediately following a Change in Control unless the Executive has received
written notice from the Company stating that a Holdover Period is not
applicable to the Executive or unless the time period prescribed by the Company
for the Holdover Period has expired. The benefits prescribed herein are in
addition to those available under applicable law and under the terms of the
Company's benefit plans and programs.
4. DISABILITY BENEFITS
If the Executive's employment with the Company is terminated after a
Change in Control and during the Protected Period due to Disability, the
Executive shall receive no Severance Compensation under Subsection 2.2 of this
Agreement; provided, however, that if the Executive terminates employment due
to Disability during the Holdover Period, the Executive shall receive Severance
Compensation as if the date of termination due to Disability were the date of a
Termination of Employment. For purposes of this Section 4, the Executive will
be deemed to be in a Holdover Period for the six-month period immediately
following a Change in Control unless the Executive has received written notice
from the Company stating that a Holdover Period is not applicable to the
Executive or unless the time period prescribed by the Company for the Holdover
Period has expired. The Executive shall also be eligible for disability
benefits available under applicable law and under the terms of the Company's
benefit plans and programs.
6
<PAGE>
5. CERTAIN REDUCTION IN PAYMENTS
Notwithstanding anything to the contrary in this Agreement, the
provisions of this Section 5 shall apply in the event that any payment or
distribution (whether paid or payable, or distributed or distributable,
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any reductions in payments required under this Section 5 (a
"Payment")) to the Executive would constitute a "parachute payment" within the
meaning of Code Section 280G; this Section 5 shall not be applicable if no such
Payment to the Executive constitutes a parachute payment under Code
Section 280G.
In the event that a nationally recognized accounting firm chosen by
the Company (the "Accounting Firm") shall determine that receipt of all
Payments would subject the Executive to the excise tax imposed by Code
Section 4999, then the aggregate present value of all Payments shall be reduced
(but not below zero) such that such aggregate present value of Payments equals
the Reduced Amount. If the Accounting Firm determines that some amount of
Payments would result in a Reduced Amount, the Company shall promptly notify
the Executive of the Accounting Firm's decision and further provide a copy of
the detailed computations, and the Executive shall be entitled solely to the
Reduced Amount. The Executive may then elect which of the Payments shall be
eliminated or reduced (as long as after such election the present value, as
determined in accordance with Code Section 280G(d)(4) ("Present Value"), of the
aggregate Payments equals the Reduced Amount). The Executive shall advise the
Company in writing of such election within 20 days of his receipt of notice.
If no such election is made by the Executive within the 20-day period, the
Company may elect which of such Payments shall be eliminated or reduced (as
long as after such election the Present Value of the aggregate Payments equals
the Reduced Amount) and shall promptly notify the Executive of such election.
All fees and expenses of the Accounting Firm shall be borne solely by the
Company.
The "Reduced Amount" shall be an amount expressed in present value
which maximizes the aggregate present value of Payments without causing any
Payment to be nondeductible by the Company because of Code Section 280G or
subject to an excise tax on the Executive under Code Section 4999. For
purposes of this Section 5, Present Value shall be determined in accordance
with Code Section 280G(d)(4).
7
<PAGE>
6. NO CONTRACT OF EMPLOYMENT
This Agreement shall not be construed so as to create a contract,
promise, or guarantee of employment for any particular term or duration, in any
particular position or assignment, or at any particular level of compensation
or benefits.
7. NON-ALIENATION OF BENEFITS
No right or benefit at any time under the Agreement shall be subject
to alienation, sale, transfer, assignment, pledge, or any encumbrance of any
kind. If the Executive shall attempt to or shall alienate, sell, transfer,
assign, pledge, or otherwise encumber his or her rights, benefits, or amounts
payable under the Agreement, or any part thereof, or if by reason of his
bankruptcy or other events happening at any time, such benefits would otherwise
be received by anyone else, the Company in its sole discretion may terminate
his interest in any such right or benefit and hold or pay it to, or for the
benefit of, such person, his spouse, children, or other dependents, or any of
them as the Company may determine.
8. TERM OF THIS AGREEMENT
The Term of this Agreement shall commence on the date of this
Agreement and end on the first anniversary of that date; PROVIDED, HOWEVER,
that the Term shall automatically be extended without further action by the
parties for additional one-year periods, unless written notice of the Company's
intention not to extend has been given to the Executive at least six months
prior to the expiration of the then effective Term. This Agreement shall be
void and of no effect if (i) a Change in Control occurs after the expiration of
the Term, or (ii) the Executive's employment with the Company and its
subsidiaries is terminated for any reason prior to a Change in Control.
9. RESOLUTION OF DISPUTES
(a) Any disputes arising under or in connection with this Agreement
shall be resolved, in the Executive's discretion, either (i) by arbitration, to
be held in Houston, Texas in accordance with the rules and procedures of the
American Arbitration Association, or (ii) by litigation.
(b) All costs, fees, and expenses of any arbitration or litigation
in connection with this Agreement that results in any decision or settlement
requiring the Company to make a payment to the Executive, including, without
limitation, attorneys' fees of both the Executive and the Company, shall be
borne by, and be
8
<PAGE>
the obligation of, the Company. In no event shall the Executive be required
to reimburse the Company for any of the costs and expenses incurred by the
Company relating to arbitration or litigation.
10. MISCELLANEOUS
10.1 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to principles of
conflict of laws.
10.2 AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or
modified otherwise than by a written agreement executed by the parties to this
Agreement or their respective successors and legal representatives. No waiver
by any party to this Agreement of any breach of any term, provision, or
condition of this Agreement by the other party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same time, or any prior or
subsequent time.
10.3 NOTICES. All notices and other communications hereunder shall be in
writing and shall be given by hand-delivery to the other party, by facsimile
transmission, by overnight courier, or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive: Marilyn I. Eckersley
Rt. 3, Box 37A.
Hempstead, Texas 77445
If to the Company: TPC Corporation
200 West Lake Park Boulevard
Suite 1000
Houston, Texas 77079.
10.4 PAYMENT OBLIGATION ABSOLUTE. Subject to Section 5 and to Subsection
2.4, the obligations of the Company to pay the benefits described in Section 2
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense, or other right which the Company may have against the
Executive. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, nor shall the
amount of any payment hereunder be reduced by any compensation earned by the
Executive as a result of employment by another employer.
9
<PAGE>
10.5 TAX WITHHOLDING. The Company may withhold from any benefits payable
under this Agreement all federal, state, city, or other taxes that are required
by any law or governmental regulation or ruling.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and the Company has caused this Agreement to be executed in its name and
on its behalf, all as of the day and year first above written.
TPC CORPORATION
By: /s/ JOHN A. STROM
----------------------------------
John A. Strom, President
/s/ MARILYN I. ECKERSLEY
----------------------------------
Marilyn I. Eckersley
10
<PAGE>
CHANGE IN CONTROL
AGREEMENT
This Agreement ("Agreement"), dated as of November 8, 1996, is made by and
between TPC Corporation, a Delaware corporation (the "Company"), and Patrick J.
Peldner (the "Executive").
RECITALS
The Board of Directors of the Company (the "Board") has determined that it
is in the best interest of the Company and its shareholders to ensure that the
Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat, or occurrence of a Change in Control (as defined
below) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by any pending or threatened Change in Control and to
encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change in Control, and
to provide the Executive with compensation arrangements upon a Change in
Control that ensure that the compensation expectations of the Executive will be
satisfied and that are competitive with those of other corporations.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, and for other good and valuable consideration, the Company and the
Executive hereby agree as follows:
1. DEFINITIONS
1.1 BASE AMOUNT means the Executive's base amount on the date of the
Change in Control, as determined in accordance with Code Section 280G.
1.2 BOARD means the Board of Directors of the Company.
1.3 CHANGE IN CONTROL shall mean any of the following events that occur
during the Term of this Agreement:
<PAGE>
(a) The acquisition by any individual, entity, or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) a
percentage of the then outstanding shares of common stock (assuming, for
purposes of this definition, that all shares of Class B Common Stock have been
converted into the same number of shares of Class A Common Stock) of the
Company (the "Outstanding Company Common Stock") that, when added to the
beneficial ownership previously held by that Person, and to the largest holding
of beneficial ownership in Outstanding Company Common Stock by any other
Person, equals or exceeds 50%, or (ii) a percentage of the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities") that, when added to the beneficial ownership previously held by
that Person, and to the largest holding of beneficial ownership in Outstanding
Company Voting Securities by any other Person, equals or exceeds 50%; provided,
however, that for purposes of this subparagraph (a), the following acquisitions
shall not in and of themselves constitute a Change in Control hereunder: (x)
any acquisition of securities of the Company made directly from the Company and
approved by a majority of the directors then comprising the Incumbent Board (as
defined below), (y) any acquisition of beneficial ownership of a higher
percentage of the Outstanding Company Common Stock or the Outstanding Company
Voting Securities that results solely from the acquisition, purchase, or
redemption of securities of the Company by the Company so long as such action
by the Company was approved by a majority of the directors then comprising the
Incumbent Board, or (z) any acquisition by any Company pursuant to a
transaction that complies with clauses (i), (ii), and (iii) of subparagraph (c)
hereof; or
(b) Individuals who, as of November 8, 1996, constituted the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to November 8, 1996 whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger, or consolidation or
sale or other disposition of all or substantially all the assets of the
Company (a
2
<PAGE>
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities
that were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially owned, directly or indirectly, more
than 75% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
company resulting from such Business Combination (including, without
limitation, a company which as a result of such transaction owns the Company
or all or substantially all the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case
may be, (ii) no Person (excluding any company resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the company
resulting from such Business Combination (including, without limitation, a
company which as a result of such transaction owns the Company or all or
substantially all the Company's assets either directly or through one or more
subsidiaries) or the combined voting power of the then outstanding voting
securities of such company except to the extent that such ownership existed
prior to the Business Combination, and (iii) at least a majority of the
members of the board of directors of the company resulting from such Business
Combination were members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
1.4 CODE means the Internal Revenue Code of 1986, as amended.
1.5 COMPANY means TPC Corporation and any successor thereto.
1.6 DIRECTOR means a member of the Board.
1.7 DISABILITY has the same meaning as the definition of disability under
the Company's long-term disability plan.
1.8 GOOD REASON shall mean any of the following:
3
<PAGE>
(a) the assignment to the Executive of any duties inconsistent with
the Executive's duties at the time of a Change in Control or a change in the
Executive's reporting responsibilities as in effect immediately prior to the
Change in Control, without the Executive's express written consent; or any
removal of the Executive from or any failure to reelect the Executive to
positions held by the Executive immediately prior to the Change in Control,
except in connection with promotions to higher office;
(b) a reduction in the Executive's total compensation as in effect
immediately prior to the Change in Control;
(c) the failure of the Company substantially to maintain and
continue the Executive's relative level of participation in the same or
substantially comparable bonus, stock incentive programs, and retirement and
welfare benefit plans as provided immediately prior to the Change in Control;
(d) the failure of the Company substantially to provide and continue
for the Executive the same or substantially comparable fringe benefits; or
(e) the Company's requiring the Executive to be based anywhere other
than in or within 20 miles of the Executive's principal place of employment at
the time of the Change in Control, except for required travel on the Company's
business to an extent substantially consistent with the Executive's prior
business travel obligations or, in the event the Executive consents to
relocation, the failure of the Company to pay (or reimburse the Executive for)
all reasonable moving expenses incurred by the Executive relating to a change
in the Executive's principal residence in connection with such relocation.
1.9 HOLDOVER PERIOD means the period following a Change in Control that
(a) begins on the date that the Company provides the Executive with written
notice that the Company requires the services of the Executive and (b) ends on
the date specified in the notice but no later than six months after the date of
the Change in Control.
1.10 PROTECTED PERIOD shall be the period of time beginning upon the later
of (a) the date of a Change in Control or (b) the last day of the Executive's
Holdover Period, and ending two years after such date.
1.11 RETENTION BONUS means the Executive's benefit, as described in
Subsection 2.1 of this Agreement.
4
<PAGE>
1.12 SEVERANCE COMPENSATION means the Executive's severance benefit, as
described in Subsection 2.2 of this Agreement.
1.13 TERM has the meaning set forth in Section 8 of this Agreement.
1.14 TERMINATION OF EMPLOYMENT shall be deemed to have occurred for
purposes of this Agreement and the Executive shall be entitled to the Severance
Compensation hereunder if following a Change in Control that occurs during the
Term of this Agreement, the Executive (a) is terminated by the Company during
the Holdover Period or the Protected Period for any reason other than willful
dishonesty or the commission of a felony for which he is convicted and which,
in either case, may cause material harm to the Company, (b) terminates
employment during the Protected Period where such termination in any way
follows or results from a Good Reason, or (c) terminates employment during the
Holdover Period where such termination in any way follows or results from a
Good Reason described in Subsection 1.8(b)-(e) of this Agreement. The Executive
is not entitled to benefits under this Agreement if he terminates service
during the Holdover Period for a Good Reason described in Subsection 1.8(a) of
this Agreement; provided, however, that immediately following the end of the
Holdover Period, the Executive may have a Termination of Employment for a Good
Reason described in Subsection 1.8(a) based on events that occurred during the
Holdover Period.
2. BENEFITS
2.1 RETENTION BONUS. Upon a Change in Control, the Executive shall be
entitled to a cash payment equal to two-thirds times the Base Amount as a
Retention Bonus. The Retention Bonus shall be paid within three business days
after the Change in Control.
2.2 SEVERANCE COMPENSATION. Upon Termination of Employment, the
Executive shall be entitled to receive a cash payment equal to four-thirds
times the Base Amount. The Severance Compensation shall be paid within three
business days after the Termination of Employment.
2.3 HEALTH COVERAGE. Upon Termination of Employment, the Executive shall
be entitled to receive continuing group medical and dental insurance coverage
for a period of 24 months after Termination of Employment, at no cost to the
Executive.
2.4 EXCEPTION TO BENEFIT ELIGIBILITY. The Executive shall not be
entitled to receive any of the benefits under this Agreement if the Executive
is one of the "Persons" (or a member of a group within the meaning of Section
13(d)(3) of the Exchange Act that constitutes the "Person") whose beneficial
ownership results in a "Change in Control" under Subsection 1.3(a) or clause
(ii) of Subsection 1.3(c) or if the Executive is (i) a general partner,
executive officer, or director of any such
5
<PAGE>
Person, (ii) a person controlling any such Person, (iii) a general partner ,
executive officer, or director of any person controlling any such person, or
(iv) a beneficial owner of (x) any equity interest in any such Person or
controlling person, if such Person or controlling person was formed for the
purpose of engaging in the transaction resulting in the Change in Control or
(y) more than 5% of the outstanding equity interest therein, if not so formed.
3. DEATH BENEFITS
If the Executive's employment with the Company is terminated after a
Change in Control and during the Protected Period due to death, the Executive
shall receive no Severance Compensation under Subsection 2.2 of this Agreement;
provided however, that if the Executive dies either (a) during the Holdover
Period or (b) after a Termination of Employment, but prior to payment of all
benefits under Section 2 of this Agreement, then the Executive's surviving
spouse (or if no spouse survives the Executive, the Executive's estate) shall
be entitled to the Severance Compensation. For purposes of this Section 3, the
Executive will be deemed to be in a Holdover Period for the six-month period
immediately following a Change in Control unless the Executive has received
written notice from the Company stating that a Holdover Period is not
applicable to the Executive or unless the time period prescribed by the Company
for the Holdover Period has expired. The benefits prescribed herein are in
addition to those available under applicable law and under the terms of the
Company's benefit plans and programs.
4. DISABILITY BENEFITS
If the Executive's employment with the Company is terminated after a
Change in Control and during the Protected Period due to Disability, the
Executive shall receive no Severance Compensation under Subsection 2.2 of this
Agreement; provided, however, that if the Executive terminates employment due
to Disability during the Holdover Period, the Executive shall receive Severance
Compensation as if the date of termination due to Disability were the date of a
Termination of Employment. For purposes of this Section 4, the Executive will
be deemed to be in a Holdover Period for the six-month period immediately
following a Change in Control unless the Executive has received written notice
from the Company stating that a Holdover Period is not applicable to the
Executive or unless the time period prescribed by the Company for the Holdover
Period has expired. The Executive shall also be eligible for disability
benefits available under applicable law and under the terms of the Company's
benefit plans and programs.
6
<PAGE>
5. CERTAIN REDUCTION IN PAYMENTS
Notwithstanding anything to the contrary in this Agreement, the
provisions of this Section 5 shall apply in the event that any payment or
distribution (whether paid or payable, or distributed or distributable,
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any reductions in payments required under this Section 5 (a
"Payment")) to the Executive would constitute a "parachute payment" within the
meaning of Code Section 280G; this Section 5 shall not be applicable if no such
Payment to the Executive constitutes a parachute payment under Code
Section 280G.
In the event that a nationally recognized accounting firm chosen by
the Company (the "Accounting Firm") shall determine that receipt of all
Payments would subject the Executive to the excise tax imposed by Code
Section 4999, then the aggregate present value of all Payments shall be reduced
(but not below zero) such that such aggregate present value of Payments equals
the Reduced Amount. If the Accounting Firm determines that some amount of
Payments would result in a Reduced Amount, the Company shall promptly notify
the Executive of the Accounting Firm's decision and further provide a copy of
the detailed computations, and the Executive shall be entitled solely to the
Reduced Amount. The Executive may then elect which of the Payments shall be
eliminated or reduced (as long as after such election the present value, as
determined in accordance with Code Section 280G(d)(4) ("Present Value"), of the
aggregate Payments equals the Reduced Amount). The Executive shall advise the
Company in writing of such election within 20 days of his receipt of notice.
If no such election is made by the Executive within the 20-day period, the
Company may elect which of such Payments shall be eliminated or reduced (as
long as after such election the Present Value of the aggregate Payments equals
the Reduced Amount) and shall promptly notify the Executive of such election.
All fees and expenses of the Accounting Firm shall be borne solely by the
Company.
The "Reduced Amount" shall be an amount expressed in present value
which maximizes the aggregate present value of Payments without causing any
Payment to be nondeductible by the Company because of Code Section 280G or
subject to an excise tax on the Executive under Code Section 4999. For
purposes of this Section 5, Present Value shall be determined in accordance
with Code Section 280G(d)(4).
7
<PAGE>
6. NO CONTRACT OF EMPLOYMENT
This Agreement shall not be construed so as to create a contract,
promise, or guarantee of employment for any particular term or duration, in any
particular position or assignment, or at any particular level of compensation
or benefits.
7. NON-ALIENATION OF BENEFITS
No right or benefit at any time under the Agreement shall be subject
to alienation, sale, transfer, assignment, pledge, or any encumbrance of any
kind. If the Executive shall attempt to or shall alienate, sell, transfer,
assign, pledge, or otherwise encumber his or her rights, benefits, or amounts
payable under the Agreement, or any part thereof, or if by reason of his
bankruptcy or other events happening at any time, such benefits would otherwise
be received by anyone else, the Company in its sole discretion may terminate
his interest in any such right or benefit and hold or pay it to, or for the
benefit of, such person, his spouse, children, or other dependents, or any of
them as the Company may determine.
8. TERM OF THIS AGREEMENT
The Term of this Agreement shall commence on the date of this
Agreement and end on the first anniversary of that date; PROVIDED, HOWEVER,
that the Term shall automatically be extended without further action by the
parties for additional one-year periods, unless written notice of the Company's
intention not to extend has been given to the Executive at least six months
prior to the expiration of the then effective Term. This Agreement shall be
void and of no effect if (i) a Change in Control occurs after the expiration of
the Term, or (ii) the Executive's employment with the Company and its
subsidiaries is terminated for any reason prior to a Change in Control.
9. RESOLUTION OF DISPUTES
(a) Any disputes arising under or in connection with this Agreement
shall be resolved, in the Executive's discretion, either (i) by arbitration, to
be held in Houston, Texas in accordance with the rules and procedures of the
American Arbitration Association, or (ii) by litigation.
(b) All costs, fees, and expenses of any arbitration or litigation
in connection with this Agreement that results in any decision or settlement
requiring the Company to make a payment to the Executive, including, without
limitation, attorneys' fees of both the Executive and the Company, shall be
borne by, and be
8
<PAGE>
the obligation of, the Company. In no event shall the Executive be required
to reimburse the Company for any of the costs and expenses incurred by the
Company relating to arbitration or litigation.
10. MISCELLANEOUS
10.1 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to principles of
conflict of laws.
10.2 AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or
modified otherwise than by a written agreement executed by the parties to this
Agreement or their respective successors and legal representatives. No waiver
by any party to this Agreement of any breach of any term, provision, or
condition of this Agreement by the other party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same time, or any prior or
subsequent time.
10.3 NOTICES. All notices and other communications hereunder shall be in
writing and shall be given by hand-delivery to the other party, by facsimile
transmission, by overnight courier, or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive: Patrick J. Peldner
22210 Bay Spring Dr.
Katy, Texas 77450
If to the Company: TPC Corporation
200 West Lake Park Boulevard
Suite 1000
Houston, Texas 77079.
10.4 PAYMENT OBLIGATION ABSOLUTE. Subject to Section 5 and to Subsection
2.4, the obligations of the Company to pay the benefits described in Section 2
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense, or other right which the Company may have against the
Executive. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, nor shall the
amount of any payment hereunder be reduced by any compensation earned by the
Executive as a result of employment by another employer.
9
<PAGE>
10.5 TAX WITHHOLDING. The Company may withhold from any benefits payable
under this Agreement all federal, state, city, or other taxes that are required
by any law or governmental regulation or ruling.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and the Company has caused this Agreement to be executed in its name and
on its behalf, all as of the day and year first above written.
TPC CORPORATION
By: /s/ JOHN A. STROM
--------------------------
John A. Strom, President
/s/ PATRICK J. PELDNER
--------------------------
Patrick J. Peldner
10
<PAGE>
CHANGE IN CONTROL
AGREEMENT
This Agreement ("Agreement"), dated as of November 8, 1996, is made by and
between TPC Corporation, a Delaware corporation (the "Company"), and D. Hughes
Watler, Jr. (the "Executive").
RECITALS
The Board of Directors of the Company (the "Board") has determined that it
is in the best interest of the Company and its shareholders to ensure that the
Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat, or occurrence of a Change in Control (as defined
below) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by any pending or threatened Change in Control and to
encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change in Control, and
to provide the Executive with compensation arrangements upon a Change in
Control that ensure that the compensation expectations of the Executive will be
satisfied and that are competitive with those of other corporations.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, and for other good and valuable consideration, the Company and the
Executive hereby agree as follows:
1. DEFINITIONS
1.1 BASE AMOUNT means the Executive's base amount on the date of the
Change in Control, as determined in accordance with Code Section 280G.
1.2 BOARD means the Board of Directors of the Company.
1.3 CHANGE IN CONTROL shall mean any of the following events that occur
during the Term of this Agreement:
<PAGE>
(a) The acquisition by any individual, entity, or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) a
percentage of the then outstanding shares of common stock (assuming, for
purposes of this definition, that all shares of Class B Common Stock have been
converted into the same number of shares of Class A Common Stock) of the
Company (the "Outstanding Company Common Stock") that, when added to the
beneficial ownership previously held by that Person, and to the largest holding
of beneficial ownership in Outstanding Company Common Stock by any other
Person, equals or exceeds 50%, or (ii) a percentage of the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities") that, when added to the beneficial ownership previously held by
that Person, and to the largest holding of beneficial ownership in Outstanding
Company Voting Securities by any other Person, equals or exceeds 50%; provided,
however, that for purposes of this subparagraph (a), the following acquisitions
shall not in and of themselves constitute a Change in Control hereunder: (x)
any acquisition of securities of the Company made directly from the Company and
approved by a majority of the directors then comprising the Incumbent Board (as
defined below), (y) any acquisition of beneficial ownership of a higher
percentage of the Outstanding Company Common Stock or the Outstanding Company
Voting Securities that results solely from the acquisition, purchase, or
redemption of securities of the Company by the Company so long as such action
by the Company was approved by a majority of the directors then comprising the
Incumbent Board, or (z) any acquisition by any Company pursuant to a
transaction that complies with clauses (i), (ii), and (iii) of subparagraph (c)
hereof; or
(b) Individuals who, as of November 8, 1996, constituted the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to November 8, 1996 whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger, or consolidation or
sale or other disposition of all or substantially all the assets of the
Company (a
2
<PAGE>
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities that
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially owned, directly or indirectly, more than 75%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the company
resulting from such Business Combination (including, without limitation, a
company which as a result of such transaction owns the Company or all or
substantially all the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding any company resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the company
resulting from such Business Combination (including, without limitation, a
company which as a result of such transaction owns the Company or all or
substantially all the Company's assets either directly or through one or more
subsidiaries) or the combined voting power of the then outstanding voting
securities of such company except to the extent that such ownership existed
prior to the Business Combination, and (iii) at least a majority of the
members of the board of directors of the company resulting from such Business
Combination were members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
1.4 CODE means the Internal Revenue Code of 1986, as amended.
1.5 COMPANY means TPC Corporation and any successor thereto.
1.6 DIRECTOR means a member of the Board.
1.7 DISABILITY has the same meaning as the definition of disability under
the Company's long-term disability plan.
1.8 GOOD REASON shall mean any of the following:
3
<PAGE>
(a) the assignment to the Executive of any duties inconsistent with
the Executive's duties at the time of a Change in Control or a change in the
Executive's reporting responsibilities as in effect immediately prior to the
Change in Control, without the Executive's express written consent; or any
removal of the Executive from or any failure to reelect the Executive to
positions held by the Executive immediately prior to the Change in Control,
except in connection with promotions to higher office;
(b) a reduction in the Executive's total compensation as in effect
immediately prior to the Change in Control;
(c) the failure of the Company substantially to maintain and
continue the Executive's relative level of participation in the same or
substantially comparable bonus, stock incentive programs, and retirement and
welfare benefit plans as provided immediately prior to the Change in Control;
(d) the failure of the Company substantially to provide and continue
for the Executive the same or substantially comparable fringe benefits; or
(e) the Company's requiring the Executive to be based anywhere other
than in or within 20 miles of the Executive's principal place of employment at
the time of the Change in Control, except for required travel on the Company's
business to an extent substantially consistent with the Executive's prior
business travel obligations or, in the event the Executive consents to
relocation, the failure of the Company to pay (or reimburse the Executive for)
all reasonable moving expenses incurred by the Executive relating to a change
in the Executive's principal residence in connection with such relocation.
1.9 HOLDOVER PERIOD means the period following a Change in Control that
(a) begins on the date that the Company provides the Executive with written
notice that the Company requires the services of the Executive and (b) ends on
the date specified in the notice but no later than six months after the date of
the Change in Control.
1.10 PROTECTED PERIOD shall be the period of time beginning upon the later
of (a) the date of a Change in Control or (b) the last day of the Executive's
Holdover Period, and ending two years after such date.
1.11 RETENTION BONUS means the Executive's benefit, as described in
Subsection 2.1 of this Agreement.
4
<PAGE>
1.12 SEVERANCE COMPENSATION means the Executive's severance benefit, as
described in Subsection 2.2 of this Agreement.
1.13 TERM has the meaning set forth in Section 8 of this Agreement.
1.14 TERMINATION OF EMPLOYMENT shall be deemed to have occurred for
purposes of this Agreement and the Executive shall be entitled to the Severance
Compensation hereunder if following a Change in Control that occurs during the
Term of this Agreement, the Executive (a) is terminated by the Company during
the Holdover Period or the Protected Period for any reason other than willful
dishonesty or the commission of a felony for which he is convicted and which,
in either case, may cause material harm to the Company, (b) terminates
employment during the Protected Period where such termination in any way
follows or results from a Good Reason, or (c) terminates employment during the
Holdover Period where such termination in any way follows or results from a
Good Reason described in Subsection 1.8(b)-(e) of this Agreement. The Executive
is not entitled to benefits under this Agreement if he terminates service
during the Holdover Period for a Good Reason described in Subsection 1.8(a) of
this Agreement; provided, however, that immediately following the end of the
Holdover Period, the Executive may have a Termination of Employment for a Good
Reason described in Subsection 1.8(a) based on events that occurred during the
Holdover Period.
2. BENEFITS
2.1 RETENTION BONUS. Upon a Change in Control, the Executive shall be
entitled to a cash payment equal to two-thirds times the Base Amount as a
Retention Bonus. The Retention Bonus shall be paid within three business days
after the Change in Control.
2.2 SEVERANCE COMPENSATION. Upon Termination of Employment, the
Executive shall be entitled to receive a cash payment equal to four-thirds
times the Base Amount. The Severance Compensation shall be paid within three
business days after the Termination of Employment.
2.3 HEALTH COVERAGE. Upon Termination of Employment, the Executive shall
be entitled to receive continuing group medical and dental insurance coverage
for a period of 24 months after Termination of Employment, at no cost to the
Executive.
2.4 EXCEPTION TO BENEFIT ELIGIBILITY. The Executive shall not be
entitled to receive any of the benefits under this Agreement if the Executive
is one of the "Persons" (or a member of a group within the meaning of Section
13(d)(3) of the Exchange Act that constitutes the "Person") whose beneficial
ownership results in a "Change in Control" under Subsection 1.3(a) or clause
(ii) of Subsection 1.3(c) or if the Executive is (i) a general partner,
executive officer, or director of any such
5
<PAGE>
Person, (ii) a person controlling any such Person, (iii) a general partner ,
executive officer, or director of any person controlling any such person, or
(iv) a beneficial owner of (x) any equity interest in any such Person or
controlling person, if such Person or controlling person was formed for the
purpose of engaging in the transaction resulting in the Change in Control or
(y) more than 5% of the outstanding equity interest therein, if not so formed.
3. DEATH BENEFITS
If the Executive's employment with the Company is terminated after a
Change in Control and during the Protected Period due to death, the Executive
shall receive no Severance Compensation under Subsection 2.2 of this Agreement;
provided however, that if the Executive dies either (a) during the Holdover
Period or (b) after a Termination of Employment, but prior to payment of all
benefits under Section 2 of this Agreement, then the Executive's surviving
spouse (or if no spouse survives the Executive, the Executive's estate) shall
be entitled to the Severance Compensation. For purposes of this Section 3, the
Executive will be deemed to be in a Holdover Period for the six-month period
immediately following a Change in Control unless the Executive has received
written notice from the Company stating that a Holdover Period is not
applicable to the Executive or unless the time period prescribed by the Company
for the Holdover Period has expired. The benefits prescribed herein are in
addition to those available under applicable law and under the terms of the
Company's benefit plans and programs.
4. DISABILITY BENEFITS
If the Executive's employment with the Company is terminated after a
Change in Control and during the Protected Period due to Disability, the
Executive shall receive no Severance Compensation under Subsection 2.2 of this
Agreement; provided, however, that if the Executive terminates employment due
to Disability during the Holdover Period, the Executive shall receive Severance
Compensation as if the date of termination due to Disability were the date of a
Termination of Employment. For purposes of this Section 4, the Executive will
be deemed to be in a Holdover Period for the six-month period immediately
following a Change in Control unless the Executive has received written notice
from the Company stating that a Holdover Period is not applicable to the
Executive or unless the time period prescribed by the Company for the Holdover
Period has expired. The Executive shall also be eligible for disability
benefits available under applicable law and under the terms of the Company's
benefit plans and programs.
6
<PAGE>
5. CERTAIN REDUCTION IN PAYMENTS
Notwithstanding anything to the contrary in this Agreement, the
provisions of this Section 5 shall apply in the event that any payment or
distribution (whether paid or payable, or distributed or distributable,
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any reductions in payments required under this Section 5 (a
"Payment")) to the Executive would constitute a "parachute payment" within the
meaning of Code Section 280G; this Section 5 shall not be applicable if no such
Payment to the Executive constitutes a parachute payment under Code
Section 280G.
In the event that a nationally recognized accounting firm chosen by
the Company (the "Accounting Firm") shall determine that receipt of all
Payments would subject the Executive to the excise tax imposed by Code
Section 4999, then the aggregate present value of all Payments shall be reduced
(but not below zero) such that such aggregate present value of Payments equals
the Reduced Amount. If the Accounting Firm determines that some amount of
Payments would result in a Reduced Amount, the Company shall promptly notify
the Executive of the Accounting Firm's decision and further provide a copy of
the detailed computations, and the Executive shall be entitled solely to the
Reduced Amount. The Executive may then elect which of the Payments shall be
eliminated or reduced (as long as after such election the present value, as
determined in accordance with Code Section 280G(d)(4) ("Present Value"), of the
aggregate Payments equals the Reduced Amount). The Executive shall advise the
Company in writing of such election within 20 days of his receipt of notice.
If no such election is made by the Executive within the 20-day period, the
Company may elect which of such Payments shall be eliminated or reduced (as
long as after such election the Present Value of the aggregate Payments equals
the Reduced Amount) and shall promptly notify the Executive of such election.
All fees and expenses of the Accounting Firm shall be borne solely by the
Company.
The "Reduced Amount" shall be an amount expressed in present value
which maximizes the aggregate present value of Payments without causing any
Payment to be nondeductible by the Company because of Code Section 280G or
subject to an excise tax on the Executive under Code Section 4999. For
purposes of this Section 5, Present Value shall be determined in accordance
with Code Section 280G(d)(4).
7
<PAGE>
6. NO CONTRACT OF EMPLOYMENT
This Agreement shall not be construed so as to create a contract,
promise, or guarantee of employment for any particular term or duration, in any
particular position or assignment, or at any particular level of compensation
or benefits.
7. NON-ALIENATION OF BENEFITS
No right or benefit at any time under the Agreement shall be subject
to alienation, sale, transfer, assignment, pledge, or any encumbrance of any
kind. If the Executive shall attempt to or shall alienate, sell, transfer,
assign, pledge, or otherwise encumber his or her rights, benefits, or amounts
payable under the Agreement, or any part thereof, or if by reason of his
bankruptcy or other events happening at any time, such benefits would otherwise
be received by anyone else, the Company in its sole discretion may terminate
his interest in any such right or benefit and hold or pay it to, or for the
benefit of, such person, his spouse, children, or other dependents, or any of
them as the Company may determine.
8. TERM OF THIS AGREEMENT
The Term of this Agreement shall commence on the date of this
Agreement and end on the first anniversary of that date; PROVIDED, HOWEVER,
that the Term shall automatically be extended without further action by the
parties for additional one-year periods, unless written notice of the Company's
intention not to extend has been given to the Executive at least six months
prior to the expiration of the then effective Term. This Agreement shall be
void and of no effect if (i) a Change in Control occurs after the expiration of
the Term, or (ii) the Executive's employment with the Company and its
subsidiaries is terminated for any reason prior to a Change in Control.
9. RESOLUTION OF DISPUTES
(a) Any disputes arising under or in connection with this Agreement
shall be resolved, in the Executive's discretion, either (i) by arbitration, to
be held in Houston, Texas in accordance with the rules and procedures of the
American Arbitration Association, or (ii) by litigation.
(b) All costs, fees, and expenses of any arbitration or litigation
in connection with this Agreement that results in any decision or settlement
requiring the Company to make a payment to the Executive, including, without
limitation, attorneys' fees of both the Executive and the Company, shall be
borne by, and be
8
<PAGE>
the obligation of, the Company. In no event shall the Executive be required
to reimburse the Company for any of the costs and expenses incurred by the
Company relating to arbitration or litigation.
10. MISCELLANEOUS
10.1 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to principles of
conflict of laws.
10.2 AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or
modified otherwise than by a written agreement executed by the parties to this
Agreement or their respective successors and legal representatives. No waiver
by any party to this Agreement of any breach of any term, provision, or
condition of this Agreement by the other party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same time, or any prior or
subsequent time.
10.3 NOTICES. All notices and other communications hereunder shall be in
writing and shall be given by hand-delivery to the other party, by facsimile
transmission, by overnight courier, or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive: D. Hughes Watler, Jr.
23 Woodsborough Circle.
Houston, Texas 77055
If to the Company: TPC Corporation
200 West Lake Park Boulevard
Suite 1000
Houston, Texas 77079.
10.4 PAYMENT OBLIGATION ABSOLUTE. Subject to Section 5 and to Subsection
2.4, the obligations of the Company to pay the benefits described in Section 2
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense, or other right which the Company may have against the
Executive. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, nor shall the
amount of any payment hereunder be reduced by any compensation earned by the
Executive as a result of employment by another employer.
9
<PAGE>
10.5 TAX WITHHOLDING. The Company may withhold from any benefits payable
under this Agreement all federal, state, city, or other taxes that are required
by any law or governmental regulation or ruling.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and the Company has caused this Agreement to be executed in its name and
on its behalf, all as of the day and year first above written.
TPC CORPORATION
By: /s/ John A. Strom
-------------------------------
John A. Strom, President
/s/ D. Hughes Watler, Jr.
----------------------------------
D. Hughes Watler, Jr.
10
<PAGE>
TPC CORPORATION SIGNS AGREEMENT TO BE ACQUIRED BY PACIFICORP HOLDINGS, INC.
Houston, Texas (March 12, 1997) -- TPC Corporation (NYSE: TPC) announced
today that TPC has entered into a definitive merger agreement with PacifiCorp
Holdings, Inc., a wholly owned subsidiary of PacifiCorp (NYSE:PPW), of
Portland, Oregon.
Under the terms of the merger agreement, which was approved by TPC's
Board of Directors at a meeting held yesterday, PacifiCorp, through a
subsidiary, will commence a tender offer on Tuesday, March 18, 1997, to
purchase all outstanding shares of TPC common stock for $13.41 per share. The
aggregate purchase price for outstanding shares and stock options is expected
to be approximately $288 million.
The tender offer will be conditioned upon, among other things, the tender
of TPC shares which represented at least a majority of the outstanding shares on
a fully-diluted basis. In addition, the agreement provides that if it is
terminated under specified circumstances, PacifiCorp will be entitled to
receive from TPC a fee of $9 million. In the merger to occur following
consummation of the tender offer, each share of TPC common stock which is
outstanding and not purchased pursuant to the tender offer will be converted
into the right to receive $13.41 in cash.
PacifiCorp and TPC expect that the necessary filings with the Securities
and Exchange Commission in connection with the tender offer will be made early
next week, and that the tender offer documents will be mailed to TPC's
shareholders promptly thereafter.
-more-
<PAGE>
The transaction is the culmination of an exploration of strategic
alternatives for increasing shareholder value that TPC's Board of Directors
began last fall.
Larry W. Bickle, chairman and chief executive officer of TPC, said, "TPC
is excited to be able to combine its business with PacifiCorp. The acquisition
recognizes the great progress TPC has made in expanding our gathering and
processing business, our gas marketing operations, and our gas storage
business through Market Hub Partners. The combination of our company and
PacifiCorp makes us a formidable competitor in eastern energy markets."
"This transaction is key in establishing PacifiCorp as full service
energy company," said Fred Buckman, PacifiCorp president and chief executive
officer. "To successfully compete, energy companies need to have the skills
and assets that enable them to meet all aspects of customers' energy needs, be
they electricity, gas or coal." Dennis Steinberg, PacifiCorp senior vice
president of global sales and marketing, added, "Customers tell us they want
to deal with an energy provider who can take care of their total energy needs.
So we have taken this significant step toward building gas capabilities into
our energy marketing portfolio."
TPC Corporation was represented in the transaction by Lehman Brothers as
financial advisors, and Baker & Botts, L.L.P., as legal advisors.
For the year ended December 31, 1996, TPC had revenue of $617 million and
net income of $5 million. At December 31, 1996, TPC had $349 million in total
assets, total liabilities of $246 million (including $139 million of long-term
debt) and stockholders' equity of $103 million.
PACIFICORP IS THE PARENT COMPANY OF PACIFIC POWER AND UTAH POWER, SERVING
1.4 MILLION RETAIL ELECTRIC CUSTOMERS THROUGHOUT PORTIONS OF SEVEN WESTERN
STATES. THE COMPANY ALSO HAS ELECTRIC OPERATIONS IN AUSTRALIA, IS A MAJOR
WHOLESALE POWER MARKETER AND PROVIDES TELECOMMUNICATIONS SERVICES THROUGHOUT
THE UNITED STATES THROUGH PACIFIC TELECOM, INC.
TPC CORPORATION IS ENGAGED IN THE GATHERING, PROCESSING,
HIGH-DELIVERABILITY STORAGE AND MARKETING OF NATURAL GAS. THROUGH ITS 66%
OWNED AFFILIATE, MARKET HUB PARTNERS, THE COMPANY CURRENTLY HAS TWO FULLY
OPERATIONAL MARKET HUBS--THE MOSS BLUFF HUB IN TEXAS AND THE EGAN HUB IN
LOUISIANA; THREE OTHER SUCH MARKET HUBS ARE IN VARIOUS STAGES OF DEVELOPMENT
IN STRATEGIC LOCATIONS IN MISSISSIPPI, PENNSYLVANIA AND THE MIDWEST AREA.
INFORMATION ON TPC IS ACCESSIBLE ON THE INTERNET THROUGH THE WORLDWIDE WEB AT
THE FOLLOWING ADDRESS: HTTP://WWW.TPC-CORP.COM.
####
