<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
SCHEDULE 14D-1
Tender Offer Statement
Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934
------------------------
TPC CORPORATION
(Name of Subject Company)
POWER ACQUISITION COMPANY
PACIFICORP HOLDINGS, INC.
(Bidders)
CLASS A COMMON STOCK, $.01 PAR VALUE, AND CLASS B COMMON STOCK, $.01 PAR VALUE
(Title of Class of Securities)
872616107
(CUSIP Number of Class A Common Stock)
RICHARD T. O'BRIEN
PACIFICORP HOLDINGS, INC.
PORT OF PORTLAND BUILDING, SUITE 1600
700 NE MULTNOMAH
PORTLAND, OREGON 97232
(503) 731-2000
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
COPY TO:
STUART W. CHESTLER
STOEL RIVES LLP
900 SW FIFTH AVENUE, SUITE 2300
PORTLAND, OREGON 97204-1268
(503) 294-9500
------------------------
CALCULATION OF FILING FEE
<TABLE>
<S> <C>
Transaction Valuation* Amount of Filing Fee*
$288,337,918 $57,668
</TABLE>
<TABLE>
<C> <S> <C>
* The transaction valuation assumes the purchase of 21,501,709 shares of Class A Common Stock
and Class B Common Stock of TPC Corporation at $13.41 per share in cash, which is based on
the number of shares of Common Stock represented by the Company to be outstanding
(18,004,215) as of March 11, 1997 and the number of shares of Common Stock issuable under
outstanding stock options (3,497,494) as of March 11, 1997. The amount of the filing fee,
calculated in accordance with Rule 0-11(d) under the Securities Exchange Act of 1934, equals
1/50 of one percent of the cash offered by the Bidder.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the
filing with which the offsetting fee was previously paid. Identify the previous filing by
registration statement number, or the Form or Schedule and the date of its filing.
Amount Previously Paid:..........................................................
Form or Registration No.:........................................................
Filing Party:....................................................................
Date Filed:......................................................................
</TABLE>
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<PAGE>
14D-1
<TABLE>
<C> <S>
- ----------------------------------------------------------------------------------------------------
1. Name of reporting person
Power Acquisition Company
- ----------------------------------------------------------------------------------------------------
2. Check the appropriate box if a member of a group (a) / /
(b) / /
- ----------------------------------------------------------------------------------------------------
3. SEC Use Only
- ----------------------------------------------------------------------------------------------------
4. Sources of Funds
AF
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5. Check box if disclosure of legal proceedings is required pursuant to Items 2(e) OR
2(f) / /
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6. Citizenship or place of organization
Delaware
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7. Aggregate amount beneficially owned by each reporting person
None (0)
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8. Check box if the aggregate amount in row (7) excludes certain shares. / /
- ----------------------------------------------------------------------------------------------------
9. Percent of class represented by amount in row (7)
None (0)
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10. Type of reporting person
CO
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</TABLE>
2
<PAGE>
14D-1
<TABLE>
<C> <S>
- ----------------------------------------------------------------------------------------------------
1. Name of reporting person
PacifiCorp Holdings, Inc.
- ----------------------------------------------------------------------------------------------------
2. Check the appropriate box if a member of a group (a) / /
(b) / /
- ----------------------------------------------------------------------------------------------------
3. SEC Use Only
- ----------------------------------------------------------------------------------------------------
4. Sources of Funds
BK, WC, OO
- ----------------------------------------------------------------------------------------------------
5. Check box if disclosure of legal proceedings is required pursuant to Items 2(e) OR
2(f) / /
- ----------------------------------------------------------------------------------------------------
6. Citizenship or place of organization
Delaware
- ----------------------------------------------------------------------------------------------------
7. Aggregate amount beneficially owned by each reporting person
None (0)
- ----------------------------------------------------------------------------------------------------
8. Check box if the aggregate amount in row (7) excludes certain shares. / /
- ----------------------------------------------------------------------------------------------------
9. Percent of class represented by amount in row (7)
None (0)
- ----------------------------------------------------------------------------------------------------
10. Type of reporting person
CO
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</TABLE>
3
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is TPC Corporation, a Delaware
corporation, (the "Company") and the address of its principal executive offices
is 200 WestLake Park Boulevard, Suite 1000, Houston, TX 77079.
(b) The classes of securities to which this statement relates are the Class
A Common Stock, $.01 par value per share, and the Class B Common Stock, $.01 par
value per share (collectively, the "Shares"), of the Company. The information
set forth in the Introductory Section and Section 1 of the Offer to Purchase
(the "Offer to Purchase") annexed hereto as Exhibit (a)1 is incorporated herein
by reference.
(c) The information concerning the principal market in which the Class A
Common Stock is traded and the high and low sales prices for the Class A Common
Stock in such principal market is set forth in Section 6 ("Price Range of
Shares; Cash Distributions") of the Offer to Purchase which is incorporated
herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a) - (d) and (g) The name, principal business and address of the principal
office of Power Acquisition Company, a Delaware corporation (the "Purchaser"),
PacifiCorp Holdings, Inc., a Delaware corporation ("PHI"), and PacifiCorp, an
Oregon corporation, is set forth in Section 8 ("Certain Information Concerning
the Purchaser") of the Offer to Purchase which is incorporated herein by
reference. The name, citizenship, business address, present principal occupation
or employment of each director and executive officer of Purchaser, PHI and
PacifiCorp and the name, principal business and address of any corporation or
other organization in which such occupation or employment is conducted, material
occupations, positions, offices or employments during the last five years and
the name, principal business and address of any business corporation or other
organization in which such occupation, position, office or employment was
carried on, is set forth in Schedule I of the Offer to Purchase and is
incorporated herein by reference.
(e) and (f) During the last five years none of the Purchaser, PHI or
PacifiCorp or, to the best knowledge of the Purchaser, any of the persons listed
in Schedule I to the Offer to Purchase has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors). During the
last five years, none of the Purchaser, PHI or PacifiCorp or, to the best
knowledge of the Purchaser, any of the persons listed in Schedule I to the Offer
to Purchase was a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction and, as a result of such proceeding, was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting activities subject to, federal or state securities laws or finding
any violation of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) To the best of Purchaser's and PHI's knowledge, there have been no
transactions with the Company required to be set forth in this Item.
(b) The information set forth in Section 10 ("Background of the Offer;
Contacts with the Company") of the Offer to Purchase is incorporated herein by
reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in Section 9 ("Source and Amount of Funds") of
the Offer to Purchase is incorporated herein by reference.
(b) and (c) Not applicable.
4
<PAGE>
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a) - (e) The information set forth in the Introduction and Section 11 ("The
Merger Agreement; Purpose of the Offer; Plans for the Company") of the Offer to
Purchase is incorporated herein by reference.
(f) and (g) The information set forth in Section 12 ("Effect of the Offer on
the Market for the Shares; New York Stock Exchange Listing and Exchange Act
Registration") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
Not applicable.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 10 ("Background of
the Offer; Contacts with the Company"), Section 11 ("The Merger Agreement;
Purpose of the Offer; Plans for the Company"), Section 14 ("Certain Legal
Matters") and Section 15 ("Fees and Expenses") of the Offer to Purchase is
incorporated herein by reference. Except as set forth in the Introduction and
Sections 10, 11, 14 and 15 of the Offer to Purchase, neither the Purchaser, PHI
or PacifiCorp or, to the best knowledge of the Purchaser, any of the persons
listed in Schedule I to the Offer to Purchase, has any contract, arrangement,
understanding or relationship (whether or not legally enforceable) with any
other person with respect to any securities of the Company (including, but not
limited to, any contract, arrangement, understanding or relationship concerning
the transfer or the voting of any such securities, joint ventures, loan or
option arrangements, puts or calls, guaranties of loans, guaranties against
loss, or the giving or withholding of proxies).
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 15 ("Fees and Expenses") of the Offer
to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The Purchaser is a wholly owned subsidiary of PHI formed for the purpose of
making this tender offer. The consolidated financial statements of PHI are set
forth in Annex I to this Schedule 14D-1 and are incorporated herein by
reference. The consolidated financial statements as of December 31, 1995 and
1994 and for the three years ended December 31, 1995 are audited. The
consolidated financial statements as of December 31, 1996 and for the year then
ended are unaudited. Audited financial statements for the period ended December
31, 1996 are not currently available and cannot be obtained without unreasonable
cost and expense due to the scheduled completion of the audited financial
statements.
ITEM 10. ADDITIONAL INFORMATION.
(a) None.
(b) - (d) The information set forth in the Introduction and Section 14
("Certain Legal Matters") of the Offer to Purchase is incorporated herein by
reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, to the extent not otherwise incorporated herein by reference, is
incorporated herein by reference.
5
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <S>
(a)(1) Offer to Purchase, dated March 18, 1997.
(2) Letter of Transmittal.
(3) IRS Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
(4) Form of Summary Advertisement, dated March 18, 1997.
(5) Form of Notice of Guaranteed Delivery.
(6) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(7) Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees.
(8) Press Release, dated March 12, 1997.
(b) Not applicable.
(c)(1) Agreement and Plan of Merger, dated March 11, 1997, among the Purchaser, PHI and the
Company.
(2) Stockholder Agreement, dated March 11, 1997, among the Purchaser, PHI, Larry W.
Bickle, J. Chris Jones and John A. Strom.
(d) Not applicable.
(e) Not applicable.
(f) The Offer to Purchase and the Letter of Transmittal are incorporated herein by
reference.
</TABLE>
6
<PAGE>
SIGNATURE
After due 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.
Date: March 18, 1997 POWER ACQUISITION COMPANY
By /s/ DENNIS STEINBERG
------------------------------------------
Dennis Steinberg
PRESIDENT
PACIFICORP HOLDINGS, INC.
By /s/ VERL R. TOPHAM
------------------------------------------
Verl R. Topham
SENIOR VICE PRESIDENT
7
<PAGE>
ANNEX I
PACIFICORP HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED FINANCIAL STATEMENTS
Statement of Consolidated Income and Retained Earnings for the Year
Ended December 31, 1996............................................... A-2
Consolidated Balance Sheet at December 31, 1996......................... A-4
Statement of Consolidated Cash Flows for the Year Ended December 31,
1996.................................................................. A-6
AUDITED FINANCIAL STATEMENTS
Independent Auditors' Report............................................ A-7
Statements of Consolidated Income and Retained Earnings for the Years
Ended December 31, 1995, 1994 and 1993................................ A-8
Consolidated Balance Sheets at December 31, 1995 and 1994............... A-10
Statements of Consolidated Cash Flows for the Years Ended December 31,
1995, 1994 and 1993................................................... A-12
Notes to Consolidated Financial Statements.............................. A-13
</TABLE>
A-1
<PAGE>
PACIFICORP HOLDINGS, INC.
UNAUDITED STATEMENT OF CONSOLIDATED INCOME AND
RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF DOLLARS)
<TABLE>
<S> <C>
Revenues........................................................................ $ 1,332,973
-------------
Expenses
Operations.................................................................... 474,824
Maintenance................................................................... 141,182
Administrative and general.................................................... 132,172
Depreciation and amortization................................................. 186,981
Taxes, other than income taxes................................................ 22,496
-------------
Total....................................................................... 957,655
-------------
Income from operations.......................................................... 375,318
-------------
Interest expense and other
Interest expense.............................................................. 164,339
Minority interest............................................................. 4,187
Other--net.................................................................... 6,521
-------------
Total....................................................................... 175,047
-------------
Income before income taxes...................................................... 200,271
Income tax expense.............................................................. 67,074
-------------
Net income...................................................................... 133,197
Retained earnings, January 1.................................................... 433,662
Common dividends................................................................ --
-------------
Retained earnings, December 31.................................................. $ 566,859
-------------
-------------
</TABLE>
A-2
<PAGE>
(This page has been left blank intentionally.)
A-3
<PAGE>
PACIFICORP HOLDINGS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 1996
(IN THOUSANDS OF DOLLARS)
ASSETS
<TABLE>
<S> <C>
Current assets
Cash and cash equivalents..................................................... $ 15,235
Accounts receivable (less allowance for doubtful accounts: $942).............. 235,344
Accounts and notes receivable--affiliates..................................... 32,527
Inventory, materials and supplies............................................. 73,523
Finance assets--net........................................................... 40,676
Other......................................................................... 8,197
-------------
Total current assets........................................................ 405,502
-------------
Property, plant and equipment
Australian Electric operations................................................ 1,361,896
Telecommunications............................................................ 1,670,027
Other operations.............................................................. 68,802
Accumulated depreciation and amortization..................................... (800,353)
-------------
Total property, plant and equipment--net.................................... 2,300,372
-------------
Other assets
Investments in and advances to affiliated companies........................... 351,645
Intangible assets--net........................................................ 888,731
Finance note receivable....................................................... 214,623
Finance assets--net........................................................... 425,552
Real estate investments....................................................... 217,021
Deferred charges and other.................................................... 35,820
-------------
Total other assets.......................................................... 2,133,392
-------------
Total assets.................................................................... $ 4,839,266
-------------
-------------
</TABLE>
A-4
<PAGE>
PACIFICORP HOLDINGS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 1996
(IN THOUSANDS OF DOLLARS)
LIABILITIES AND CAPITALIZATION
<TABLE>
<S> <C>
Current liabilities
Long-term debt currently maturing............................................. $ 27,109
Notes payable and commercial paper............................................ 152,198
Accounts payable.............................................................. 147,142
Accounts and notes payable--affiliates........................................ 3,637
Interest payable.............................................................. 55,836
Taxes payable................................................................. 7,052
Customer deposits and other................................................... 97,567
-------------
Total current liabilities................................................... 490,541
-------------
Long-term debt
Long-term debt................................................................ 2,016,246
Long-term debt-affiliates..................................................... 33,499
-------------
Total long-term debt........................................................ 2,049,745
-------------
Other noncurrent liabilities
Deferred income taxes......................................................... 429,567
Unamortized investment tax credits............................................ 7,151
Deferred gain on disposition of subsidiary.................................... 173,801
Other......................................................................... 199,221
-------------
Total other noncurrent liabilities.......................................... 809,740
-------------
Minority interest............................................................... 31,769
-------------
Common equity
Cumulative currency translation adjustment.................................... 12,719
Common shareholder's capital.................................................. 877,893
Retained earnings............................................................. 566,859
-------------
Total common equity......................................................... 1,457,471
-------------
Total liabilities and capitalization............................................ $ 4,839,266
-------------
-------------
</TABLE>
A-5
<PAGE>
PACIFICORP HOLDINGS, INC.
UNAUDITED STATEMENT OF CONSOLIDATED CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF DOLLARS)
<TABLE>
<S> <C>
Cash flows from operating activities
Net income..................................................................... $ 133,197
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation and amortization................................................ 199,920
Deferred income taxes and investment tax credits--net........................ 12,226
Minority interest and other.................................................. (21,439)
Accounts receivable and prepayments.......................................... (54,759)
Inventory, materials and supplies............................................ 6,741
Accounts payable and accrued liabilities..................................... 61,138
-------------
Net cash provided by operating activities.................................. 337,024
-------------
Cash flows from investing activities
Construction................................................................... (208,732)
Operating companies and assets acquired........................................ (45,594)
Investments in and advances to affiliated companies--net....................... (153,919)
Proceeds from sales of assets.................................................. 45,407
Proceeds from sales of finance assets and principal payments................... 55,831
Purchase of finance assets..................................................... (13,681)
Other.......................................................................... (1,480)
-------------
Net cash used in investing activities...................................... (322,168)
-------------
Cash flows from financing activities
Changes in short-term debt..................................................... (388,977)
Changes in notes with affiliated companies..................................... (1,829)
Proceeds from long-term debt................................................... 536,468
Repayments of long-term debt................................................... (127,283)
Other.......................................................................... (39,903)
-------------
Net cash used in financing activities...................................... (21,524)
-------------
Decrease in cash and cash equivalents............................................ (6,668)
Cash and cash equivalents
January 1...................................................................... 21,903
-------------
December 31.................................................................... $ 15,235
-------------
-------------
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest..................................................................... $ 215,730
Income tax payments--net of refunds.......................................... 7,305
</TABLE>
A-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
PacifiCorp Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of PacifiCorp
Holdings, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income and retained earnings and of cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of PacifiCorp
Holdings, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Notes 1 and 17 to the consolidated financial statements, the
Company changed its method of accounting for income taxes and other
postretirement benefits in the year ended December 31, 1993.
DELOITTE & TOUCHE LLP
Portland, Oregon
February 13, 1996
A-7
<PAGE>
PACIFICORP HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED INCOME AND
RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- -----------
<S> <C> <C> <C>
Revenues................................................................... $ 784,840 $ 858,760 $ 898,556
---------- ----------- -----------
Expenses
Operations............................................................... 199,717 297,401 342,391
Maintenance.............................................................. 112,643 117,694 122,024
Administrative and general............................................... 85,785 101,962 109,145
Depreciation and amortization............................................ 123,604 122,737 124,378
Taxes, other than income taxes........................................... 16,237 15,891 15,760
---------- ----------- -----------
Total.................................................................. 537,986 655,685 713,698
---------- ----------- -----------
Income from operations..................................................... 246,854 203,075 184,858
---------- ----------- -----------
Interest expense and other
Interest expense......................................................... 71,555 74,537 107,929
Gain on sale of Alascom, net of minority interest and goodwill........... (37,216) -- --
Minority interest........................................................ 9,960 13,275 11,297
Other--net............................................................... (11,470) (2,345) (2,993)
---------- ----------- -----------
Total.................................................................. 32,829 85,467 116,233
---------- ----------- -----------
Income from continuing operations before income taxes...................... 214,025 117,608 68,625
Income tax expense......................................................... 24,732 29,610 8,087
---------- ----------- -----------
Income from continuing operations before cumulative effect of change in
accounting principle..................................................... 189,293 87,998 60,538
Discontinued operations (less applicable income tax expense of $26,011).... -- -- 52,406
Cumulative effect on prior years of change in accounting for income
taxes.................................................................... -- -- 1,932
---------- ----------- -----------
Net income................................................................. 189,293 87,998 114,876
Retained earnings, January 1............................................... 278,369 293,025 339,476
Common dividends........................................................... (34,000) (102,654) (161,327)
---------- ----------- -----------
Retained earnings, December 31............................................. $ 433,662 $ 278,369 $ 293,025
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
(See accompanying Notes to Consolidated Financial Statements)
A-8
<PAGE>
(This page has been left blank intentionally.)
A-9
<PAGE>
PACIFICORP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31, 1995 AND 1994
(IN THOUSANDS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Current assets
Cash and cash equivalents........................................................... $ 21,903 $ 22,785
Accounts receivable (less allowance for doubtful accounts: 1995/$886 and
1994/$1,858)...................................................................... 169,490 119,967
Accounts and notes receivable--affiliates........................................... 3,110 34,585
Inventory, materials and supplies................................................... 79,487 77,693
Finance assets...................................................................... 29,912 27,890
Taxes receivable.................................................................... 53,595 1,042
Other............................................................................... 10,869 16,566
------------ ------------
Total current assets.............................................................. 368,366 300,528
------------ ------------
Property, plant and equipment
Telecommunications.................................................................. 1,592,917 1,572,668
Electricity distributor............................................................. 1,286,484 --
Other............................................................................... 65,007 64,921
Accumulated depreciation and amortization........................................... (695,564) (808,288)
------------ ------------
Net................................................................................. 2,248,844 829,301
Construction work in progress....................................................... 30,299 52,667
------------ ------------
Total property, plant and equipment--net.......................................... 2,279,143 881,968
------------ ------------
Other assets
Investments in and advances to affiliated companies................................. 180,634 182,658
Intangible assets--net.............................................................. 761,985 256,552
Finance note receivable............................................................. 217,492 220,726
Finance assets...................................................................... 453,744 481,940
Real estate investments............................................................. 179,804 166,475
Deferred charges and other.......................................................... 43,093 41,176
------------ ------------
Total other assets................................................................ 1,836,752 1,349,527
------------ ------------
Total assets.......................................................................... $ 4,484,261 $ 2,532,023
------------ ------------
------------ ------------
</TABLE>
A-10
<PAGE>
PACIFICORP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31, 1995 AND 1994
(IN THOUSANDS OF DOLLARS)
LIABILITIES AND CAPITALIZATION
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Current liabilities
Long-term debt currently maturing................................................... $ 23,227 $ 44,455
Notes payable and commercial paper.................................................. 541,175 21,713
Accounts payable.................................................................... 135,751 134,335
Accounts and notes payable--affiliates.............................................. 1,567 1,700
Interest payable.................................................................... 49,516 30,013
Customer deposits and other......................................................... 112,722 59,769
------------ ------------
Total current liabilities......................................................... 863,958 291,985
------------ ------------
Long-term debt
Long-term debt...................................................................... 1,542,241 612,176
Long-term debt-affiliates........................................................... -- 2,062
------------ ------------
Total long-term debt.............................................................. 1,542,241 614,238
------------ ------------
Other noncurrent liabilities
Deferred income taxes............................................................... 412,418 363,146
Unamortized investment tax credits.................................................. 8,877 15,757
Deferred gain on disposition of subsidiary.......................................... 176,612 179,821
Other............................................................................... 145,596 102,901
------------ ------------
Total other noncurrent liabilities................................................ 743,503 661,625
------------ ------------
Minority interest..................................................................... 23,004 107,913
------------ ------------
Commitments and contingencies (See Notes 5, 12 and 13)
Common equity
Common shareholder's capital........................................................ 877,893 577,893
Retained earnings................................................................... 433,662 278,369
------------ ------------
Total common equity............................................................... 1,311,555 856,262
------------ ------------
Total liabilities and capitalization.................................................. $ 4,484,261 $ 2,532,023
------------ ------------
------------ ------------
</TABLE>
(See accompanying Notes to Consolidated Financial Statements)
A-11
<PAGE>
PACIFICORP HOLDINGS, INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1995 1994 1993
------------ ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities
Income from continuing operations....................................... $ 189,293 $ 87,998 $ 60,538
Adjustments to reconcile income from continuing operations to net cash
provided by operating activities
Depreciation and amortization......................................... 137,217 160,799 177,898
Deferred income taxes and investment tax credits--net................. 35,491 (79,245) 54,125
Gain on sale of Alascom, net of minority interest and goodwill........ (37,216) -- --
Minority interest and other........................................... (21,026) (727) 16,716
Accounts receivable and prepayments................................... (43,194) (1,311) 39,569
Inventory, materials and supplies..................................... 3,074 4,741 11,112
Accounts payable and accrued liabilities.............................. (48,684) 42,385 (96,166)
------------ ---------- ----------
Net cash provided by operating activities........................... 214,955 214,640 263,792
------------ ---------- ----------
Cash flows from investing activities
Construction............................................................ (123,939) (150,600) (105,197)
Operating companies and assets acquired................................. (2,002,073) (5,919) (17,981)
Purchase of minority interest of Pacific Telecom........................ (131,469) -- --
Investments in and advances to affiliated companies--net................ (7,019) (9,514) (46,770)
Proceeds from sales of assets........................................... 92,925 288,869 600,306
Proceeds from sales of finance assets and principal payments............ 36,589 109,135 168,321
Proceeds from sale of Alascom........................................... 235,076 105,000 --
Purchase of finance assets.............................................. (1,210) (7,793) (57,684)
Investment in finance note.............................................. -- -- (225,000)
Other................................................................... 7,199 4,867 20,746
------------ ---------- ----------
Net cash (used in) provided by investing activities................. (1,893,921) 334,045 336,741
------------ ---------- ----------
Cash flows from financing activities
Changes in short-term debt.............................................. 533,104 (268,168) (2,581)
Changes in notes with affiliated companies.............................. 29,161 (16,130) 1,989
Proceeds from long-term debt............................................ 1,073,135 15,424 5,001
Capital contribution from parent........................................ 300,000 -- 125,000
Dividends paid.......................................................... (34,000) (102,654) (161,327)
Repayments of long-term debt............................................ (173,750) (153,431) (557,013)
Other................................................................... (49,566) (31,544) (29,760)
------------ ---------- ----------
Net cash provided by (used in) financing activities................. 1,678,084 (556,503) (618,691)
------------ ---------- ----------
Decrease in cash and cash equivalents..................................... (882) (7,818) (18,158)
Cash and cash equivalents
January 1............................................................... 22,785 30,603 48,761
------------ ---------- ----------
December 31............................................................. $ 21,903 $ 22,785 $ 30,603
------------ ---------- ----------
------------ ---------- ----------
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest.............................................................. $ 126,098 $ 138,282 $ 177,582
Income tax payments--net of refunds................................... 44,184 105,523 9,969
</TABLE>
(See accompanying Notes to Consolidated Financial Statements)
A-12
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
PacifiCorp Holdings, Inc. (the "Company") is a wholly owned subsidiary of
PacifiCorp. The consolidated financial statements of the Company encompass the
wholly owned operations of Pacific Telecom, Inc. ("Pacific Telecom"), a
telecommunications operation (formerly 87 percent-owned, see Note 2), Powercor
Australia Limited ("Powercor"), an Australian electricity distributor (acquired
in December 1995, see Note 2), and PacifiCorp Financial Services, Inc. ("PFS"),
a financial services business. Together these businesses are referred to herein
as the Companies. Significant intercompany transactions and balances have been
eliminated.
Investments in and advances to affiliated companies represent investments in
unconsolidated affiliated companies carried on the equity basis, which
approximates the Company's equity in their underlying net book value.
The equity method is used to account for those affiliated companies in which
the Companies exert significant influence through management agreements,
partnership interests or voting stock ownership of 50 percent or less. The
Company's proportionate share of income or loss from equity investments is
included in other expense.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
REGULATION
Pacific Telecom is engaged in providing local telephone service and access
to the long distance network in Alaska, seven other western states and three
midwestern states and provides cellular mobile telephone services in six states.
Pacific Telecom's sale of its long distance business was completed in August
1995. Pacific Telecom's accounting policies are in conformity with the
requirements of the Federal Communications Commission and the regulatory
agencies of the various states in which Pacific Telecom operates.
Powercor is engaged in the distribution of electricity in a portion of
suburban Melbourne and the western and central regions of the State of Victoria
in Australia. Powercor has been granted an exclusive license to sell electricity
to franchise customers whose facilities are in its distribution area, and a
nonexclusive state wide license to sell to contestable customers. Customers who
are able to choose between retailers are referred to as contestable or
nonfranchise customers, while customers who cannot choose between retailers are
referred to as franchise customers. Franchise customers will progressively
become contestable over the period to January 1, 2001. All customers with loads
in excess of 1 MW are now contestable. Other customers will become contestable
over the next five years depending on their energy demand level, with
substantially all residential customers remaining as franchise customers until
January 1, 2001.
A-13
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
For the purposes of these financial statements, the Company considers all
liquid investments with original maturities of three months or less to be cash
equivalents.
FOREIGN CURRENCY TRANSLATION
Financial statements for foreign subsidiaries are translated into United
States dollars at year-end exchange rates as to assets and liabilities and
weighted average exchange rates as to revenues and expenses. If material, the
resulting translation adjustments are recorded in common equity.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at original cost. Additions to
plant include direct costs and related indirect charges.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization are provided using the straight-line method
based on the estimated service lives of the various classes of depreciable
assets. Depreciation and amortization expense for Pacific Telecom reflects
methods prescribed by regulators in its regulated operations and, given Pacific
Telecom's operating environment, do not materially differ from estimated useful
life determinations used to calculate depreciation estimates of its nonregulated
operations. These depreciation estimates and methods are applied consistently in
both regulated and public financial statements. Estimates of remaining useful
lives for depreciable assets of Powercor are made on a regular basis for all
assets with annual reassessments for major items. The composite depreciation
rates for depreciable telecommunications plant were 6.1 percent, 6.4 percent and
6.9 percent in 1995, 1994 and 1993, respectively. The depreciation rate decrease
in 1994 was mainly due to a rate decrease ordered by the Alaska Public Utilities
Commission for Alaska local exchange operations.
INVENTORY VALUATION
Pacific Telecom's inventory of $60,571 on the North Pacific Cable represents
the construction costs for the cable, which are carried at lower of cost or
market and charged to income on an average cost per unit basis as capacity in
the cable is sold. Material and supplies inventories are generally stated at
average cost.
INTANGIBLE ASSETS
Intangible assets consist of: estimates of license and other intangible
costs relating to the electricity distributor in Australia ($311,722 and
$29,712, respectively, in 1995); franchises of local exchange and cellular
companies ($397,754 in 1995 and $263,156 in 1994); and excess cost over net
assets of businesses acquired ($65,050 in 1995 and $41,104 in 1994). These costs
are offset by accumulated amortization ($42,253 in 1995 and $47,708 in 1994).
Intangible assets are generally being amortized over 40 years.
A-14
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company will recognize impairments related to intangible assets if the
market value of the investment or the investment's ability to return cash to the
Company through operations or through sale do not equal or exceed the carrying
value of the investment, including related intangible assets.
FINANCE AND LEASE INCOME RECOGNITION
Direct financing lease revenue is recognized as a constant yield on asset
carrying values. Operating lease revenue consists of periodic rentals, primarily
monthly. The cost of equipment under operating lease is depreciated on a
straight-line basis over the lease term. Leveraged lease revenue is recorded so
as to produce a constant yield on the outstanding investments in periods when
PFS's net investment in the lease is positive.
ALLOWANCE FOR CREDIT LOSSES
Given the limited number and relatively large size of individual loan/lease
assets, PFS's allowance for credit losses is generally derived from an analysis
of each account. As such, PFS's allowance and earnings are subject to a higher
degree of volatility than larger more diversified finance companies. PFS's
management attempts to control this volatility by subjecting the entire
portfolio to the rigorous review standards described below.
Allowance for credit losses is maintained at a level considered adequate to
provide for potential credit losses on finance receivables and leveraged leases
based on management's assessment of various factors affecting the receivable
portfolio, including: the characteristics of the accounts, the value of
underlying collateral, borrower financial condition and projections and past
charge off experience. Management also assesses general economic and industry
conditions, trends and strategy with respect to under-performing assets.
VALUATION AND IMPAIRMENT CHARGES
The carrying value of the Company's assets, other than finance receivables
and leveraged leases, are evaluated periodically for impairment of carrying
value. When necessary, valuation and/or impairment charges are recorded to
reduce the assets to estimated net realizable value based on undiscounted cash
flows.
REAL ESTATE ASSETS
Real estate assets are stated at cost. Depreciation is provided under the
straight-line method over the estimated useful lives of assets (five to
forty-five years).
SALES OF AFFORDABLE HOUSING PARTNERSHIPS
PFS sells limited partnership interests in its multifamily residential
rental projects to unrelated third party corporate investors. PFS has provided
indemnifications to the investors regarding the continuing qualification of the
partnerships to receive the federal affordable housing tax credits. Accordingly,
the sale is not recorded on PFS's books. The gain on the sale is deferred and
recognized as income pro rata as the
A-15
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
affordable housing credits flow through to the partners. PFS retains rights to
the residual value of the project at the conclusion of the federal tax credit
period, generally 10 years.
DERIVATIVES
Gains and losses on hedges of existing assets and liabilities are included
in the carrying amounts of those assets or liabilities and are recognized in
income as part of those carrying amounts. Gains and losses related to hedges of
anticipated transactions and firm commitments are deferred and are recognized in
income when the transaction occurs.
INCOME TAXES
The Company and its subsidiaries join with PacifiCorp in the filing of a
consolidated federal income tax return. Income taxes are not provided on a
separate entity basis, except that the Company has a policy with PacifiCorp in
which the Company receives the tax benefits or expenses derived from the
consolidation of federal and state tax returns of PacifiCorp and its
subsidiaries.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") 109, "Accounting for Income Taxes." This statement
requires use of the liability method of accounting for deferred income taxes.
Deferred tax liabilities and assets reflect the expected future tax
consequences, based on enacted tax law, of temporary differences between the tax
bases of assets and liabilities and their financial reporting amounts. The
cumulative effect of adoption of SFAS 109 resulted in an increase in
consolidated net income in 1993 of $1,932.
Investment tax credits for regulated operations are deferred and amortized
over the estimated useful lives of the assets. All other investment tax credits
are recognized when utilized.
REVENUE RECOGNITION
Telecommunications' subsidiaries participate with other telephone companies
in access revenue pools for certain interstate and intrastate revenues, which
are initially recorded based on estimates. Certain network access revenues are
estimated under cost separations procedures that base revenues on current
operating costs and investments in facilities to provide such services. These
estimates are subject to subsequent adjustment in future accounting periods as
refined operational information becomes available. Powercor accrues estimated
unbilled revenues for electric services provided after cycle billing to month-
end.
RECLASSIFICATION
Certain amounts from prior years have been reclassified to conform with the
1995 method of presentation. These reclassifications had no effect on previously
reported net income.
NEW ACCOUNTING STANDARD
Effective January 1, 1996, the Company adopted SFAS 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
This Statement requires that long-lived assets
A-16
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Company does
not expect the adoption of this standard in 1996 to have a material effect on
its consolidated financial statements.
2. ACQUISITIONS AND DISPOSITIONS
On December 12, 1995, the Company purchased Powercor, an electricity
distributor in Australia, for $1,600,000 in cash and approximately $50,000 of
liabilities assumed. Powercor's service territory includes a portion of suburban
Melbourne and the western and central regions of the State of Victoria and has
approximately 540,000 customers.
The acquisition has been accounted for as a purchase and the results of
operations of Powercor have been included in the consolidated financial
statements since December 12, 1995.
The unaudited pro forma consolidated information as set forth below has been
prepared by the Company based upon assumptions deemed proper by it and a
preliminary allocation of the purchase price paid as though it had occurred on
January 1, 1994. The unaudited pro forma consolidated results of operations are
shown for illustrative purposes only and are not necessarily indicative of the
future results of operations of the Company, or of the results of operations of
the Company that would have actually occurred had the transaction been in effect
as of the periods presented. Pro forma adjustments to the Company's results of
operations include: interest expense relating to the preacquisition activities
was removed and interest expense relating to the acquisition debt was included;
depreciation of fixed assets acquired was based on their estimated fair value;
and amortization on a straight-line basis over a 40-year life of intangible
assets relating to the purchase was included.
<TABLE>
<CAPTION>
1995 1994
------------ ------------
(UNAUDITED)
<S> <C> <C>
Revenues.......................................................... $ 1,326,000 $ 1,419,700
Net income........................................................ 192,800 84,500
</TABLE>
On September 27, 1995, holders of a majority of the 5,300,000 shares of
outstanding common stock held by minority shareholders of Pacific Telecom voted
in favor of the merger of a wholly owned subsidiary of the Company into Pacific
Telecom. Shareholders tendering shares pursuant to the merger were paid a total
of $131,000, or $30 per share, and an accrued liability for $28,000 was
established to cover estimated amounts payable to dissenters.
During 1995, Pacific Telecom acquired certain local telephone exchange
assets from US WEST Communications, Inc. In February 1995, Pacific Telecom
purchased assets in Colorado that serve 53,000 access lines for $202,070. Assets
serving 20,000 access lines in Washington were purchased in September 1995 for
$92,794 and assets serving 17,000 access lines in Oregon were purchased in
October 1995 for $81,500. Funds used for the acquisitions were provided by
proceeds from the sale of Alascom, Inc. ("Alascom") and the issuance of Pacific
Telecom medium-term notes and short-term borrowings.
On August 7, 1995, Pacific Telecom closed the sale of the stock of its long
distance communications subsidiary, Alascom, to AT&T Corp. ("AT&T"), in a
transaction providing $365,500 in proceeds. Under
A-17
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
2. ACQUISITIONS AND DISPOSITIONS (CONTINUED)
terms of the agreement, AT&T paid $290,500 in cash for the Alascom stock and for
settlement of all past cost study issues. AT&T agreed to allow Pacific Telecom
to retain the $75,000 transition payment made by AT&T to Alascom in July 1994.
AT&T made a down payment of $30,000 to Pacific Telecom upon signing the stock
purchase agreement in October 1994. The remaining $260,500 was paid when the
transaction closed. Pacific Telecom agreed to provide accounting, data
processing and human resource service support for up to 15 months for certain
services following the sale to allow for a smooth transition in exchange for
telecommunications equipment that Pacific Telecom intends to incorporate in its
local exchange operations. The Company recognized an after-tax gain of $37,216
from the sale of Alascom, net of minority interest and write-off of goodwill.
Condensed financial information for Alascom is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR
7 MONTHS ENDED ----------------------
JULY 31, 1995 1994 1993
--------------- ---------- ----------
<S> <C> <C> <C>
Revenues............................................ $ 193,126 $ 343,506 $ 337,843
Income from operations.............................. 36,914 80,651 59,454
</TABLE>
PFS has been selling and liquidating portions of its assets. PFS expects to
retain only its tax-advantaged investments in leveraged lease assets (primarily
aircraft) and low-income housing projects (included with real estate), which
presently represent $472,000 of its assets at December 31, 1995. Asset
dispositions in 1995 included sales of 6,000,000 shares of common stock and
100,000 shares of preferred stock of Comdial Corporation ("Comdial"), real
estate properties in Portland, Oregon's Lloyd Center district and the majority
of PFS's agriculture operations. Asset dispositions by PFS in 1994 included its
computer leasing and manufacturing operations and significant portions of its
real estate and asset-based lending portfolios. After-tax gains of approximately
$13,900 in 1995 and $9,600 in 1994 were recorded on these sales. Cash generated
by the sales was used to pay down debt.
On April 29, 1994, Pacific Telecom completed the sale of PTI Harbor Bay,
Inc. and Upsouth Corporation to IntelCom Group, Inc. for 1,183,147 shares of
IntelCom common stock and $200 in cash. On October 17, 1994, Pacific Telecom
sold its IntelCom stock. Cash proceeds of $15,934 and a gain of $870, net of tax
and selling expenses, were recognized in 1994.
In September 1993, Pacific Telecom sold a cellular property which resulted
in proceeds of $2,183 and an after-tax gain to the Company of $700.
3. FINANCE ASSETS
FINANCE RECEIVABLES
Net finance receivables include amounts for unearned income that are
deferred and amortized over the term of the respective receivable so as to
produce a constant rate of return.
A-18
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
3. FINANCE ASSETS (CONTINUED)
PFS's net investment in finance receivables at December 31 was as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Direct finance leases
Minimum lease payments............................................ $ 153,585 $ 163,495
Unguaranteed residual value....................................... 36,327 37,163
Unearned income................................................... (106,710) (115,674)
----------- -----------
Total direct finance leases....................................... 83,202 84,984
Notes receivable.................................................... 77,360 78,955
Less allowance for credit losses.................................... (26,990) (26,269)
----------- -----------
Total............................................................. 133,572 137,670
Less current portion................................................ (14,834) (11,798)
----------- -----------
Long-term investment in finance receivables......................... $ 118,738 $ 125,872
----------- -----------
----------- -----------
</TABLE>
Contractual maturities of finance receivables outstanding at December 31,
1995 were as follows:
<TABLE>
<CAPTION>
DIRECT FINANCE
---------------------------
NOTES
LEASES RECEIVABLE
---------- ---------------
<S> <C> <C>
1996............................................................ $ 8,757 $ 6,077
1997............................................................ 9,448 4,143
1998............................................................ 9,722 4,538
1999............................................................ 9,700 9,444
2000............................................................ 9,801 5,619
Thereafter...................................................... 106,157 47,539
---------- -------
Total......................................................... $ 153,585 $ 77,360
---------- -------
---------- -------
</TABLE>
Nonaccrual finance receivables were $8,160 and $14,564 at December 31, 1995
and 1994, respectively.
A-19
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
3. FINANCE ASSETS (CONTINUED)
INVESTMENT IN LEVERAGED LEASES
PFS's net investment in leveraged leases at December 31 was as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Minimum lease payments receivable (net of principal and interest on third
party nonrecourse debt)..................................................... $ 235,262 $ 244,918
Estimated unguaranteed residual value of leased assets........................ 178,892 189,793
Less unearned income and investment tax credits............................... (101,599) (108,196)
Less allowance for credit losses.............................................. (20,307) (18,326)
----------- -----------
Total....................................................................... 292,248 308,189
Less current portion.......................................................... (5,544) (6,558)
----------- -----------
Long-term net investment in leveraged leases.................................. $ 286,704 $ 301,631
----------- -----------
----------- -----------
</TABLE>
Deferred income tax liability related to leveraged leases was $275,245 and
$283,451 at December 31, 1995 and 1994, respectively.
INVESTMENT IN EQUIPMENT UNDER OPERATING LEASES
PFS's net investment in equipment under operating leases at December 31 was
as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Investment in equipment under operating leases........................ $ 89,796 $ 94,244
Accumulated depreciation.............................................. (8,460) (6,773)
Accumulated impairment charges........................................ (23,500) (23,500)
---------- ----------
Total............................................................... 57,836 63,971
Less current portion.................................................. (9,534) (9,534)
---------- ----------
Long-term investment in equipment under operating lease............... $ 48,302 $ 54,437
---------- ----------
---------- ----------
</TABLE>
Scheduled payments to be received as rents from equipment under operating
leases at December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996............................................................... $ 9,534
1997............................................................... 6,251
---------
Total............................................................ $ 15,785
---------
---------
</TABLE>
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
Finance receivables from customers within the aviation industry were
$328,135, or 47 percent, and $342,614, or 47 percent, of PFS's total assets at
December 31, 1995 and 1994, respectively.
A-20
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
4. REAL ESTATE INVESTMENTS
PFS's investment in residential and commercial real estate assets at
December 31 was as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Real estate properties................................................ $ 204,514 $ 202,938
Accumulated depreciation.............................................. (21,810) (23,116)
Accumulated impairment charges........................................ (2,900) (13,347)
---------- ----------
Net investment...................................................... $ 179,804 $ 166,475
---------- ----------
---------- ----------
</TABLE>
5. INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES
Investments include ownership interests in cellular partnerships,
investments in co-generation projects and various other small investments. The
investment balances included interest bearing advances of $20,769 and $19,354 at
December 31, 1995 and 1994, respectively.
Investments in and advances to affiliated companies at December 31 are
summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Pacific Telecom cellular partnerships................................. $ 88,812 $ 84,316
Comdial Corporation................................................... 9,744 18,047
Cogeneration partnerships............................................. 63,854 58,274
Other................................................................. 18,224 36,820
Valuation reserve..................................................... -- (14,799)
---------- ----------
Total............................................................... $ 180,634 $ 182,658
---------- ----------
---------- ----------
</TABLE>
During 1995, PFS sold 6,000,000 shares of Comdial common stock for proceeds
of $24,000 and recognized an after-tax gain of $8,400. Additionally, during 1995
100,000 shares of Comdial preferred stock held by PFS were redeemed at its par
value of $7,500. At December 31, 1995, PFS owned approximately 907,000 shares of
Comdial common stock (after a reverse three for one stock split) representing an
approximate ownership percentage in Comdial of 11 percent.
In connection with the ownership of certain equity investments, the Company
or its subsidiaries have guaranteed the repayment of outstanding long-term debt
and lease commitments aggregating $8,074 at December 31, 1995.
A-21
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
6. PLANT IN SERVICE
The plant in service and average depreciable lives by category at December
31 was as follows:
<TABLE>
<CAPTION>
AVERAGE
REMAINING LIFE 1995 1994
------------------- ------------ ------------
<S> <C> <C> <C>
Pacific Telecom
Telecommunications plant
Central office equipment................................ 13 $ 520,810 $ 530,871
Poles, cable and conduit................................ 19 826,075 576,044
Building and towers..................................... 31 91,331 169,974
Earth stations.......................................... 7 3,148 117,595
Satellite............................................... -- 14,183
Other telecommunications plant.......................... 13 128,898 141,886
Other................................................... 22,655 22,115
------------ ------------
Total Pacific Telecom................................. 1,592,917 1,572,668
Powercor
Buildings............................................... 39 41,950 --
Distribution system..................................... 22 1,208,041 --
Other................................................... 36,493 --
------------ ------------
Total Powercor........................................ 1,286,484 --
--
------------
Other....................................................... 65,007 64,921
------------ ------------
Total plant in service...................................... $ 2,944,408 $ 1,637,589
------------ ------------
------------ ------------
</TABLE>
7. COMMON STOCK
At December 31, 1995, the Company had 1,000 authorized shares of common
stock of which 100 shares were issued and outstanding. Changes in common shares
and common shareholder capital are listed below:
<TABLE>
<CAPTION>
COMMON
SHAREHOLDER
SHARES ISSUED CAPITAL
----------------- -----------
<S> <C> <C>
Balance, December 31, 1993 and 1994............................... 100 $ 577,893
Capital contribution by PacifiCorp.............................. -- 300,000
--- -----------
Balance, December 31, 1995........................................ 100 $ 877,893
--- -----------
--- -----------
</TABLE>
A-22
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
8. SHORT-TERM DEBT AND BORROWING ARRANGEMENTS
The Companies' short-term debt and borrowing arrangements are as follows:
<TABLE>
<CAPTION>
DECEMBER 31 FOR THE YEAR
----------------------------- ------------------------------
AVERAGE INTEREST AVERAGE AVERAGE INTEREST
BALANCE RATE (a) OUTSTANDING RATE (b)
---------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C>
1995
The Company............................... $ 451,175 6.10% $ 57,458 6.03%
Subsidiaries.............................. 90,000 5.90 122,529 6.26
1994
The Company............................... $ -- -- % $ 80,508 4.52%
Subsidiaries.............................. 21,713 7.52 14,456 5.21
1993
The Company............................... $ 265,000 4.29% $ 155,917 3.88%
Subsidiaries.............................. 24,909 3.46 318,374 3.84
</TABLE>
- ------------------------
(a) Computed by dividing the total interest on principal amounts outstanding at
the end of the period by the weighted daily principal amounts outstanding.
(b) Computed by dividing the total interest expense for the period by the
average daily principal amount outstanding for the period.
At December 31, 1995, the Company had a $500,000 committed bank revolving
credit agreement and subsidiaries had agreements totaling $1,300,000. The
Companies have the intent and ability to support short-term borrowings through
various revolving credit agreements on a long-term basis. At December 31, 1995,
subsidiaries had $971,000 of short-term debt classified as long-term.
Consolidated commitment fees were approximately $1,000 in 1995, $2,100 in 1994
and $3,500 in 1993.
The Company's revolving credit agreement restricts the payment of cash and
other distributions on common stock. At December 31, 1995, the Company's
retained earnings available for these purposes was approximately $400,000.
Under the terms of certain loan agreements at December 31, 1995, the
Company's proportionate share of the retained earnings of subsidiaries available
as to the payment of dividends was $242,342.
A-23
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
9. LONG-TERM DEBT
The Companies' nonaffiliated long-term debt at December 31 was as follows:
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
The Company
Commercial paper and bank lines.................................. $ -- $ 50,000
Pacific Telecom
Commercial paper and bank lines (a)(c)........................... 75,000 25,000
2%-11.8% First mortgage notes due through 2028................... 137,173 142,766
9.5% First mortgage notes due through 1999....................... 6,039 16,307
7.3%-12% Unsecured notes due through 2007........................ 246,825 208,525
------------ -----------
Total.......................................................... 465,037 392,598
Less current maturities.......................................... (5,535) (15,601)
------------ -----------
Long-term...................................................... 459,502 376,997
------------ -----------
Powercor
Australian bank bill borrowings (b)(c)........................... 896,242 --
------------ -----------
Long-term...................................................... 896,242 --
PFS
4.5%-11% Nonrecourse debt due through 2031....................... 142,492 125,699
6.4%-9.5% Senior debt due through 1996........................... 11,000 22,000
9.5%-9.8% Senior subordinated debt due through 1998.............. 6,000 10,000
10%-10.2% Junior subordinated debt due through 1998.............. 2,000 9,000
------------ -----------
Total.......................................................... 161,492 166,699
Less current maturities.......................................... (12,914) (24,217)
Long-term...................................................... 148,578 142,482
Other
Variable rate notes due 2007 (a)................................. 21,357 22,450
9.7%-9.9% Notes due through 2000................................. 7,966 10,824
7.5% Nonrecourse industrial development revenue bonds due through
2007 13,374 14,060
------------ -----------
Total.......................................................... 42,697 47,334
Less current maturities.......................................... (4,778) (4,637)
------------ -----------
Long-term...................................................... 37,919 42,697
------------ -----------
Long-term debt................................................... $ 1,542,241 $ 612,176
------------ -----------
------------ -----------
</TABLE>
- ------------------------
(a) Interest rates fluctuate based on various rates, primarily on certificate of
deposit rates, interbank borrowing rates, prime rates or other short-term
market rates.
A-24
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
9. LONG-TERM DEBT (CONTINUED)
(b) Interest rates fluctuate based on Australian Bank Bill Acceptance Rate. The
loan agreement requires that within 90 days of initial drawdown at least 50
percent of the borrowing must be hedged against variations in interest rates
for an average life of 3.5 years. In January and February 1996,
approximately $450,000 has been hedged at an average rate of 7.7 percent and
for an average life of 4.3 years.
(c) The Companies have the ability to support short-term borrowings and current
debt being refinanced on a long-term basis through revolving lines of credit
and, therefore, based upon management's intent, have classified $971,000 of
short-term debt as long-term in 1995.
At December 31, 1995, approximately $2,558,000 of assets of the Companies
secured long-term debt.
Future obligations on nonaffiliated long-term debt at December 31, 1995 were
as follows:
<TABLE>
<CAPTION>
SUBSIDIARIES
-----------
<S> <C>
1996............................................................................. $ 23,227
1997............................................................................. 34,697
1998............................................................................. 42,193
1999............................................................................. 97,683
2000............................................................................. 909,290
Thereafter....................................................................... 458,378
</TABLE>
The Company guarantees certain debt of the Leveraged ESOP Trust established
under PacifiCorp's K Plus Employee Stock Ownership and Savings Plan ("K Plus
Plan"). The amount of the debt guaranteed net of repayment for shares allocated
to employees at December 31, 1995 was $12,240. The Company believes this debt
will be serviced by the ESOP from employer contributions and dividends. The debt
was used to acquire PacifiCorp common stock. Remaining unallocated common shares
total 559,543 at December 31, 1995.
Nonrecourse long-term notes are secured by assignment of related finance
receivables, asset security interests and cash flow from operating leases. The
noteholders have no additional recourse to the Companies.
10. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company seeks to reduce net income and cash flow exposure to changing
interest and currency exchange rates and commodity price risks through the use
of derivative financial instruments. The Company's participation in derivative
transactions involves instruments that have a close correlation with its
portfolio of liabilities, thereby managing its risk. Derivatives have been
designed for hedging purposes and not held or issued for speculative purposes.
NOTIONAL AMOUNTS AND CREDIT EXPOSURE OF DERIVATIVES--The notional amounts of
derivatives summarized below do not represent amounts exchanged and, therefore,
are not a measure of the exposure of the Company through its use of derivatives.
The amounts exchanged are calculated on the basis of the notional amounts and
other terms of the derivatives, which relate to interest rates, exchange rates
or other indexes.
A-25
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
10. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
The Company is exposed to credit-related losses in the event of
nonperformance by counterparties to financial instruments, but it does not
expect any counterparties to fail to meet their obligations given their high
credit ratings. The Company's credit policy provides that counterparties satisfy
minimum credit ratings. The credit exposure of interest rate, foreign exchange
and forward contracts is represented by the fair value of contracts with a
positive fair value at the reporting date.
INTEREST RATE RISK MANAGEMENT--The Company enters into interest rate swaps
in managing its interest rate risk. At December 31, 1995, the Companies had four
interest rate swap contracts having a notional amount of $69,833. The interest
rates on these contracts ranged from 5.7 percent to 8.6 percent. The swap
contracts have between two and five years remaining.
The Company uses interest rate swaps to adjust the characteristics of its
liability portfolio by hedging portions of its interest expense, allowing the
Company to establish a mix of fixed or variable interest rates on its
outstanding debt.
In January and February 1996, PacifiCorp Australia LLC entered into 12
interest rate swaps with an aggregate notional amount of $450,000. These swap
arrangements effectively fix interest rates on the Australian bank debt used to
acquire Powercor at rates ranging from 7.4-7.9 percent. Terms of these
arrangements have an average life of 4.3 years. Also in February 1996, the
Company entered into interest rate hedges having an aggregate notional amount of
$200 million to hedge interest rate fluctuations relating to anticipated debt
issuances.
FOREIGN EXCHANGE RISK MANAGEMENT--In December 1995, the Company entered into
three foreign currency exchange agreements, that terminate in 2002, with an
aggregate notional amount of $300,000 to hedge a portion of its exposure to
fluctuations in the Australian dollar relating to its investment in its
Australian subsidiary.
ELECTRICITY PRICE RISK MANAGEMENT--The Company's Australian subsidiary,
Powercor, has entered into forward contracts structured to hedge exposure to
electricity price risk on anticipated transactions or firm commitments. Under
these forward contracts, Powercor receives or makes payment based on a
differential between a contracted price and the actual spot market price of
electricity. At December 31, 1995, Powercor had 21 forward contracts with
electricity generation companies to exchange payments calculated on notional
quantities amounting to approximately 38,000,000 MWh through December 31, 2000.
At December 31, 1995, Powercor's average fixed price was $26.59 per MWh compared
to an average spot market price of $28.08 per MWh.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, receivables, payables,
accrued liabilities and short-term borrowings approximates fair value because of
the short-term maturity of these instruments. The fair value of the finance note
receivable approximates its carrying value at December 31, 1995.
The fair value of long-term debt has been estimated by discounting projected
future cash flows, using the current rate at which similar loans would be made
to borrowers with similar credit ratings and for the same maturities. The fair
value of the Company's nonaffiliated long-term debt, including current portion,
A-26
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
is estimated to be $1,591,600 or 102 percent of the carrying value of $1,565,468
and $651,200, or 99 percent of the carrying value of $656,631, at December 31,
1995 and 1994, respectively.
The fair value of interest rate and currency swaps and forward electricity
price contracts is the estimated amount the Company would pay to terminate the
agreements, taking into account current interest and currency exchange rates,
electricity market prices and the current creditworthiness of the agreement
counterparties. Termination of the contracts would have resulted in a loss of
$3,700 at December 31, 1995 and a gain of $2,500 at December 31, 1994.
12. LEASES
The Companies lease certain properties under operating leases with various
expiration dates and renewal options. Rentals on lease renewals are subject to
negotiation. Certain leases provide for options to purchase at fair market
value. The Companies are also committed to pay all taxes, expenses of operation
(other than depreciation) and maintenance applicable to the leased property.
Net rent expense for the years ended December 31, 1995, 1994 and 1993 was
$36,890, $42,282 and $46,646, respectively.
Future minimum lease payments under noncancellable operating leases are
$18,834, $12,173, $10,790, $4,811 and $2,678 for 1996 through 2000,
respectively.
13. COMMITMENTS AND CONTINGENCIES
The construction and capital expenditure program is estimated at $585,000
for 1996. This amount includes $377,000 for Pacific Telecom, $69,000 for
Powercor, $50,000 for PFS and $89,000 for other companies.
In December 1995, Pacific Telecom signed an agreement with US WEST
Communications, Inc. under which it agreed to purchase certain local telephone
exchange assets in Minnesota for approximately $103,000, included in the
estimate above. Completion of this transaction will be dependent upon
appropriate regulatory approvals, expected to be received during 1996.
In connection with the sale of PFS's computer leasing assets, certain
representations and warranties were given the purchaser. The aggregate maximum
potential amount of these claims is $6,500. PFS has deferred a portion of the
gain realized until these claims are ultimately resolved.
14. LEGAL PROCEEDINGS
The Company and certain of its subsidiaries are parties to various legal
claims, actions and proceedings, one of which is described below. Although the
ultimate resolution of legal proceedings cannot be predicted with certainty, the
Company believes that disposition of these matters will not have a material
adverse effect on the Company's consolidated financial statements.
On September 27, 1995, holders of a majority of the approximately 5,300,000
shares of outstanding common stock held by minority shareholders of Pacific
Telecom voted in favor of the merger of a wholly owned subsidiary of the Company
into Pacific Telecom. As a result of the merger, the common stock held
A-27
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
14. LEGAL PROCEEDINGS (CONTINUED)
by minority shareholders was converted into the right to receive $30 per share
in cash, other than shares as to which dissenters' rights were perfected. Former
minority shareholders of Pacific Telecom who owned approximately 26 percent of
the total outstanding shares held by minority shareholders filed notices with
Pacific Telecom asserting dissenters' rights in connection with the merger.
Certain of these shareholders have asserted that the fair value of Pacific
Telecom's common stock, to which they will be entitled under the dissenters'
rights provisions of the Washington Business Corporation Act ("WBCA"), was
substantially in excess of the $30 per share paid to the minority shareholders
who did not dissent. The process for judicial resolution of dissenting
shareholder proceedings is governed by the provisions of the WBCA and, on
February 12, 1996, Pacific Telecom filed a petition with the Superior Court of
Washington for Clark County in accordance with those provisions.
15. INCOME TAXES
The Company's effective combined federal and state income tax rate from
continuing operations was 12 percent in 1995, 25 percent in 1994 and 12 percent
in 1993. The difference between taxes calculated as if the statutory federal tax
rate of 35 percent was applied to income from continuing operations before
income taxes and the recorded tax expense is reconciled as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Computed federal income taxes.................................................... $ 74,909 $ 41,163 $ 24,019
Reduction (increase) in tax resulting from
Minority interest.............................................................. (5,680) (3,859) (2,807)
Investment tax credits......................................................... 3,392 7,589 5,190
Affordable housing credits..................................................... 8,427 8,240 8,705
Amortization of excess deferred taxes.......................................... 451 1,776 2,128
Excess of tax over book basis.................................................. 24,401 1,364 --
Audit settlement............................................................... 31,355 -- --
Amortization of goodwill....................................................... (9,528) (2,480) (1,994)
Other items capitalized and miscellaneous differences.......................... 7,421 (322) (727)
--------- --------- ---------
Total........................................................................ 60,239 12,308 10,495
--------- --------- ---------
Federal income tax............................................................... 14,670 28,855 13,524
State income tax net of federal income tax expense (benefit)..................... 10,062 755 (5,437)
--------- --------- ---------
Total income tax expense......................................................... $ 24,732 $ 29,610 $ 8,087
--------- --------- ---------
--------- --------- ---------
</TABLE>
A-28
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
15. INCOME TAXES (CONTINUED)
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Current
Federal................................................. $ (15,443) $ 89,934 $ (35,774)
State................................................... 3,622 18,921 (10,264)
Foreign................................................. 1,062 -- --
---------- ---------- ----------
Total................................................. (10,759) 108,855 (46,038)
---------- ---------- ----------
Deferred
Federal................................................. 25,438 (56,225) 57,365
State................................................... 12,478 (15,431) 1,950
Foreign................................................. 967 -- --
---------- ---------- ----------
Total................................................. 38,883 (71,656) 59,315
---------- ---------- ----------
Investment tax credits.................................... (3,392) (7,589) (5,190)
---------- ---------- ----------
Total income tax expense.................................. $ 24,732 $ 29,610 $ 8,087
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The tax effects of significant items comprising the Company's net deferred
tax liability as of December 31 were as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Deferred tax liabilities
Property, plant and equipment....................................... $ 417,880 $ 398,758
Regulatory asset.................................................... 704 8,193
Other deferred liabilities.......................................... 37,757 23,500
Deferred tax assets
Regulatory liability................................................ (8,900) (14,195)
Book reserves not deductible for tax................................ (35,024) (53,110)
---------- ----------
Net deferred tax liability............................................ $ 412,417 $ 363,146
---------- ----------
---------- ----------
</TABLE>
During 1995, the Company and the Internal Revenue Service (the "IRS") agreed
to a settlement of all issues related to the IRS examination of the Company's
federal income tax returns for the years 1983 through 1988. As a result of the
settlement, the Company released $32,000 of tax accruals.
The Company's 1989 and 1990 federal income tax returns are currently under
examination by the IRS.
PFS acquires housing projects that qualify for the low-income housing credit
established as part of the Tax Reform Act of 1986 to provide an incentive for
the development and preservation of privately owned affordable rental housing.
Annual tax benefits scheduled to be received from these projects are expected to
be $9,644, $9,644, $9,388, $8,353 and $4,173 for 1996 through 2000,
respectively.
A-29
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
16. RETIREMENT PLANS
The Companies have pension plans covering substantially all of their
employees. Benefits under plans in the United States are generally based on the
employee's years of service and average monthly pay in the 60 consecutive months
of highest pay out of the last 120 months, with adjustments to reflect benefits
estimated to be received from Social Security. Pension costs are funded annually
by no more than the maximum amount of pension expense which can be deducted for
federal income tax purposes. Unfunded prior service costs are amortized over the
remaining service period of employees expected to receive benefits. At December
31, 1995, plan assets were primarily invested in common stocks, bonds and U.S.
government obligations.
All permanent employees of Powercor engaged prior to October 4, 1994 are
members of Divisions B or C of the Superannuation Fund ("Fund") which provides
defined benefits in the form of pensions (Division B) or lump sums (Division C).
Both defined benefit Funds are closed to new members. Division B members
contribute at 6 percent of superannuation salary, and Division C members can
contribute at 0, 3, or 6 percent. During 1995, contributions were made to the
Fund at the rate of 10 percent for the defined benefit. The net periodic cost
from the date of acquisition to December 31, 1995 is assumed to be zero.
Net pension cost is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Service cost-benefits earned.............................. $ 3,937 $ 4,545 $ 4,063
Interest cost on projected benefit obligation............. 10,940 10,116 10,144
Actual (gain) loss on plan assets......................... (32,818) 1,662 (11,474)
Net amortization and deferral............................. 18,945 (16,113) (1,665)
---------- ---------- ----------
Net pension cost.......................................... $ 1,004 $ 210 $ 1,068
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The funded status, net pension liability and significant assumptions at
December 31 were as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Actuarial present value of benefit obligations
Vested benefit obligation........................................... $ 206,904 $ 112,566
Accumulated benefit obligation...................................... 209,087 113,859
---------- ----------
Projected benefit obligation.......................................... 243,285 133,618
Plan assets at fair value............................................. 226,785 131,971
---------- ----------
Projected benefit obligation in excess of plan assets................. (16,500) (1,647)
Unrecognized prior service cost....................................... (2,029) (2,291)
Unrecognized net (gain) loss.......................................... 6,801 (4,374)
Unrecognized net asset................................................ (4,506) (6,379)
---------- ----------
Net pension liability................................................. $ (16,234) $ (14,691)
---------- ----------
---------- ----------
Discount rate......................................................... 7.25% 7.5-8.5%
Expected long-term rate of return on assets........................... 8.50-9% 8.75-9%
Rate of increase in compensation levels............................... 5-6% 5%
</TABLE>
A-30
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
16. RETIREMENT PLANS (CONTINUED)
The Companies in the United States participate in the K Plus Plan. Under the
plan, eligible employees may elect to contribute a portion of their pay, within
specified limits, to the plan. The Companies make a matching contribution of 50
percent of the employee's elective contribution. Employee contributions eligible
for matching contributions are limited to six percent of compensation.
17. OTHER POSTRETIREMENT BENEFITS
Pacific Telecom provides health care and life insurance benefits for its
eligible retirees on a basis substantially similar to those who are active
employees. Effective January 1, 1993, Pacific Telecom adopted SFAS 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." The
cost of postretirement benefits are now accrued over the active service period
of employees. The transition obligation, which represents the previously
unrecognized prior service cost, was $38,356 at January 1, 1993, and is being
amortized over a period of 20 years. Pacific Telecom's policy is to fund
annually the maximum amount of postretirement benefit expense that can be
deducted for federal income tax purposes. In addition, Pacific Telecom funded
$13,254 and $2,429 in 1995 and 1994, respectively, through contributions to
restricted trust funds and by directly paying postretirement benefit costs to
third parties.
The net periodic postretirement benefit costs at December 31 are summarized
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Service costs--benefits earned.................................. $ 2,030 $ 2,307 $ 1,835
Interest cost on accumulated postretirement benefit
obligation.................................................... 5,891 5,836 5,055
Amortization of transition obligation........................... 1,844 1,918 1,918
Net amortization and deferral................................... 1,010 (620) 77
Actual return on plan assets.................................... (1,902) 180 (233)
--------- --------- ---------
Net periodic postretirement benefit cost........................ $ 8,873 $ 9,621 $ 8,652
--------- --------- ---------
--------- --------- ---------
</TABLE>
A-31
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
17. OTHER POSTRETIREMENT BENEFITS (CONTINUED)
The accumulated postretirement benefit obligations ("APBO") at December 31
were as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Retirees and dependents............................................... $ 43,415 $ 37,119
Fully eligible active plan participants............................... 11,677 11,089
Other active plan participants........................................ 26,498 22,198
---------- ----------
APBO.................................................................. 81,590 70,406
Plan assets at fair value, primarily listed stocks and bonds.......... (21,977) (8,503)
---------- ----------
APBO in excess of plan assets......................................... 59,613 61,903
Unrecognized prior service cost....................................... 552 675
Unrecognized transition obligation.................................... (29,579) (34,521)
Unrecognized net loss from changes in assumptions..................... (6,853) (1,666)
---------- ----------
Accrued postretirement benefit obligation............................. $ 23,733 $ 26,391
---------- ----------
---------- ----------
Discount rate......................................................... 7.25% 8.50%
Estimated long-term rate of return on assets.......................... 9.00% 9.00%
Initial health care cost trend rate-under 65.......................... 11.00% 11.00%
Initial health care cost trend rate-over 65........................... 10.00% 10.00%
Ultimate health care cost trend rate.................................. 4.50% 5.50%
</TABLE>
The assumed health care cost trend rates gradually decrease over eight
years. The health care cost trend rate assumptions have a significant effect on
the amounts reported. Increasing the assumed health care cost trend rate by one
percentage point would increase the postretirement benefit obligation as of
December 31, 1995 by $2,238, and the annual net periodic postretirement benefit
costs by $267.
18. DISCONTINUED OPERATIONS
A gain of $52,406 and proceeds of $195,000 were recorded in 1993 relating to
the sale of an international communications subsidiary of Pacific Telecom.
19. RELATED PARTY TRANSACTIONS
The Company and its subsidiaries participate in PacifiCorp's consolidated
cash management program. Any funds advanced to/from PacifiCorp are included in
accounts and notes receivable/payable-affiliates. These notes are due upon
demand and bear interest at a short-term rate as defined under an intercompany
loan agreement with PacifiCorp. Net interest income on these advances was
$1,656, $1,005 and $1,088 in 1995, 1994 and 1993, respectively.
PacifiCorp provides certain management services, such as corporate and
financial advice and consultation, to the Companies at PacifiCorp's cost. The
amounts charged to the Companies were $2,062, $1,726 and $1,759 in 1995, 1994
and 1993, respectively.
Pacific Telecom's long lines subsidiary recognized approximately $10,001 for
the first seven months of 1995, $18,332 in 1994 and $15,852 in 1993 of
interstate and intrastate access expense related to its local
A-32
<PAGE>
PACIFICORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
19. RELATED PARTY TRANSACTIONS (CONTINUED)
exchange companies in Alaska. These amounts were recorded as revenue by the
local exchange companies and have not been eliminated in the consolidated
financial statements.
Revenues for 1995, 1994 and 1993 include rents from affiliated tenants of
$513, $901 and $3,090, respectively. In March 1994, PFS sold one of its office
buildings and certain other assets to PacifiCorp for a gross sales price of
$47,700 and net cash proceeds of $30,300, after repayment of related nonrecourse
debt. The sale of these properties resulted in no gain or loss to PFS.
20. BUSINESS SEGMENTS
<TABLE>
<CAPTION>
AUSTRALIAN
CORPORATE AND ELECTRICITY
CONSOLIDATED OTHER TELECOMMUNICATIONS DISTRIBUTOR PFS (a)
------------ ------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1995
Revenues......................... $ 784,840 $ 28,166 $ 648,596 $ 25,870 $ 82,208
Income from operations........... 246,854 28,166 165,311 5,463 47,914
Depreciation and amortization.... 123,604 -- 111,934 3,084 8,586
Capital spending................. 2,264,500 131,743 497,422 1,590,955 44,380
Identifiable assets.............. 4,484,261 409,989 1,626,272 1,750,506 697,494
1994
Revenues......................... $ 858,760 $ 28,512 $ 704,962 $ -- $ 125,286
Income from operations........... 203,075 28,512 164,641 -- 9,922
Depreciation and amortization.... 122,737 -- 104,498 -- 18,239
Capital spending................. 166,033 2,590 152,974 -- 10,469
Identifiable assets.............. 2,532,023 406,477 1,400,765 -- 724,781
1993
Revenues......................... $ 898,556 $ 16,841 $ 702,111 $ -- $ 179,604
Income from operations........... 184,858 16,461 140,817 -- 27,580
Depreciation and amortization.... 124,378 -- 109,958 -- 14,420
Capital spending................. 169,948 8,426 125,601 -- 35,921
Identifiable assets.............. 2,955,141 391,737 1,447,270 -- 1,116,134
</TABLE>
- ------------------------
(a) Includes PFS's finance, real estate, manufacturing and agricultural
activities.
A-33
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
OF
TPC CORPORATION
AT
$13.41 NET PER SHARE
BY
POWER ACQUISITION COMPANY
A WHOLLY OWNED SUBSIDIARY OF
PACIFICORP HOLDINGS, INC.
THE OFFER AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME, ON MONDAY, APRIL 14, 1997
UNLESS THE OFFER IS EXTENDED
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION
1) THAT NUMBER OF SHARES THAT WOULD REPRESENT A MAJORITY OF ALL OUTSTANDING
SHARES (DETERMINED ON A FULLY DILUTED BASIS) ON THE DATE OF PURCHASE. SEE
INTRODUCTION AND SECTION 13.
THE BOARD OF DIRECTORS OF TPC CORPORATION HAS APPROVED THE MERGER AGREEMENT
AND THE MAKING OF THE OFFER BY THE PURCHASER, AND HAS DETERMINED THAT THE TERMS
OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE
COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER.
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should (A) complete and sign the Letter of Transmittal (or a facsimile
thereof) in accordance with the instructions in the Letter of Transmittal, have
such stockholder's signature thereon guaranteed if required by Instruction 1 to
the Letter of Transmittal, and mail or deliver the Letter of Transmittal (or
such facsimile) and any other required documents to the Depositary, and either
deliver, together with the Letter of Transmittal, the certificates representing
the tendered Shares and any other required documents to the Depositary, or
tender such Shares pursuant to the procedure for book-entry transfer set forth
in Section 3 or (B) request such stockholder's broker, dealer, bank, trust
company or other nominee to effect the transaction for such stockholder.
Stockholders having Shares registered in the name of a broker, dealer, bank,
trust company or other nominee must contact such broker, dealer, bank, trust
company or other nominee if they desire to tender Shares so registered.
If a stockholder desires to tender Shares and such stockholder's
certificates for such Shares are not immediately available, or the procedures
for book-entry transfer cannot be completed on a timely basis, or time will not
permit all documents to reach the Depositary prior to the Expiration Date, such
stockholder may tender such Shares by following the procedures for guaranteed
delivery set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent at the address and telephone numbers set forth on the back cover of this
Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent or from brokers, dealers, commercial banks or trust companies.
------------------------
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
March 18, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<C> <S> <C>
INTRODUCTION.............................................................................................. 3
1. TERMS OF THE OFFER; EXPIRATION DATE................................................................. 4
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES....................................................... 6
3. PROCEDURE FOR TENDERING SHARES...................................................................... 7
4. WITHDRAWAL RIGHTS................................................................................... 9
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES............................................................. 10
6. PRICE RANGE OF SHARES; CASH DISTRIBUTIONS........................................................... 10
7. CERTAIN INFORMATION CONCERNING THE COMPANY.......................................................... 11
8. CERTAIN INFORMATION CONCERNING THE PURCHASER........................................................ 12
9. SOURCE AND AMOUNT OF FUNDS.......................................................................... 14
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.................................................. 15
11. THE PURPOSE OF THE OFFER; MERGER AGREEMENT; PLANS FOR THE COMPANY................................... 16
12. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, NEW YORK STOCK EXCHANGE LISTING AND EXCHANGE ACT
REGISTRATION...................................................................................... 23
13. CERTAIN CONDITIONS OF THE OFFER..................................................................... 24
14. CERTAIN LEGAL MATTERS............................................................................... 25
15. FEES AND EXPENSES................................................................................... 26
16. MISCELLANEOUS....................................................................................... 27
SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER, PHI,
AND PACIFICORP............................................................................ S-1
</TABLE>
2
<PAGE>
To the Holders of Class A Common Stock and Class B Common Stock
of TPC Corporation:
INTRODUCTION
Power Acquisition Company, a Delaware corporation (the "Purchaser"), which
is a wholly owned Subsidiary of PacifiCorp Holdings, Inc., a Delaware
corporation ("PHI"), hereby offers to purchase all outstanding shares of Class A
Common Stock, $.01 par value per share, and Class B Common Stock, $.01 par value
per share (collectively, the "Shares"), of TPC Corporation, a Delaware
corporation (the "Company"), at a purchase price of $13.41 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Letter of Transmittal (which, together with
any amendments or supplements hereto or thereto, collectively constitute the
"Offer").
The purpose of the Offer is to enable PHI to acquire the entire equity
interest in the Company. The Offer is being made pursuant to an Agreement and
Plan of Merger dated as of March 11, 1997 by and among the Purchaser, PHI and
the Company (the "Merger Agreement"). The Merger Agreement provides for, among
other things, the Purchaser to commence a cash tender offer to purchase all of
the Shares of the Company for $13.41 per Share. As soon as practicable following
the consummation of the Offer, it is intended that the Purchaser will merge into
the Company (the "Merger") pursuant to the applicable provisions of the Delaware
General Corporation Law ("DGCL"). The purpose of the Merger is to facilitate the
acquisition of the Shares not tendered and purchased pursuant to the Offer.
Under the terms of the Merger Agreement, upon consummation of the Merger each
then outstanding Share (other than Shares owned by the Company or any subsidiary
of the Company, the Purchaser, PHI or any other subsidiary of PHI and Shares
held by stockholders who perfect any available appraisal rights under the DGCL)
would be converted into the right to receive an amount in cash equal to the
price per Share paid pursuant to the Offer (the "Offer Price").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses of IBJ Schroder Bank & Trust Company,
which is acting as the depositary (the "Depositary"), and Georgeson & Company
Inc., which is acting as Information Agent (the "Information Agent"), incurred
in connection with the Offer. See Section 15.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MERGER AGREEMENT AND
THE MAKING OF THE OFFER BY THE PURCHASER, AND HAS DETERMINED THAT THE TERMS OF
THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE
COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER. THREE
OF THE COMPANY'S EXECUTIVE OFFICERS HAVE ENTERED INTO AN AGREEMENT TO TENDER
THEIR SHARES PURSUANT TO THE OFFER. SEE SECTION 10. THE COMPANY HAS INFORMED THE
PURCHASER THAT, TO THE COMPANY'S KNOWLEDGE, ALL OTHER EXECUTIVE OFFICERS AND
DIRECTORS OF THE COMPANY INTEND TO TENDER THEIR SHARES PURSUANT TO THE OFFER.
Lehman Brothers Inc. ("Lehman Brothers") has delivered to the Board of
Directors of the Company its opinion that the consideration to be offered to the
holders of Shares in the Offer and the Merger is fair to such holders from a
financial point of view. A copy of the opinion of Lehman Brothers is contained
in the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), which is being mailed to stockholders herewith.
THE OFFER IS CONDITIONED UPON THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN
PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION 1) THAT NUMBER OF SHARES
(THE "MINIMUM NUMBER OF SHARES") THAT WOULD REPRESENT A MAJORITY OF ALL
OUTSTANDING SHARES OF THE COMPANY (ON A FULLY DILUTED BASIS) ON THE DATE OF
PURCHASE (THE "MINIMUM CONDITION"). SUBJECT TO
3
<PAGE>
OBTAINING THE CONSENT OF THE COMPANY, THE PURCHASER RESERVES THE RIGHT (SUBJECT
TO THE APPLICABLE RULES AND REGULATIONS OF THE COMMISSION), WHICH IT CURRENTLY
HAS NO INTENTION OF EXERCISING, TO WAIVE OR REDUCE THE MINIMUM CONDITION AND TO
ELECT TO PURCHASE, PURSUANT TO THE OFFER, FEWER THAN THE MINIMUM NUMBER OF
SHARES. SEE SECTIONS 1 AND 13.
Certain other conditions to the Offer are described in Section 13. Subject
to the limitations of the Merger Agreement, the Purchaser reserves the right to
waive any one or more of the conditions to the Offer. See Sections 2 and 13.
According to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "Company's 1996 Form 10-K"), as of March 7, 1997, there
were 18,004,215 Shares issued and outstanding (17,424,252 shares of Class A
Common Stock, par value $.01 per share, and 579,963 shares of Class B Common
Stock, par value $.01 per share). According to the Company's representation in
the Merger Agreement, there were 3,497,494 shares subject to options as of March
11, 1997. The Company has agreed in the Merger Agreement to use its best efforts
to enter into agreements with holders of outstanding options providing that,
immediately after the date on which the Purchaser shall have accepted for
payment all Shares tendered hereunder, each option shall be cancelled in
exchange for a payment to the option holder equal to the Offer Price less the
exercise price of such option multiplied by the number of shares previously
subject to such option (less any applicable withholding). Based on the
foregoing, and assuming that no changes occur prior to the date of purchase
pursuant to the Offer, there would currently be 21,501,709 Shares outstanding on
a fully diluted basis and the Minimum Number of Shares would be 10,750,856.
However, the actual Minimum Number of Shares will depend upon the facts as they
exist on the date of purchase.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; EXPIRATION DATE.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of such extension or
amendment), the Purchaser will accept for payment and pay for all Shares that
are validly tendered prior to the Expiration Date and not withdrawn as permitted
by Section 4. The term "Expiration Date" means 12:00 Midnight, Eastern time, on
April 14, 1997, unless and until the period during which the Offer is open shall
have been extended in accordance with the terms of the Merger Agreement, in
which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended, will expire.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION, THE
EXPIRATION OR EARLY TERMINATION OF THE APPLICABLE WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE
REGULATIONS THEREUNDER (THE "HSR ACT") AND THE SATISFACTION OF THE OTHER
CONDITIONS SET FORTH IN SECTION 13.
If by 12:00 Midnight, Eastern time, on Monday, April 14, 1997 (or any date
and time then set as the Expiration Date), any or all of the conditions to the
Offer have not been satisfied or waived, the Purchaser reserves the right (but
shall not be obligated), subject to the applicable rules and regulations of the
Securities and Exchange Commission ("Commission") and subject to limitations in
the Merger Agreement, to (a) terminate the Offer and not accept for payment or
pay for any Shares and return all tendered Shares to tendering stockholders, (b)
waive all the unsatisfied conditions and accept for payment and pay for all
Shares validly tendered prior to the Expiration Date and not theretofore
withdrawn, (c) extend the Offer and, subject to the right of stockholders to
withdraw Shares until the Expiration Date, retain the Shares that have been
tendered during the period or periods for which the Offer is extended or (d)
amend
4
<PAGE>
the Offer. See Section 11. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
OFFER PRICE FOR TENDERED SHARES, WHETHER OR NOT THE PURCHASER EXERCISES ITS
RIGHT TO EXTEND THE OFFER.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer. Any extension, amendment or termination will be followed as
promptly as practicable by public announcement. In the case of an extension,
Rule 14e-1(d) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that the announcement be issued no later than 9:00
a.m., Eastern time, on the next business day after the previously scheduled
Expiration Date in accordance with the public announcement requirements of Rule
14d-4(c) under the Exchange Act. Subject to applicable law (including Rules
14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material
change in the information published, sent or given to stockholders in connection
with the Offer be promptly disseminated to stockholders in a manner reasonably
designed to inform stockholders of such change), and without limiting the manner
in which the Purchaser may choose to make any public announcement, the Purchaser
will not have any obligation to publish, advertise or otherwise communicate any
such public announcement other than by making a release to the Dow Jones News
Service. As used in this Offer to Purchase, "business day" has the meaning set
forth in Rule 14d-1 under the Exchange Act.
If the Purchaser extends the Offer or if the Purchaser is delayed in its
acceptance for payment of or payment (whether before or after its acceptance for
payment of Shares) for Shares or it is unable to pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser,
and such Shares may not be withdrawn except to the extent tendering stockholders
are entitled to withdrawal rights as described in Section 4. However, the
ability of the Purchaser to delay the payment for Shares that the Purchaser has
accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which
requires that a bidder pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or waives a material condition of the Offer,
the Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of an offer or information concerning an
offer, other than a change in the percentage of securities sought or a change in
price, will depend upon the facts and circumstances, including the relative
materiality of the changes or information.
If, prior to the Expiration Date and subject to the limitations in the
Merger Agreement, the Purchaser should increase or decrease the percentage of
Shares being sought, or increase or decrease the consideration offered pursuant
to the Offer to holders of Shares, such increase or decrease would be applicable
to all holders whose Shares are accepted for payment pursuant to the Offer and
if, at the time notice of any increase or decrease is first published, sent or
given to holders of Shares, the Offer is scheduled to expire at any time earlier
than the tenth business day from and including the date that such notice is
first so published, sent or given, the Offer would be extended at least until
the expiration of such ten business-day period. With respect to a change in
price or a change in the percentage of securities sought, a minimum period of
ten business days is generally required to allow for adequate dissemination to
stockholders and investor response.
This Offer to Purchase and the related Letter of Transmittal is being mailed
to the record holders of Shares and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the Company's stockholder list or, if applicable,
who are listed as participants in a clearing agency's security position listing
for subsequent transmittal to beneficial owners of Shares.
5
<PAGE>
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will accept for payment, and will pay for all Shares
validly tendered prior to the Expiration Date (and not properly withdrawn in
accordance with Section 4) promptly after the Expiration Date. See Sections 1
and 13. If any condition to the Offer specified in the Merger Agreement or in
Section 13 of the Offer to Purchase is not satisfied at the Expiration Date, the
Purchaser must either (a) waive the unsatisfied condition and accept for payment
and pay for any tendered Shares, (b) terminate the Offer and return all tendered
Shares to the tendering stockholders, or (c) further extend the Offer resulting
in an extension of the right of stockholders to withdraw tendered Shares until
the new Expiration Date; provided, however, that the Purchaser may accept
tendered Shares for payment subject to the expiration or termination of the
applicable waiting period under the HSR Act.
PHI filed a Notification and Report Form with respect to the Offer under the
HSR Act on March 18, 1997. The waiting period under the HSR Act with respect to
the Offer will expire at 11:59 p.m., Eastern time, on April 2, 1997 unless early
termination of the waiting period is granted. However, the Antitrust Division of
the Department of Justice (the "Antitrust Division") or the Federal Trade
Commission (the "FTC") may extend the waiting period by requesting additional
information or documentary material from PHI or the Company. If such a request
is made, such waiting period will expire at 11:59 p.m., Eastern time, on the
10th day after substantial compliance by PHI or the Company with such request.
See Section 14 hereof for additional information concerning the HSR Act and the
applicability of the antitrust laws to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when the Purchaser gives oral or written notice to the Depositary of the
Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon
the terms and subject to the conditions of the Offer, payment for Shares
accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payments from the Purchaser
and transmitting such payments to stockholders whose Shares have been accepted
for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE OFFER PRICE FOR
TENDERED SHARES BE PAID, REGARDLESS OF ANY DELAY IN MAKING THE PAYMENT AFTER THE
EXPIRATION DATE.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
certificates for such Shares or timely confirmation of a book-entry transfer of
such Shares into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility,"
and collectively the "Book-Entry Transfer Facilities") pursuant to the procedure
set forth in Section 3, (ii) the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
and (iii) any other documents required by the Letter of Transmittal.
If any tendered Shares are not accepted for payment for any reason
certificates evidencing unpurchased Shares will be returned, without expense, to
the tendering stockholder (or, in the case of Shares tendered by book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility
pursuant to the procedures set forth in Section 3, such Shares will be credited
to an account maintained at such Book-Entry Transfer Facility), as promptly as
practicable following the expiration or termination of the Offer.
6
<PAGE>
3. PROCEDURE FOR TENDERING SHARES.
In order for a holder of Shares validly to tender Shares pursuant to the
Offer, (i) the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, together with any required signature guarantees and
any other documents required by the Letter of Transmittal, must be received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase and either the certificates evidencing tendered Shares ("Share
Certificates") must be received by the Depositary at such address or such Shares
must be tendered pursuant to the procedure for book-entry transfer described
below and a Book-Entry Confirmation (as defined below) must be received by the
Depositary, in each case prior to the Expiration Date, or (ii) the tendering
stockholder must comply with the guaranteed delivery procedure described below.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facilities for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of any Book-Entry Transfer
Facility may make book-entry delivery of Shares by causing such Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account at such
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer at a Book-Entry Transfer Facility,
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or an Agent's
Message, and any other required documents must, in any case, be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase prior to the Expiration Date, or the tendering stockholder must comply
with the guaranteed delivery procedure described below. The confirmation of a
book-entry transfer of Shares into the Depositary's account at a Book-Entry
Transfer Facility as described above is referred to herein as a "Book-Entry
Confirmation."
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEES. Signatures on Letters of Transmittal must be
guaranteed by a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or by a
bank or trust company having an office or correspondent in the United States
(each of the foregoing being referred to as an "Eligible Institution"), except
no signature guarantee is required where Shares are tendered (i) by a registered
holder of Shares who has not completed either the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" on the Letter
of Transmittal or (ii) for the account of an Eligible Institution. See
Instruction 1 of the Letter of Transmittal. If the Share Certificates are
registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment is to be made, or Share Certificates not accepted for
payment or not tendered
7
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are to be returned, to a person other than the registered holder(s), the Share
Certificates, as the case may be, must be endorsed or accompanied by appropriate
stock powers, in either case, signed exactly as the name(s) of the registered
holder(s) appear on such certificates, with the signature(s) on such
certificates or stock powers guaranteed as aforesaid. See Instructions 1 and 5
of the Letter of Transmittal.
A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL (OR A FACSIMILE
THEREOF) MUST ACCOMPANY EACH DELIVERY OF SHARE CERTIFICATES TO THE DEPOSITARY.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or such stockholder cannot deliver the Share Certificates and all
other required documents to the Depositary prior to the Expiration Date, or such
stockholder cannot complete the procedure for delivery by book-entry transfer on
a timely basis, such Shares may nevertheless be tendered, provided that all of
the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by the Purchaser, is received
by the Depositary, as provided below, on or prior to the Expiration
Date; and
(iii) the Share Certificates (or a Book-Entry Confirmation) representing all
tendered Shares, in proper form for transfer, in each case together
with the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees or
in the case of a book-entry transfer, an Agent's Message, and any other
required documents are received by the Depositary within three trading
days after the date of execution of such Notice of Guaranteed Delivery.
A "trading day" is any day on which the New York Stock Exchange
("NYSE") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice of Guaranteed Delivery.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (a) certificates for
(or a timely Book-Entry Confirmation with respect to) such Shares, (b) a Letter
of Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees, or, in the case of a book-entry
transfer, an Agent's Message, and (c) any other documents required by the Letter
of Transmittal. Accordingly, tendering stockholders may be paid at different
times depending upon when certificates for Shares or Book-Entry Confirmations
with respect to Shares, are actually received by the Depositary.
DETERMINATION OF VALIDITY. In order for any tender of Shares to be valid,
it must be in proper form. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Purchaser, in its sole discretion, which determination
shall be final and binding on all parties. The Purchaser reserves the absolute
right to reject any and all tenders determined by it not to be in proper form or
the acceptance for payment of which may, in the opinion of its counsel, be
unlawful. The Purchaser also reserves the absolute right to waive any defect or
irregularity in any tender of Shares of any particular stockholder whether or
not similar defects or irregularities are waived in the case of other
stockholders. No tender of Shares will be deemed to have been validly made until
all defects and irregularities have been cured or waived. None of the Purchaser,
PHI, the Depositary, the Information Agent or any other person will be under any
duty to give notification of any defects or irregularities in tenders or incur
any liability for failure to give any such notification. The Purchaser's
determinations with regard to compliance with the terms and conditions of the
Offer (including the Letter of Transmittal and the instructions thereto) will be
final and binding.
8
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OTHER REQUIREMENTS. By executing a Letter of Transmittal as set forth
above, the tendering stockholder irrevocably appoints designees of the Purchaser
as such stockholder's proxies, each with full power of substitution, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares or other securities issued or issuable in respect of such
Shares on or after March 11, 1997. Such appointment is effective when, and only
to the extent that, the Purchaser deposits the payment for such Shares with the
Depositary. Upon the effectiveness of such appointment, all prior proxies,
consents and powers of attorney given by such stockholder will be revoked, and
no subsequent proxies, consents and powers of attorney may be given (and, if
given, will not be deemed effective). The designees of the Purchaser will, with
respect to the Shares and other securities for which appointment is effective,
be empowered to exercise all voting and other rights of such stockholder in
respect of any annual, special or adjourned meeting of the stockholders of the
Company, actions by written consent in lieu of any such meeting or otherwise as
they, in their sole discretion, deem proper. The Purchaser reserves the right to
require that, in order for Shares to be deemed validly tendered, immediately
upon the Purchaser's payment for such Shares, the Purchaser must be able to
exercise full voting rights with respect to such Shares and other securities.
A valid tender of Shares pursuant to one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer. The Purchaser's acceptance for payment of Shares
tendered pursuant to the Offer will constitute a binding agreement between the
tendering stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
TO AVOID BACKUP WITHHOLDING OF FEDERAL INCOME TAX WITH RESPECT TO PAYMENT TO
CERTAIN STOCKHOLDERS OF THE OFFER PRICE FOR THE SHARES PURCHASED PURSUANT TO THE
OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S
CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH STOCKHOLDER IS NOT
SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE
FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 10 OF THE LETTER
OF TRANSMITTAL.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment by the Purchaser pursuant to the Offer,
may also be withdrawn at any time after May 16, 1997.
If the Purchaser extends the Offer, is delayed in the acceptance for payment
of Shares or is unable to purchase Shares validly tendered pursuant to the Offer
for any reason, then, without prejudice to the Purchaser's rights under the
Offer, the Depositary may nevertheless, on behalf of the Purchaser, retain
tendered Shares, and such Shares may not be withdrawn except to the extent that
tendering stockholders are entitled to withdrawal rights as described in this
Section 4. Any such delay will be by an extension of the Offer to the extent
required by law.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If Share Certificates to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial number shown on such certificates must be submitted to
the Depositary and the signature(s) on the notice of withdrawal must be
guaranteed by an Eligible Institution unless such Shares have been tendered for
the account of any Eligible Institution. If Shares have been tendered pursuant
to the procedure for book-entry transfer as set forth in Section 3, any notice
of withdrawal must specify the
9
<PAGE>
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Shares and otherwise comply with such Book-Entry
Transfer Facility's procedures.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of the
Purchaser, PHI, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following discussion summarizes the principal federal income tax
consequences under the Internal Revenue Code of 1986, as amended (the "Code"),
associated with the Offer, assuming that the Offer is consummated as
contemplated herein. This summary does not purport to be comprehensive, does not
describe all potentially relevant tax considerations and does not discuss state,
local or foreign tax laws.
The receipt of cash for Shares pursuant to the Offer will be a taxable
transaction for federal income tax purposes under the Code (and may also be a
taxable transaction under applicable state, local, foreign and other tax laws).
Generally, for federal income tax purposes, a tendering stockholder will
recognize gain or loss equal to the difference between the amount of cash
received pursuant to the Offer or the Merger and the holder's adjusted tax basis
for the Shares sold pursuant to the Offer or converted in the Merger. Such gain
or loss will be capital gain or loss if such holder held such Shares as a
capital asset. If the shares were held longer than one year, the capital gain or
loss will be long-term.
For noncorporate taxpayers, including individuals, estates and trusts, net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) currently is taxed at a maximum federal income tax rate of 28%.
Short-term capital gain is taxed at the same federal income rates as ordinary
income, currently at a maximum of 39.6%. Capital loss generally is deductible
only to the extent of capital gain plus $3,000. Net capital loss in excess of
$3,000 may be carried forward to subsequent taxable years.
For corporations, capital losses are allowed only to the extent of capital
gains, and net capital gain is taxed at the same rate as ordinary income.
Corporations generally may carry capital losses back up to three years and
forward up to five years.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES
RECEIVED PURSUANT TO THE EXERCISE OF STOCK OPTIONS OR OTHERWISE AS COMPENSATION
OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL TAX TREATMENT
UNDER THE CODE, SUCH AS NON-U.S. PERSONS, INSURANCE COMPANIES, TAX-EXEMPT
ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND SECURITIES DEALERS, AND MAY NOT
APPLY TO A HOLDER OF SHARES IN LIGHT OF INDIVIDUAL CIRCUMSTANCES. HOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL
OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER.
6. PRICE RANGE OF SHARES; CASH DISTRIBUTIONS.
The Company's Class A Common Stock is listed and traded principally on the
NYSE and was traded on the American Stock Exchange ("AMEX") through December 10,
1996. The following table sets forth, for the quarters indicated, the high and
low sales prices on the NYSE and AMEX, as applicable, for the
10
<PAGE>
shares of Class A Common Stock based on the Company's 1996 Form 10-K, and other
publicly available sources.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Year Ended December 31, 1995:
First Quarter......................... $10 1/8 $ 9 1/8
Second Quarter........................ 9 7/8 8 1/4
Third Quarter......................... 10 8
Fourth Quarter........................ 9 1/2 8 1/4
Year Ended December 31, 1996:
First Quarter......................... $ 9 1/4 $ 7 1/4
Second Quarter........................ 9 6 5/8
Third Quarter......................... 8 7/8 6 3/8
Fourth Quarter........................ 9 1/2 7 7/8
Year Ending December 31, 1997:
First Quarter (through March 11)...... $11 1/4 $ 8 3/4
</TABLE>
On March 11, 1997, the last full trading day prior to the announcement of
the Offer, the closing sale price per share of the Company's Class A Common
Stock reported on the NYSE was $11 1/8. There is no established public market
for the Company's Class B Common Stock.
According to the Company's 1996 Form 10-K, the Company has not paid
dividends on the Company's Class A or Class B Common Stock, and the Company's
credit agreements currently restrict the payment of dividends.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY.
The information concerning the Company contained in this Offer to Purchase,
including financial information, has been furnished by the Company or taken
from, or based upon, publicly available documents and records on file with the
Commission and other public sources. The summary information concerning the
Company in this Section 7 and elsewhere in this Offer to Purchase is derived
from the Company's 1996 Form 10-K. The summary information set forth below is
qualified in its entirety by reference to such documents (which may be obtained
and inspected as described below) and should be considered in conjunction with
the more comprehensive financial and other information in such documents and
other publicly available reports and documents filed by the Company with the
Commission. The Purchaser assumes no responsibility for the accuracy or
completeness of the information contained in such documents and records, or for
any failure by the Company to disclose events that may have occurred and may
affect the significance or accuracy of any such information but which are not
known to the Purchaser.
GENERAL. The Company is a Delaware corporation, and according to the
Company's 1996 Form 10-K, the Company is engaged in the gathering, processing,
storage and marketing of natural gas. The Company reports that it owns and
operates gathering systems located in the Gulf of Mexico, plus related natural
gas processing facilities. Its gathering systems currently consist of
approximately 350 miles of pipe with 1,680 MMcf/day total capacity and an
average throughput for the year ended December 31, 1996 of 868 MMcf/ day. The
Company also has a majority voting and ownership interest in Market Hub
Partners, which is developing an integrated system of natural gas market hubs
with high deliverability salt cavern storage facilities, certain of which are
connected via third party pipelines to the Company's offshore gathering systems.
11
<PAGE>
CERTAIN FINANCIAL INFORMATION. Set forth below is certain selected
consolidated financial data with respect to the Company and its subsidiaries,
which was excerpted from the Company's 1996 Form 10-K. More comprehensive
financial information is included in such report (including management's
discussion and analysis of financial condition and results of operations) and
other documents filed by the Company with the Commission, and the following
financial information is qualified in its entirety by reference to such report
and other documents and all of the financial information and notes contained
therein. Such report and other documents may be examined and copies thereof may
be obtained in the manner set forth below.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................................... $ 617,292 $ 311,565 $ 294,162
Operating income........................................................... 24,102 12,898 11,544
Income before extraordinary item........................................... 5,044 494 3,317
Net income................................................................. 5,044 701 3,122
Net income per common share................................................ 0.27 0.05 0.21
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................................................ $ 20,072 $ 14,204
Total assets............................................................... 348,611 375,916
Long-term debt............................................................. 138,532 146,515
Stockholders' equity....................................................... 102,880 98,441
</TABLE>
AVAILABLE INFORMATION. The Company is subject to the information filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file with the Commission periodic reports, proxy statements and other
information relating to its business, financial condition and other matters.
Information as of particular dates concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company is required to be disclosed in reports filed with
the Commission or in proxy statements distributed to the Company's stockholders
and filed with the Commission. Such reports, proxy statements and other
information may be inspected at the Commission's office at 450 Fifth Street,
N.W., Washington, D.C., 20549, and also should be available for inspection at
the regional offices of the Commission located in the Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois, and 7 World
Trade Center, 13th Floor, New York, New York. Copies of such materials should be
obtainable, upon payment of the Commission's customary charges, by writing to
the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.,
20549. The information also should be available at the NYSE at 20 Broad Street,
New York, New York 10005.
8. CERTAIN INFORMATION CONCERNING THE PURCHASER.
GENERAL. The Purchaser, a Delaware corporation and a wholly owned
subsidiary of PHI, was recently organized to acquire the Company and has not
conducted any unrelated activities since its organization. The principal office
of the Purchaser is located at the principal office of PHI. All outstanding
shares of capital stock of the Purchaser are owned by PHI.
PHI, a Delaware corporation (formerly Inner PacifiCorp, Inc.), is a wholly
owned subsidiary of PacifiCorp, an Oregon corporation ("PacifiCorp"). PacifiCorp
is a domestic electric utility headquartered
12
<PAGE>
in Portland, Oregon that conducts a retail electric utility business through
Pacific Power & Light Company and Utah Power & Light Company and engages in
power production and sales on a wholesale basis under the name PacifiCorp. The
principal executive offices of PHI are located at 700 NE Multnomah, Suite 1600,
Portland, Oregon 97232; the telephone number is (503) 731-2000.
PHI was formed in 1984 to hold the stock of PacifiCorp's principal
subsidiaries and to facilitate the conduct of businesses not regulated as
domestic electric utilities. Historically, PHI's principal subsidiaries were
engaged in telecommunications, mining and resource development and financial
services. In recent years, PHI reduced the size and scope of its financial
services operations and sold its mining and resource development subsidiary. In
addition, PacifiCorp, through several subsidiaries of PHI, has been pursuing
opportunities to strengthen the domestic and international scope and competitive
position of its electric utility and telecommunications operations and to
develop and expand its nonregulated energy related activities, including its
independent power production, cogeneration and power marketing and trading
businesses. PHI expects that this expansion will continue into the future as the
domestic energy markets become less regulated and as opportunities arise in
domestic and international markets. At the present time, PHI's principal
subsidiaries are engaged primarily in telecommunications and international and
domestic power production, distribution and marketing. PHI also owns certain
financial assets directly and through other subsidiaries.
CERTAIN FINANCIAL INFORMATION. Set forth below is certain selected
consolidated financial information with respect to PHI and its subsidiaries
excerpted from the consolidated financial statements contained in PHI's Tender
Offer Statement on Schedule 14D-1 (the "Schedule 14D-1"), copies of which are
available for inspection at the Commission's office at 450 Fifth Street, N.W.,
Washington, D.C., 20549, and also should be available for inspection at the
regional offices of the Commission located in the Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois, and 7 World Trade
Center, 13th Floor, New York, New York. Copies of such materials should be
obtainable, upon payment of the Commission's customary charges, by writing to
the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.,
20549.
13
<PAGE>
SELECTED FINANCIAL DATA
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1994 1993
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
INCOME STATEMENT DATA:
Revenues.............................................................. $ 1,333.0 $ 784.8 $ 858.8 $ 898.6
Income from operations................................................ 375.3 246.9 203.1 184.9
Income from continuing operations before cumulative effect of change
in accounting principle............................................. 133.2 189.3 88.0 60.5
Net income............................................................ 133.2 189.3 88.0 114.9
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1996 1995 1994
----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ (85.0) $ (495.6) $ 8.5
Total assets................................................ 4,839.3 4,484.3 2,532.0
Long-term debt.............................................. 2,049.7 1,542.2 614.2
Stockholders' equity........................................ 1,457.5 1,311.6 856.3
</TABLE>
Neither the Purchaser nor, to the best knowledge of the Purchaser, any of
the persons listed on Schedule I hereto or any associate of the Purchaser,
including PHI and PacifiCorp, or any of the persons so listed, beneficially owns
or has a right to acquire directly or indirectly any securities of the Company,
and neither the Purchaser, nor, to the best knowledge of the Purchaser, any of
the persons or entities referred to above, including PHI and PacifiCorp, or any
of the respective executive officers, directors or subsidiaries of any of the
foregoing, has effected any transactions in the securities of the Company during
the past 60 days.
Except as set forth in this Offer to Purchase, none of the Purchaser, PHI or
PacifiCorp or, to the best knowledge of the Purchaser, any of the persons listed
on Schedule I hereto, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, contracts, arrangements, understandings
or relationships concerning the transfer or voting of such securities, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies. Except as set
forth in this Offer to Purchase, none of the Purchaser, PHI or PacifiCorp or, to
the best knowledge of the Purchaser, any of the persons listed on Schedule I
hereto, has had since January 1, 1994 any business relationships or transactions
with the Company or any of its executive officers, directors or affiliates that
are required to be reported under the rules and regulations of the Commission
applicable to the Offer. Except as set forth in this Offer to Purchase, since
January 1, 1994, there have been no contacts, negotiations or transactions
between the Purchaser, PHI or PacifiCorp or, to the best knowledge of the
Purchaser, any of the persons listed in Schedule I hereto, on the one hand, and
the Company or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of securities,
an election of directors, or a sale or other transfer of a material amount of
assets.
9. SOURCE AND AMOUNT OF FUNDS.
The Purchaser estimates that the total amount of funds required to purchase
pursuant to the Offer the number of Shares that are outstanding on a fully
diluted basis and to pay fees and expenses related to the Offer will be
approximately $290 million. The Purchaser plans to obtain all funds needed for
the Offer from PHI. PHI will make an unsecured advance to the Purchaser prior to
the consummation of the Offer.
14
<PAGE>
PHI expects to obtain the funds needed for the Offer from its general corporate
funds and from the issuance of commercial paper or other short-term borrowings.
THE OFFER IS NOT CONDITIONED UPON THE PURCHASER OBTAINING FINANCING TO
PURCHASE SHARES PURSUANT TO THE OFFER. SEE INTRODUCTION AND SECTION 13.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
On November 12, 1996, the Company 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 the Company. The press release
noted, however, that the Company's Board of Directors (the "Board") had not made
a determination that the Company would be sold or merged or that such a
transaction would be in the best interests of the stockholders.
PHI had previously been contacted by Lehman Brothers regarding any interest
it might have in acquiring or merging with the Company. On October 23, 1996,
PacifiCorp Power Marketing, Inc., a wholly owned subsidiary of PHI, signed a
Confidentiality Agreement with the Company. After November 12, 1996, PHI
received descriptive information about the Company and its subsidiaries and was
asked to submit a preliminary indication of interest. Following submission of
its preliminary indication of interest in mid-December 1996, PHI, along with
other potential acquirors, was invited to visit the Company's data room, receive
management presentations and then submit a definitive proposal for the
acquisition of all or part of the Company for cash or 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, including PHI, 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 the Company in a stock-for-stock merger in which each Share 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.
The Company's legal and financial advisors contacted PHI to clarify various
matters prior to a meeting of the special committee of the Board (the "Special
Committee") held 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 the Company; rather, PHI
proposed to use cash to repurchase shares of PacifiCorp common stock in the open
market for delivery to the stockholders of the Company in the merger. PHI
advised the Company that it estimated it would take 75 to 90 business days to
acquire all such shares.
After the Special Committee meeting of February 18, 1997, Lehman Brothers
contacted PHI to inform PHI of the Special Committee's responses to PHI's
initial proposal. PHI was told that the Special Committee had concluded, based
on materials included with PHI's proposal regarding certain Company 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. PHI was also told of the
Special Committee's 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 the Company's stockholders, including the possibility of delays
beyond the time frame anticipated by PHI. On behalf of the Company, Lehman
Brothers asked if PHI would be willing to acquire the Shares for $13.45 per
Share in cash in a tender offer to be followed by a second step merger.
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
15
<PAGE>
proposed transaction agreement and (iii) approval by the boards of directors of
PHI and PacifiCorp. Following that discussion, the Company transmitted to PHI a
proposed form of merger agreement revised to reflect a two-step cash
transaction. Representatives of PHI and the Company, 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.
Over the course of the next two weeks, 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 the Company that the boards of directors of PHI and PacifiCorp would be
convened on March 11, 1997 to consider approval of the transaction. The Company
scheduled a meeting of its Board on 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 the Company 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 Board.
On March 11, 1997, the boards of directors of PacifCorp and PHI approved the
Merger Agreement, the Offer and the Merger. The Company's Board also met on the
afternoon of March 11, 1997. At that meeting, 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 received by
the holders of Shares pursuant to the Offer and the Merger was fair to such
holders from a financial point of view. At the meeting, the Board approved the
Merger Agreement and the Merger and resolved to recommend the Offer to the
Company's stockholders. Immediately thereafter, PHI, the Purchaser and the
Company executed the Merger Agreement, pursuant to which the Purchaser agreed to
make the Offer. In addition, a stockholder agreement by and among PHI, the
Purchaser, Larry W. Bickle, John A. Strom and J. Chris Jones was executed,
pursuant to which such three individuals agreed to tender their Shares in the
Offer and to sell such shares to the Purchaser, 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.
11. THE PURPOSE OF THE OFFER; MERGER AGREEMENT; PLANS FOR THE COMPANY.
PURPOSE
The purpose of the Offer and the Merger is to enable PHI to acquire control
of, and the entire equity interest in, the Company.
MERGER AGREEMENT
Set forth below is a summary of the material provisions of the Merger
Agreement, a copy of which is filed as Exhibit (c)(1) to the Schedule 14D-1.
Such Exhibit should be available for inspection and copies should be obtained,
in the manner set forth in Section 8 of the Offer to Purchase (except that it
will not be available at the regional offices of the Commission). The following
summary is qualified in its entirety by reference to the Merger Agreement.
THE OFFER. The Merger Agreement provides that PHI will cause the Purchaser
to commence and the Purchaser will commence the Offer to purchase all of the
Shares for $13.41 per Share. The Merger Agreement specifies certain conditions
for the Offer, including, among other things, the Minimum Condition. Pursuant to
the Merger Agreement, the Purchaser expressly reserves the right to change or
waive any such condition, to increase the Offer Price, 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 Offer
16
<PAGE>
Price, (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 Section 13
below, (D) changes or waives the Minimum Condition, (E) extends the Offer,
except as described in the following sentence, (F) provides for a different
Offer Price 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 the Company and may be extended by the
Purchaser 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 the
Company, 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 and (ii)
the Purchaser may extend the Offer, if at the time the Offer would otherwise
expire, a 5 day cure period under clause (f) or (g) of Section 13 below 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 DGCL, as soon as practicable following the
satisfaction or waiver, if permissible, of the conditions described below under
"Conditions to the Merger," the Purchaser will be merged with and into the
Company with the Company 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 the Purchaser or by any other direct or indirect subsidiary of PHI or of
the Company, or held in the treasury of the Company, 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 equal to the Offer Price in cash (the "Merger Consideration")
net to the holder, without any interest thereon, and each share of common stock
of the Purchaser 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, the Company 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 the Purchaser 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, the Purchaser 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) the Company 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 the Purchaser 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 the Company, and
each holder of a canceled Option will be entitled to receive from the Purchaser
at the same time as payment for Shares is made by the Purchaser in connection
with the Offer, in consideration for the cancellation of such Option, an amount
in cash equal to the product of (i) the
17
<PAGE>
number of Shares previously subject to such Option, whether or not then
exercisable or vested, and (ii) the excess, if any, of the Offer Price 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 the Company, relating to, among other things,
(i) the organization of the Company and its subsidiaries and other corporate
matters, (ii) the capital structure of the Company, (iii) the authorization,
execution, delivery and consummation of the transactions contemplated by the
Merger Agreement, (iv) consents and approvals, (v) documents filed by the
Company with the Commission and the accuracy of the information contained
therein, (vi) the accuracy of the information contained in documents filed with
the Commission 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 the Purchaser, relating to, among other things, (a) the organization and
ownership of PHI and the Purchaser 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 Commission 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,
the Company has agreed that, prior to the Effective Time, except as otherwise
provided in the Merger Agreement or with the prior written consent of PHI, the
Company 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.
The Company 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 the Company and its subsidiaries,
(ii) keep available the services of the present officers and employees of the
Company and its subsidiaries, and (iii) preserve the material relationships of
the Company and its subsidiaries with licensors, licensees, customers,
suppliers, employees and any others having business dealings with the Company or
any of its subsidiaries. The Company has agreed that, unless otherwise
contemplated or disclosed in the Merger Agreement or consented to by PHI,
neither the Company nor any material subsidiary, can, between the date of the
Merger Agreement and the Effective Time: (i) amend or otherwise change its
charter or bylaws, (ii) issue, sell, pledge, dispose of, grant, or encumber any
shares of capital stock of any class of the Company 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 the Company
or any subsidiary, or, any assets and properties material to the Company 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 the Company or (b) pledges of assets and properties
required by any financing document to which the Company 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 the Company), (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 the Company; (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 the Company, (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 the Company and its
consolidated subsidiaries as
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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 Company's employee stock ownership plan (the
"ESOP") in excess of the amount necessary to amortize existing loans from the
Company 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 the Company and its 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, the Company has agreed that it
will (i) give PHI and the Purchaser and their authorized representatives
reasonable access to all offices, properties and other facilities and to all
books and records of the Company and its subsidiaries, (ii) permit PHI and the
Purchaser to make such inspections as it may reasonably require, and (iii) cause
its officers and those of its subsidiaries to furnish PHI and the Purchaser such
financial and operating data and other information with respect to the business
and properties of the Company and its subsidiaries. In this regard, PHI and the
Purchaser have agreed to comply with the terms of the Confidentiality Agreement
between the Company and PacifiCorp Power Marketing, Inc. dated October 23, 1996
(the "Confidentiality Agreement").
ALTERNATIVE PROPOSALS. The Merger Agreement provides that until the earlier
of the termination of the Merger Agreement or the Effective Time, the Company
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 the Company or any capital stock of the
Company 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"). The Company has agreed to
cease and to cause to be terminated any existing discussions or negotiations
regarding Alternative Transactions with parties other than PHI and the Purchaser
commenced before the date of the Merger Agreement. The Company has also agreed
not to grant its consent to any party other than PHI and the Purchaser 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
Confidentiality Agreement, or to provide any confidential or non-public
information regarding the Company and its subsidiaries to, or have discussions
with, any person regarding an Alternative Transaction.
Notwithstanding the foregoing, the Merger Agreement provides that if the
Company receives an unsolicited proposal or indication of interest for or with
respect to a potential Alternative Transaction (an "Alternative Proposal"), the
Company may engage in discussions or negotiations regarding such Alternative
Proposal and furnish confidential or non-public information concerning the
Company or its subsidiaries if in the reasonable, good faith judgment of the
Company's Board of Directors, taking into account the advice of outside counsel,
the failure to do so would violate the fiduciary duties of the Board of
Directors to the holders of Shares under applicable law, and if the Alternative
Proposal is a tender offer, the Company's Board of Directors may take and
disclose to the Company's stockholders a position contemplated by rule 14e-2
under the Exchange Act. The Merger Agreement also provides that the Company 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 the Purchaser pursuant to the Offer,
the Purchaser will be entitled to designate such number of directors on the
Company's Board of Directors as will give the Purchaser, subject to compliance
with Section 14(f) of the Exchange Act, a majority of such directors, and the
Company will, at such time, cause the Purchaser's designees to be so elected by
its existing Board of Directors; provided, however, that in the event that the
Purchaser's designees are elected to the Company's Board of Directors, until the
Effective Time such Board of Directors will have at least three directors who
are directors of the
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Company 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 the
Company 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, the Company has agreed
promptly, at the option of PHI, either to increase the size of the Company's
Board of Directors and/or obtain the resignation of such number of its current
directors as is necessary to enable the Purchaser's designees to be elected or
appointed to the Company'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 the
Company as of the date of execution of the Merger Agreement. The Merger
Agreement provides that the Company 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 the
Company as identified in the Merger Agreement to the full extent required or
permitted under Delaware law, subject to certain limitations. 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 the
Company 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 the Company 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 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 the Company and its subsidiaries certain employee benefit
plans, except that PHI or the Surviving Corporation may, during such period,
replace any of these employee benefit plans 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 Code, that PHI will maintain or cause to be maintained the
ESOP as a separate qualified plan or separate feature in a qualified plan solely
for the benefit of the ESOP participants and new employees of the business that
was conducted by the Company prior to the Effective Time, until the notes issued
by the ESOP (the "ESOP Notes") are paid in full (prior to or at maturity).
Employees who are 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 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
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of the Company 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 the Company'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 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 the Company in accordance with the Company'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) the Purchaser 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 the Company, upon approval of its Board of Directors, if (1) the
Purchaser 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 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 the Company to satisfy the conditions set forth in clause (f) or
(g) of Section 13 below, or (2) prior to the purchase of Shares pursuant to the
Offer, the Company's Board of Directors shall have withdrawn or modified in a
manner adverse to the Purchaser or PHI its approval or recommendation of the
Offer, the Merger Agreement or the Merger in order to approve the execution by
the Company 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 the Company's stockholders from
a financial point of view than the Offer and the Merger taken together, as
determined by the Company's 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 the Company 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 Section 13 below, the Purchaser
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 the
Purchaser 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 the Purchaser 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 Company's Board of Directors or any committee thereof
shall have withdrawn or modified in a manner adverse to the Purchaser 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, the Company 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, the Purchaser or the Company if the Merger
is not consummated on or before the first anniversary of the date
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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 the Company under the provision 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,
the Company 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 the Purchaser's
designees to the Company's Board of Directors.
STOCKHOLDER AGREEMENT
Messrs. Larry W. Bickle, John A. Strom and J. Chris Jones, executive
officers of the Company, are parties to a Stockholder Agreement dated March 11,
1997 with PHI and the Purchaser. 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
Purchaser has agreed to purchase, his Shares at a price per share equal to
$13.41, or such higher price per Share as may be offered by the Purchaser in the
Offer, provided that such obligations to purchase and sell are both subject to
(i) the Purchaser having accepted Shares for payment 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. According to representations in the Stockholder Agreement, Messrs. Bickle,
Strom and Jones together own a total of 244,441 Shares and hold options to
purchase 1,904,439 Shares. 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 the Company, PHI or the Purchaser, 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
(c)(2) to the Schedule 14D-1 and is incorporated herein by reference.
OPERATIONS FOLLOWING CONSUMMATION OF THE OFFER
Following consummation of the Offer, PHI intends to invest in and expand the
Company's gas marketing operations, but otherwise has no definitive plans to
make any material changes in the business or operations of the Company. Based on
its review of the Company's operations following the consummation of the Offer,
PHI may make changes in the Company's assets, capitalization, structure and
management.
APPRAISAL RIGHTS
Holders of Shares do not have appraisal rights as a result of the Offer.
However, if the Merger is consummated, holders of Shares at the effective time
of the Merger will have certain rights pursuant to the provisions of Section 262
of the DGCL ("Section 262") to dissent and demand appraisal of their Shares.
Under Section 262, dissenting stockholders who comply with the applicable
statutory procedures will be
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entitled to receive a judicial determination of the fair value of their Shares
(exclusive of any element of value arising from the accomplishment or
expectation of the proposed Merger) and to receive payment of such fair value in
cash, together with a fair rate of interest, if any. Any such judicial
determination of the fair value of Shares could be based upon factors other
than, or in addition to, the price per Share to be paid in the Merger or the
market value of the Shares. The value so determined could be more or less than
the price per Share to be paid in the Merger. The foregoing summary of Section
262 does not purport to be complete and is qualified in its entirety by
reference to Section 262.
GOING PRIVATE TRANSACTIONS
The Commission has adopted Rule 13e-3 under the Exchange Act which is
applicable to certain: "going private: transactions and which may under certain
circumstances be applicable to the Merger. However, Rule 13e-3 would be
inapplicable if (a) the Shares are deregistered under the Exchange Act prior to
the Merger or (b) the Merger is consummated within one year after the purchase
of the Shares pursuant to the Offer and the Merger provided for stockholders to
receive cash for their Shares in an amount at least equal to the Offer Price. If
applicable, Rule 13e-3 requires, among other things, that certain financial
information concerning the fairness of the proposed transaction and the
consideration offered to minority stockholders in such transaction be filed with
the Commission and disclosed to stockholders prior to the consummation of the
Merger.
12. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, NEW YORK STOCK
EXCHANGE LISTING AND EXCHANGE ACT REGISTRATION.
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and the number of stockholders, which
could adversely affect the liquidity and market value of the remaining Shares
held by the public.
Depending upon the number of Shares acquired pursuant to the Offer and the
Shares accumulated by other parties, it is possible that the Company's Class A
Common Stock will no longer be eligible for listing on the NYSE. In that event,
the market for the Shares could be adversely affected.
The Company's Class A Common Stock is registered under the Exchange Act.
Registration of the Company's Class A Common Stock may be terminated upon
application of the Company to the Commission if the Company's Class A Common
Stock is not listed on a national securities exchange and there are fewer than
300 holders of record of the Company's Class A Common Stock. The Company has
informed the Purchaser that there were approximately 2200 beneficial owners of
the Company's Class A Common Stock and one beneficial owner of the Company's
Class B Common Stock as of March 7, 1997. The termination of the registration of
the Company's Class A Common Stock under the Exchange Act would render
inapplicable certain provisions of the Exchange Act, including requirements that
the Company furnish stockholders with proxy materials regarding meetings of
stockholders of the Company, the reporting and short-swing profit liability
provisions under Section 16 of the Exchange Act and the requirements of Rule
13e-3 under the Exchange Act regarding "going private" transactions.
The Shares are currently "margin securities" under the rules of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"). Among
other things, this status has the effect of allowing lenders to extend credit to
stockholders who wish to use the Shares as collateral. Depending upon factors
similar to those described above with respect to NYSE eligibility, following the
Offer the Shares might no longer constitute "margin securities" for purposes of
the Federal Reserve Board's margin regulations, in which event Shares could no
longer be used as collateral for margin loans made by brokers.
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The Purchaser currently intends to cause the Company to make an application
for termination of registration of the Shares under the Exchange Act after
consummation of the Merger, and may cause such an application to be filed prior
to the consummation of the Merger if a sufficient number of Shares are purchased
pursuant to the Offer. If registration of the Shares under the Exchange Act were
terminated, the Shares would no longer be "margin securities" or eligible for
listing on the NYSE.
13. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, the Purchaser 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, the Purchaser 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 the Merger 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 the Company, PHI or
the Purchaser of all or any material portion of the business or assets
of the Company and its subsidiaries, taken as a whole, or PHI and its
subsidiaries, taken as a whole, or compels the Company, PHI or any of
their subsidiaries to dispose of or hold separate all or any material
portion of the business or assets of the Company and its subsidiaries,
taken as a whole, or PHI and its subsidiaries, taken as a whole, in each
case as a result of the Offer or the Merger; (iii) imposes material
limitations on the ability of PHI or the Purchaser to exercise
effectively full rights of ownership of any Shares, including, without
limitation, the right to vote any Shares acquired by the Purchaser
pursuant to the Offer, or otherwise on all matters properly presented to
the Company's stockholders, including, without limitation, the approval
and adoption of the Merger Agreement and the Merger; or (iv) requires
divestiture by PHI or the Purchaser 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, the Company or any
Subsidiary or affiliate of PHI or the Company or (ii) the Offer or the
Merger, 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 NYSE 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, or (v) in the case of any of the foregoing
existing at the time of the commencement of the Offer, in the reasonable
judgment of Purchaser, 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 Offer Price;
(e) the Company's Board of Directors or any committee thereof shall have
withdrawn or modified in a manner adverse to PHI or the Purchaser its
approval or recommendation of the Offer, the Merger or the Merger
Agreement or shall have approved or recommended another merger,
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consolidation, business combination with, or acquisition of the Company
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) the Company shall have failed to perform in any material respect any of
its material covenants in the Merger Agreement and shall not have cured
such default in all material respects (provided 5 days written notice of
such default shall have been given to the Company by PHI);
(g) the representations and warranties of the Company shall fail to be true
and correct in all material respects on and as of the date made or,
except as otherwise expressly contemplated, 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 the Company by PHI);
(h) the Merger Agreement shall have been terminated in accordance with its
terms;
(i) the Purchaser and the Company shall have agreed that the Purchaser 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
Merger Agreement, (ii) disclosed in any of the Company's periodic
reports to the Commission filed since such date and prior to the date of
the Merger Agreement, or (iii) set forth in 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
the Company and its subsidiaries taken as a whole, except for changes
that affect the industries in which the Company and its subsidiaries
operate generally.
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser regardless of the circumstances giving rise to any
such condition or may be waived by the Purchaser in whole or in part at any time
and from time to time in its sole discretion. The failure by the Purchaser 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.
14. CERTAIN LEGAL MATTERS.
Except as described below, the Purchaser is not aware of any approval or
other action by any federal, state or foreign governmental or administrative
agency that would be required for the acquisition of the Shares by the Purchaser
pursuant to this Offer. Should any approval or other action be required, it is
presently contemplated that such approval or action would be sought. However,
while there is no present intent to delay the purchase of the Shares tendered
pursuant to this Offer pending the outcome of any such matter, there can be no
assurance that any such approval or other action, if needed, could be obtained
without substantial delay or conditions, or at all. The Purchaser's obligation
under the Offer to accept for payment and pay for Shares is subject to certain
conditions, including conditions relating to the legal matters discussed in this
Section 14. See Section 13.
STATE TAKEOVER LAWS. Section 203 of the DGCL prohibits a Delaware
corporation such as the Company from engaging in a "Business Combination"
(defined as a variety of transactions, including mergers, as set forth below)
with an "Interested Stockholder" (defined generally as a person that is the
beneficial owner of 15% or more of a corporation's outstanding voting stock) for
a period of three years following the date that such person became an Interested
Stockholder unless (a) prior to the date such person became an Interested
Stockholder, the board of directors of the corporation approved either the
Business Combination or the transaction that resulted in the stockholder
becoming an Interested Stockholder, (b) upon
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<PAGE>
consummation of the transaction that resulted in the stockholder becoming an
Interested Stockholder, the Interested Stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding stock held by directors who are also officers of the
corporation and employee stock ownership plans that do not provide employees
with the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer or (c) on or subsequent to
the date such person became an Interested Stockholder, the Business Combination
is approved by the board of directors of the corporation and authorized at a
meeting of stockholders, and not by written consent, by the affirmative vote of
the holders of at least 66- 2/3% of the outstanding voting stock of the
corporation not owned by the Interested Stockholder. Because the Company's Board
of Directors has approved the Offer, the prohibition of section 203 will not
apply to the Merger.
Except as described in this Offer to Purchase, the Purchaser has not
complied with any state takeover laws. Should any government official or third
party seek to apply any state takeover law to the Offer other than those
described in this Offer to Purchase, the Purchaser will take such action as then
appears desirable and currently anticipates that it will contest the validity or
applicability of such statute in appropriate court proceedings.
If it is asserted that one or more state takeover laws other than those
described in this Offer to Purchase apply to the Offer and it is not determined
by all appropriate courts that such act or acts do not apply or are invalid as
applied to the Offer, the Purchaser might be required to file certain
information with, or receive approvals from, the relevant state authorities. In
addition, if enjoined, the Purchaser might be unable to accept for payment any
Shares tendered pursuant to the Offer, or be delayed in consummating the Offer.
In such case, the Purchaser may not be obligated to accept for payment any
Shares tendered. See Section 13.
ANTITRUST LAWS. The Antitrust Division and the FTC frequently scrutinize
the legality under the antitrust laws of transactions such as the proposed
acquisition of the Company by the Purchaser. At any time before or after the
Purchaser's acquisition of Shares pursuant to the Offer, the Antitrust Division
or the FTC could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or the consummation of the proposed Merger or
seeking the divestiture of Shares acquired by the Purchaser or the divestiture
of substantial assets of the Company or its subsidiaries or PHI or its
subsidiaries. Private parties may also bring legal action under the antitrust
laws under certain circumstances. There can be no assurance that a challenge to
the Offer on antitrust grounds will not be made or, if such a challenge is made,
of the result thereof.
15. FEES AND EXPENSES.
Pursuant to an engagement letter dated December 4, 1996 (the "Engagement
Letter"), PHI retained New Harbor Incorporated and NHI Securities Inc.
(collectively, "NHI") to render strategic, financial advisory and investment
banking services to PHI in connection with the proposed acquisition of TPC. For
such financial advisory services, PHI has paid or agreed to pay NHI under the
Engagement Letter as follows: (a) a retainer of $50,000 for the services
rendered thereunder through December 31, 1996 and an additional amount of
$100,000 per month for the services rendered thereunder through the remainder of
the term thereof; (b) upon signing of the Merger Agreement, 20% of the success
fee referred to in the next subparagraph; and (c) upon completion of the
acquisition, a success fee based on the aggregate consideration paid in the
acquisition according to a schedule under which the fee for a transaction in
which the aggregate consideration is between $250 million and $300 million
equals a value interpolated between $1,775,000 and $2,040,000. The advisory fees
paid pursuant to subparagraph (a) and (b) will be credited against any success
fee owed pursuant to subparagraph (c). PHI has also agreed to reimburse NHI for
its reasonable direct, out-of-pocket expenses and to indemnify NHI and certain
related persons against certain liabilities resulting from or arising out of its
performance under the Engagement Letter.
26
<PAGE>
The Purchaser has retained IBJ Schroder Bank & Trust Company to act as
Depositary and Georgeson & Company Inc. to serve as Information Agent in
connection with the Offer. The Purchaser will pay each of the Depositary and the
Information Agent reasonable and customary compensation for their services in
connection with the Offer, plus reimbursement for out-of-pocket expenses, and
will indemnify each of them against certain liabilities and expenses in
connection therewith, including certain liabilities under the federal securities
laws.
Neither the Purchaser nor PHI will pay any fees or commissions to any broker
or dealer or other person (other than the Information Agent) in connection with
the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers,
commercial banks and trust companies will be reimbursed by the Purchaser for
customary mailing and handling expenses incurred by them in forwarding material
to their customers.
16. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, the Purchaser may, in its sole discretion, take such
action as it may deem necessary to make the Offer in any such jurisdiction and
extend the Offer to holders of Shares in such jurisdiction.
Neither the Purchaser nor PHI is aware of any jurisdiction in which the
making of the Offer or the acceptance of Shares in connection therewith would
not be in compliance with the laws of such jurisdiction. Consequently, the Offer
is currently being made to all holders of Shares. To the extent the Purchaser or
PHI becomes aware of any law that would limit the class of offers in the Offer,
the Purchaser will amend the Offer and, depending on the timing of such
amendment, if any, will extend the Offer to provide adequate dissemination of
such information to holders of Shares prior to the expiration of the Offer.
The Purchaser has filed with the Commission a Statement on Schedule 14D-1
(including exhibits) pursuant to Rule 14d-3 under the Exchange Act, furnishing
certain additional information with respect to the Offer, and may file
amendments thereto. Such Schedule 14D-1 and any amendments thereto, including
exhibits, may be examined and copies may be obtained from the principal office
of the Commission in Washington, D.C. and the NYSE in the manner set forth in
Section 8.
No person has been authorized to give any information or make any
representation on behalf of the Purchaser not contained in this Offer to
Purchase or in the Letter of Transmittal and, if given or made, such information
or representation must not be relied upon as having been authorized.
POWER ACQUISITION COMPANY
March 18, 1997
27
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER, PHI AND PACIFICORP
(NOTE: FOOTNOTE (+) APPEARS AT END OF THIS SCHEDULE I)
Set forth in the table below are the names and present principal occupations
or employments, and the material occupations, positions, offices, and
employments during the past five years, for the directors and executive officers
of Power Acquisition Company, PacifiCorp Holdings, Inc. and PacifiCorp, and the
name, principal business and address for any corporation or other organization
in which such employment is carried on. Each person listed below is of United
States citizenship, and, unless otherwise indicated, positions have been held
for the past five years. Directors are identified by an asterisk and the year in
which such person became a director is indicated in parentheses.
POWER ACQUISITION COMPANY
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND RESIDENCE (AND PRINCIPAL BUSINESS); MATERIAL POSITIONS
OR BUSINESS ADDRESS HELD DURING PAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
John A. Bohling* (1997)...................... Senior Vice President of PacifiCorp (since 1993); Executive Vice
PacifiCorp President of Pacific Power & Light Company (1991-1993); Director
700 NE Multnomah, Suite 1600 and Vice President of Power Acquisition Company (since March 1997)
Portland, Oregon 97232
Richard T. O'Brien* (1997)................... Senior Vice President and Chief Financial Officer (since 1995) and
PacifiCorp+ 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* (1997).................. Senior Vice President (since 1994) and Vice President (1990-1994)
PacifiCorp+ of PacifiCorp; Director and President of Power Acquisition Company
(since March 1997)
Donald N. Furman............................. Vice President of PacifiCorp (since February 1997); President of
PacifiCorp Power Marketing, Inc. PacifiCorp Power Marketing, Inc., a power marketing and trading
700 NE Multnomah, Suite 500 subsidiary of PacifiCorp Holdings, Inc. (since 1995); Assistant
Portland, Oregon 97232 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)
Sally A. Nofziger............................ Vice President and Corporation Secretary of PacifiCorp; Secretary
PacifiCorp+ of PacifiCorp Holdings, Inc.; Secretary of Power Acquisition
Company (since March 1997)
</TABLE>
S-1
<PAGE>
PACIFICORP HOLDINGS, INC.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND RESIDENCE (AND PRINCIPAL BUSINESS); MATERIAL POSITIONS
OR BUSINESS ADDRESS HELD DURING PAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
Frederick W. Buckman* (1994)................. President and Chief Executive Officer of PacifiCorp (since
PacifiCorp+ February 1994); Chairman of PacifiCorp Holdings, Inc. (since
1994); President and Chief Executive Officer (1992-1994) and
President and Chief Operating Officer (1988-1991) of Consumers
Power Company, Jackson, Michigan
C. Todd Conover* (1993)...................... President and Chief Executive Officer, The Vantage Company, a
The Vantage Company business consulting firm, Los Altos, California; General Manager,
101 First Street, Suite 670 Finance Industry Group, Tandem Computers Incorporated, a computer
Los Altos, California 94022 manufacturing company (January 1994-May 1995); President and Chief
Executive Officer, Central Banks of Colorado (1991-1992)
Michael C. Henderson* (1995)................. Vice President of PacifiCorp (since 1995); Director, President and
PacifiCorp+ Chief Executive Officer of PacifiCorp Holdings, Inc. and Chairman,
President and Chief Executive Officer of PacifiCorp Financial
Services, Inc. (since 1995); Executive Vice President (1992-1993)
and Senior Vice President (1991-1992) of PacifiCorp Financial
Services, Inc.
Nolan E. Karras* (1993)...................... Investment Advisor, Karras & Associates, Inc., an investment
Karras & Associates, Inc. advisory firm
4695 South 1900 West #3
Roy, Utah 84067
Richard T. O'Brien........................... (See above)
PacifiCorp+
Verl R. Topham............................... Senior Vice President and General Counsel of PacifiCorp (since May
Utah Power & Light Company 1994); Senior Vice President and General Counsel of PacifiCorp
One Utah Center, Suite 2300 Holdings, Inc. (since 1995); President of Utah Power & Light
201 South Main Company (1990-1994)
Salt Lake City, Utah 84140
William E. Peressini......................... Vice President (since 1996) and Treasurer (since 1994) of
PacifiCorp+ 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)
Sally A. Nofziger............................ (See above)
PacifiCorp++
Donald A. Bloodworth......................... Controller of PacifiCorp (since 1996); Controller of PacifiCorp
PacifiCorp+ Holdings, Inc. (since 1996); President of Revenue Requirements and
Controller, Pacific Telecom, Inc. (1993-1996); Vice President and
Treasurer, PacifiCorp Holdings, Inc. (1992-1993)
</TABLE>
S-2
<PAGE>
PACIFICORP
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND RESIDENCE (AND PRINCIPAL BUSINESS); MATERIAL POSITIONS
OR BUSINESS ADDRESS HELD DURING PAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
W. Charles Armstrong* (1996)................. Independent Consultant (since 1997); Former Chief Executive
14019 SE 35th Loop Officer, Bank of America Oregon (1992-1996)
Vancouver, Washington 98683
Kathryn A. Braun* (1994)..................... Executive Vice President, Western Digital Corporation
Western Digital Corporation
8105 Irvine Center Drive
Irvine, CA 92718
Frederick W. Buckman* (1994)................. (See above)
PacifiCorp+
C. Todd Conover* (1991)...................... (See above)
The Vantage Company
Nolan E. Karras* (1993)...................... (See above)
Karras & Associates, Inc.
Keith R. McKennon* (1990).................... Chairman of the Board of PacifiCorp (since 1994); formerly
PacifiCorp+ Chairman (1992-1994) and Chief Executive Officer (1992-1993), Dow
Corning Corporation, Midland, Michigan
Robert G. Miller* (1994)..................... Chairman of the Board and Chief Executive Officer of Fred Meyer,
Fred Meyer, Inc. Inc., a retail merchandising chain, with offices at 3800 SE 22nd,
3800 SE 22nd Portland, Oregon 97202
Portland, Oregon 97202
Alan K. Simpson* (1997)...................... Former Wyoming U.S. Senator (1979-1997)
c/o Laurie Rosen
3301 Turner Lane
Chevy Chase, Maryland 20815
Verl R. Topham* (1994)....................... (See above)
Utah Power & Light Company
Don M. Wheeler* (1989)....................... Chairman and Chief Executive Officer, ICM Equipment Company, a
ICM Equipment Company materials handling and equipment company (since 1996); formerly
4901 West 2100 South Chairman, Chief Executive Officer, President and General Manager
Salt Lake City, Utah 84120 of Wheeler Machinery Company (1955-1996)
Nancy Wilgenbusch* (1986).................... President, Marylhurst College
Marylhurst College
Marylhurst, Oregon 97036
Peter I. Wold* (1995)........................ President, Wold Oil & Gas Company, an oil and gas exploration and
Wold Oil & Gas Company production company
139 West Second Street, Suite 200
Casper, Wyoming 82602
John A. Bohling.............................. (See above)
PacifiCorp+
</TABLE>
S-3
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND RESIDENCE (AND PRINCIPAL BUSINESS); MATERIAL POSITIONS
OR BUSINESS ADDRESS HELD DURING PAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
William C. Brauer............................ Senior Vice President (since 1996) and Vice President (1992-1996)
PacifiCorp+ of PacifiCorp
Shelley R. Faigle............................ Senior Vice President (since 1993) and Vice President (1992-1993)
Pacific Power & Light Company of PacifiCorp; Vice President (1989-1992) of Pacific Power & Light
1500 Public Service Building Company
Portland, Oregon 97204
Paul G. Lorenzini............................ Senior Vice President of PacifiCorp (since 1994); President
Pacific Power & Light Company+ (1992-1994) and Executive Vice President (1989-1992) of Pacific
Power & Light Company
John E. Mooney............................... Senior Vice President of PacifiCorp (since 1994); Executive Vice
Utah Power & Light Company+ President (1991-1994) and Vice President (1990-1991) of Utah Power
& Light Company
Richard T. O'Brien........................... (See above)
PacifiCorp+
Michael J. Pittman........................... Vice President (since 1993) and Assistant Vice President
Pacific Power & Light Company+ (1990-1993) of PacifiCorp
Charles E. Robinson.......................... Chairman, President and Chief Executive Officer of Pacific
Pacific Telecom, Inc. Telecom, Inc., a telecommunications subsidiary of PacifiCorp
805 Broadway Holdings, Inc.
PO Box 9901
Vancouver, Washington 98668
Daniel L. Spalding........................... Chairman and Chief Executive Officer of Powercor Australia Limited
Powercor Australia Limited (since 1995); Senior Vice President (since 1992) and Vice
Level 3, 77 Southbank Blvd. President (1987-1992) of PacifiCorp
Southbank, Victoria 3006
Australia
Dennis P. Steinberg.......................... (See above)
PacifiCorp+
Michael C. Henderson......................... (See above)
PacifiCorp+
Thomas J. Imeson............................. Vice President of PacifiCorp
PacifiCorp+
Sally A. Nofziger............................ (See above)
PacifiCorp+
William E. Peressini......................... (See above)
PacifiCorp+
Donald A. Bloodworth......................... (See above)
PacifiCorp+
</TABLE>
- ------------------------
+ The principal business and address of the corporation or other organization
for which the listed individual's principal occupation is conducted is set
forth at the first place at which the name of such corporation or other
organization appears in this Schedule I.
S-4
<PAGE>
THE DEPOSITARY FOR THE OFFER IS:
IBJ SCHRODER BANK & TRUST COMPANY
BY MAIL:
IBJ SCHRODER BANK &
TRUST COMPANY
PO BOX 84
BOWLING GREEN STATION
NEW YORK, NEW YORK 10274-0084
ATTENTION: REORGANIZATION DEPT.
FACSIMILE TRANSMISSION:
(FOR ELIGIBLE INSTITUTIONS ONLY)
(212) 858-2611
BY HAND OR OVERNIGHT COURIER:
IBJ SCHRODER BANK &
TRUST COMPANY
ONE STATE STREET
NEW YORK, NEW YORK 10004
ATTENTION: REORGANIZATION
OPERATIONS DEPT. SECURITIES
PROCESSING WINDOW SC-1
FOR INFORMATION TELEPHONE:
(212) 858-2103
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TO A NUMBER OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
Questions or requests for assistance may be directed to the Information
Agent at the address and telephone number set forth below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and other tender offer
materials may be obtained from the Information Agent as set forth below, and
will be furnished promptly at the Purchaser's expense. Stockholders may also
contact their brokers, dealers, banks or trust companies or other nominees for
assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
Wall Street Plaza
New York, New York 10005
(212) 509-6240 (collect)
Banks and Brokers call collect (212) 440-9800
CALL TOLL FREE: 1-800-223-2064
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK
OF
TPC CORPORATION
PURSUANT TO THE OFFER TO PURCHASE DATED MARCH 18, 1997
BY
POWER ACQUISITION COMPANY
A WHOLLY OWNED SUBSIDIARY OF
PACIFICORP HOLDINGS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, EASTERN TIME, ON MONDAY, APRIL 14, 1997
UNLESS THE OFFER IS EXTENDED
THE DEPOSITARY FOR THE OFFER IS:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE: BY HAND OR OVERNIGHT COURIER
PO BOX 84 (FOR ELIGIBLE INSTITUTIONS ONLY) ONE STATE STREET
BOWLING GREEN STATION (212) 858-2611 NEW YORK, NEW YORK 10004
NEW YORK, NEW YORK 10274-0084 TO CONFIRM RECEIPT ATTENTION: REORGANIZATION
ATTENTION: REORGANIZATION DEPT. (212) 858-2103 OPERATIONS DEPT. SECURITIES
PROCESSING WINDOW SC-1
</TABLE>
Your bank or broker can assist you in completing this Letter of Transmittal.
The instructions enclosed with this Letter of Transmittal must be followed and
should be read carefully. Questions and requests for additional copies of the
Offer to Purchase (as defined below) and this Letter of Transmittal may be
directed to the Information Agent as indicated in Instruction 8.
Delivery of this Letter of Transmittal to an address other than as set forth
above, or transmission of instructions via facsimile transmission or telex
number other than as set forth above, will not constitute valid delivery.
This Letter of Transmittal is to be completed by stockholders if
certificates for Shares (as defined below) are to be forwarded herewith or if
tenders of Shares are to be made by book-entry transfer into the account of IBJ
Schroder Bank & Trust Company as Depositary (the "Depositary") at The Depository
Trust Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC")
(each a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry
Transfer Facilities") pursuant to the procedures set forth in Section 3 of the
Offer to Purchase. Stockholders who tender Shares by book-entry transfer are
referred to herein as "Book-Entry Stockholders." Holders of Shares whose
certificates for such Shares (the "Share Certificates") are not immediately
available or who cannot deliver their Share Certificates and all other required
documents to the Depositary prior to the Expiration Date (as defined in Section
1 of the Offer to Purchase), or who cannot complete the procedure for book-entry
transfer on a timely basis, must tender their Shares according to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. See
Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
Name(s) & Address(es) of Registered Holder(s) Share Certificate(s) and Share(s)
(Please fill in, if blank, exactly as Tendered (Attach additional
name(s) appear(s) on certificate(s)) signed list if necessary)
Total Number
Share of Shares Number
Certificate(s) Represented By of Shares
Number(s)* Certificate(s)* Tendered**
<S> <C> <C> <C>
Total Shares
* Need not be completed by Book-Entry Stockholders.
** Unless otherwise indicated, all Shares represented by certificates delivered to the Depositary will be deemed
to have been tendered. See Instruction 4.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
/ / CHECK HERE IF SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY
THE DEPOSITARY WITH ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
Check Box of Applicable Book-Entry Transfer Facility (check one):
/ / DTC / / PDTC
Account Number
Transaction Code Number
/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT
TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Names(s) of Registered Holder(s)
Window Ticket Number (if any)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution which Guaranteed Delivery
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Power Acquisition Company, a Delaware
corporation (the "Purchaser"), the above-described shares of common stock, $.01
par value (the "Shares," which term includes Class A Common Stock and Class B
Common Stock, as applicable), of TPC Corporation, a Delaware corporation (the
"Company"), at a purchase price of $13.41 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated March 18, 1997 and any amendments or supplements thereto (the "Offer to
Purchase"), and in this Letter of Transmittal (which together constitute the
"Offer"), receipt of which is hereby acknowledged. The undersigned understands
that the Purchaser reserves the right, with the written consent of the Company,
to transfer or assign, in whole or from time to time in part, the right to
purchase all or any portion of the Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment for the Shares
tendered herewith in accordance with the terms and conditions of the Offer, the
undersigned hereby sells, assigns and transfers to, or upon the order of, the
Purchaser all right, title and interest in and to all of the Shares that are
being tendered hereby and any and all noncash dividends, distributions
(including additional Shares) or rights declared, paid or issued with respect to
the tendered Shares on or after March 11, 1997 and payable or distributable to
the undersigned on a date prior to the transfer to the name of the Purchaser or
a nominee or transferee of the Purchaser on the Company's stock transfer records
of the Shares tendered herewith (a "Distribution"). The undersigned hereby
appoints the Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares (and any Distribution) with full power
of substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest) to (a) deliver such Share Certificates (as defined
herein) (and any Distribution) or transfer ownership of such Shares (and any
Distribution) on the account books maintained by a Book-Entry Transfer Facility,
together in either case with appropriate evidence of transfer and authenticity,
to the Depositary for the account of the Purchaser, (b) present such Shares (and
any Distribution) for transfer on the books of the Company, and receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares (and any Distribution), all in accordance with the terms and subject to
the conditions of the Offer.
The undersigned irrevocably appoints designees of the Purchaser as such
stockholder's proxy, each with full power of substitution to the full extent of
such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
Distribution. Such appointment will be effective when, and only to the extent
that, the Purchaser accepts such Shares for payment. Upon such acceptance for
payment, all prior proxies given by such stockholder with respect to such Shares
(and, if applicable, such other shares and securities) will be revoked without
further action, and no subsequent proxies may be given nor any subsequent
written consents executed (and if given or executed, will not be deemed
effective). The designees of the Purchaser will be empowered to exercise all
voting and other rights of such stockholder as they in their sole discretion may
deem proper at any annual or special meeting of the Company's stockholders or
any adjournment or postponement thereof, by written consent in lieu of any such
meeting or otherwise. The Purchaser reserves the right to require that, in order
for Shares to be deemed validly tendered, immediately upon the Purchaser's
payment for such Shares, the Purchaser must be able to exercise full voting
rights with respect to such Shares.
The undersigned hereby represents and warrants that (a) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any Distribution) and (b) when the Shares are accepted for
payment by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title to such Shares (and any Distribution), free and clear of all
liens, restrictions, charges and encumbrances, and the same will not be subject
to any adverse claim. The undersigned, upon request, will execute and deliver
any additional documents deemed by the Depositary or the Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby (and any Distribution). In addition, the undersigned
shall promptly remit and transfer to the Depositary for the account of the
Purchaser any and all Distributions in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer, and pending such
remittance or appropriate assurance thereof, the Purchaser will be, subject to
applicable law, entitled to all rights and privileges as owner of such
Distribution and may withhold the entire purchase price or deduct from the
purchase price the amount or value thereof, as determined by the Purchaser in
its sole discretion.
All authority herein conferred or agreed to be conferred shall not be
affected by and shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, executors, administrators, successors and assigns of
the undersigned.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by the Purchaser
pursuant to the Offer, may also be withdrawn at any time after May 16, 1997. See
Section 4 of the Offer to Purchase.
The undersigned understands that tenders of Shares pursuant to any of the
procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions set forth in the
Offer, including the undersigned's representations that the undersigned owns the
Shares being tendered.
<PAGE>
Unless otherwise indicated herein under "Special Payment Instructions,"
please mail the check for the purchase price and/or issue or return any
certificate(s) for Shares not tendered or not accepted for payment (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing under "Description of Shares Tendered." In the event that
both the Special Delivery Instructions and Special Payment Instructions are
completed, please issue the check for the purchase price and/or issue or return
any certificate(s) for Shares not tendered or accepted for payment in the name
of, and deliver such check and/or such certificate to, the person or persons so
indicated.
The undersigned recognizes that the Purchaser has no obligation, pursuant to
the Special Payment Instructions, to transfer any Shares from the name(s) of the
registered holder(s) thereof if the Purchaser does not accept for payment any of
the Shares so tendered.
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Shares not tendered To be completed ONLY if certificate(s) for Shares not tendered or
or not accepted for payment and/or the check for the purchase not accepted for payment and/or the check for the purchase price
price of Shares accepted for payment are to be issued in the name of Shares accepted for payment are to be mailed to someone other
of someone other than the undersigned. than the undersigned, or to the undersigned at an address other
than that shown above.
Issue / / check Mail / / check
/ / certificate(s) to: / / certificate(s) to:
Name Name
(Please Print) (Please Print)
Address Address
(Include Zip Code) (Include Zip Code)
(Tax Identification or Social Security No.) (Tax Identification or Social Security No.)
(See Substitute Form W-9 included herein) (See Substitute Form W-9 included herein)
</TABLE>
<PAGE>
SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN
________________________________________________________________________________
________________________________________________________________________________
(Signature(s) of Holder(s))
Dated: ___________________________________________________________________, 1997
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or another acting in a fiduciary or
representative capacity, please set forth full title and see Instruction 5.)
Name(s) ________________________________________________________________________
________________________________________________________________________________
(Please Type or Print)
Capacity (full title) __________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _________________________________________________
Tax Identification or Social Security No. ______________________________________
COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature ___________________________________________________________
Name ___________________________________________________________________________
(Please Type or Print)
Title __________________________________________________________________________
Name of Firm ___________________________________________________________________
Address ________________________________________________________________________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder(s) of Shares (which term, for purposes of this document, shall
include any participant in a Book-Entry Transfer Facility whose name appears on
a security position listing as the owner of Share(s)), unless such holder has
completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" included herein or (ii) if such Shares
are tendered for the account of a firm which is a member of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc. or by a commercial bank or trust company having an office or
correspondent in the United States (each of the foregoing being referred to as
an "Eligible Institution"). In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed either if certificates are to be forwarded
herewith or if tenders are to be made pursuant to the procedure for tender by
book-entry transfer set forth in Section 3 of the Offer to Purchase. Share
Certificates, or timely confirmation (a "Book-Entry Confirmation") of a
book-entry transfer of such Shares into the Depositary's account at a Book-Entry
Transfer Facility, as well as this Letter of Transmittal (or a facsimile
hereof), properly completed and duly executed, with any required signature
guarantees and any other documents required by this Letter of Transmittal, must
be received by the Depositary at one of its addresses set forth herein prior to
the Expiration Date. Stockholders whose Share Certificates are not immediately
available, or who cannot deliver their Share Certificates and all other required
documents to the Depositary prior to the Expiration Date, or who cannot complete
the procedure for delivery by book-entry transfer on a timely basis, may tender
their Shares by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedure set forth in Section 3 of
the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made
by or through an Eligible Institution; (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form made available
by the Purchaser (with any required signature guarantees) must be received by
the Depositary prior to the Expiration Date; and (iii) the Share Certificates
(or a Book-Entry Confirmation) representing all tendered Shares, in proper form
for transfer, in each case together with the Letter of Transmittal (or a
facsimile hereof), properly completed and duly executed, with any required
signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or a facsimile thereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space herein is inadequate, the certificate
numbers and/or the number of Shares should be listed on a separate signed
schedule attached hereto.
4. PARTIAL TENDERS. (NOT APPLICABLE TO BOOK-ENTRY-STOCKHOLDERS.) If fewer
than all the Shares evidenced by any Share Certificate submitted are to be
tendered, fill in the number of Shares which are to be tendered in the box
entitled "Number of Shares Tendered." In such cases, new Share Certificates for
the Shares that were evidenced by your old Share Certificates, but were not
tendered by you, will be sent to you, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as soon as practicable after the
purchase of Shares pursuant to the Offer. All Shares represented by Share
Certificates delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificate without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificate or stock power is signed by
a trustee, executor, administrator, attorney-in-fact, officer of a corporation
or another acting in a fiduciary or representative capacity, such person should
so indicate when signing, and proper evidence satisfactory to the Purchaser of
such person's authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment of the purchase price for
Shares is to be made to or certificates for Shares not tendered or purchased are
to be issued in the name of a person other than the registered holder(s).
Signatures on such certificates or stock powers must then be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the certificate(s).
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
6. STOCK TRANSFER TAXES. Except as provided in this Instruction 6, the
Purchaser will pay any stock transfer taxes with respect to the transfer and
sale of the purchased Shares pursuant to the Offer. If, however, payment of the
purchase price is to be made to, or (in the circumstances permitted hereby and
if applicable) if certificates for Shares not tendered or purchased are to be
registered in the name of, any person other than the registered holder, or if
tendered certificates are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of stock transfer taxes
(whether imposed on the registered holder or such person) payable on account of
the transfer to such person will be deducted from the purchase price if
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
not submitted. Except as provided in this Instruction 6, it will not be
necessary for transfer tax stamps to be affixed to the certificate(s) listed in
this Letter of Transmittal.
<PAGE>
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name of, and/or certificates for Shares not tendered or not accepted for
payment are to be issued or returned to, a person other than the signer of this
Letter of Transmittal, or if a check and/or such certificates are to be mailed
to a person other than the signer of this Letter of Transmittal or to an address
other than that shown in this Letter of Transmittal, the appropriate boxes on
this Letter of Transmittal should be completed.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance may be directed to the Information Agent at the address and telephone
numbers set forth below. Additional copies of the Offer to Purchase, this Letter
of Transmittal and the Notice of Guaranteed Delivery may also be obtained from
the Information Agent or brokers, dealers, commercial banks or trust companies.
9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by the
Purchaser in whole or in part at any time and from time to time in its sole
discretion. See Section 13 of the Offer to Purchase.
10. SUBSTITUTE FORM W-9. The tendering stockholder generally is required
to provide the Depositary with a correct Taxpayer Identification Number ("TIN"),
generally the stockholder's social security or federal employer identification
number, on Substitute Form W-9 contained herein. Failure to provide the
information on the form may subject the tendering stockholder to 31% federal
income tax withholding on the payment of the purchase price for Shares. The box
in Part I of the Substitute Form W-9 may be checked if the stockholder has not
been issued a TIN and has applied for a number or intends to apply for a number
in the near future. If the box in Part I is checked and the Depositary is not
provided with a TIN within 60 days, the Depositary will thereafter withhold 31%
of any purchase price payment made for Shares before a TIN is provided to the
Depositary.
IMPORTANT TAX INFORMATION
Under federal income tax law, a tendering stockholder whose tendered Shares
are accepted for purchase generally is required by law to provide the Depositary
(as payer) with such stockholder's correct TIN on Substitute Form W-9 contained
herein. If such stockholder is an individual, the TIN is such stockholder's
social security number. If the Depositary is not provided with the correct TIN,
the stockholder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, payments that are made to any stockholder with respect to
Shares pursuant to the Offer may be subject to backup withholding.
Certain stockholders (including, among others, corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements can be
obtained from the Depositary. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments of the purchase price for Shares,
each tendering stockholder generally is required to notify the Depositary of his
or her correct TIN by completing the Substitute Form W-9 contained herein,
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
stockholder is awaiting a TIN), and that (1) such stockholder has not been
notified by the Internal Revenue Service that such stockholder is subject to
backup withholding as a result of a failure to report all interest or dividends,
or (2) the Internal Revenue Service has notified such stockholder that such
stockholder is no longer subject to backup withholding (see Part II of
Substitute From W-9).
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares. If
the Shares are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidance on which number to report.
IMPORTANT: IF A STOCKHOLDER DESIRES TO ACCEPT THE OFFER, THIS LETTER OF
TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER WITH CERTIFICATES OR CONFIRMATION
OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS, OR THE NOTICE OF
GUARANTEED DELIVERY, MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION
DATE.
For additional information, please contact:
GEORGESON & COMPANY INC. LOGO
Wall Street Plaza
88 Pine Street, 30th Floor
New York, NY 10005
(212) 509-6240 (collect)
Banks and Brokers call collect: (212) 440-9800
Call Toll Free: 1-800-223-2064
<PAGE>
PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY, AS DEPOSITARY AGENT
<TABLE>
<S> <C> <C>
PART I -- Taxpayer Identification
Number (TIN)
Please enter your correct number in the
appropriate box below. NOTE: If the
account is
Your Social Security Number
SUBSTITUTE more than one name, see the chart on Or
Form W-9 the enclosed form, Guidelines for
Certification of Taxpayer Employer Identification Number
Identification on Substitute Form W-9,
for guidance on which number to enter.
Department of the Treasury, If you do not have a TIN, see the instructions "How to Get a TIN" and check the box below.
Internal Revenue Service TIN Applied For / /
PAYER'S REQUEST FOR TAXPAYER PART II -- For Payees Exempt from Backup Withholding (See instructions)
IDENTIFICATION NUMBER
AND CERTIFICATION
PART III CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued
to me), and
(2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to
report all interest and dividends, or (c) IRS has notified me that I am no longer subject to backup withholding.
(3) Please indicate the taxpayer's name associated with the TIN if other than the first name appearing in the
registration.
Certification Instructions. You must cross out Item (2) above if you have been notified by IRS that you are subject to
backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by
IRS that you were subject to backup withholding you received another notification from IRS that you are no longer subject
to backup withholding, do not cross out Item (2) above.
(X)
(Please Print)
Please Sign (X) Signature(s) Date
(Signature(s) of Registered Owner(s) or Authorized Agent) Your signature is both acknowledgment of the exchange and
certification of your taxpayer identification number.)
</TABLE>
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF
ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
NAME. If you are an individual, you must generally enter the name shown on your
social security card. However, if you have changed your last name, for instance,
due to marriage, without informing the Social Security Administration of the
name change, please enter your first name, the last name shown on your social
security card, and your new last name.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
GIVE THE NAME AND SOCIAL
SECURITY NUMBER
FOR THIS TYPE OF ACCOUNT: OF--
- ----------------------------------------------------------------------------------------
<C> <S> <C>
1. Individual The individual
2. Two or more individuals (joint account) The actual owner of the account or, if
combined funds, the first individual on
the account (1)
3. Custodian account of a minor (Uniform The minor (2)
Gift to Minors Act)
4. a. The usual revocable savings trust The grantor-trustee (1)
(grantor is also trustee)
b. So-called trust account that is not a The actual owner (1)
legal or valid trust under state law
5. Sole proprietorship The owner (3)
<CAPTION>
- ----------------------------------------------------------------------------------------
GIVE THE NAME AND EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF--
- ----------------------------------------------------------------------------------------
<C> <S> <C>
6. Sole Proprietorship The owner (3)
7. A valid trust, estate, or pension trust Legal entity (4)
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational, or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a state or local
government, school district, or prison)
that receives agricultural program
payments
</TABLE>
- --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use your social security number or
employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless the
legal entity itself is not designated in the account title).
NOTE: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Section references are to the Internal Revenue Code.
PURPOSE OF FORM.--A person who is required to file an information return with
the IRS must get your correct TIN to report income paid to you, real estate
transactions, mortgage interest you paid, the acquisition or abandonment of
secured property, cancellation of debt, or contributions you made to an IRA. Use
Form W-9 to give your correct TIN to the requester (the person requesting your
TIN) and, when applicable, (1) to certify the TIN you are giving is correct (or
you are waiting for a number to be issued), (2) to certify you are not subject
to backup withholding, or (3) to claim exemption from backup withholding if you
are an exempt payee. Giving your correct TIN and making the appropriate
certifications will prevent certain payments from being subject to backup
withholding.
NOTE: If a requester gives you a form other than a W-9 to request your TIN, you
must use the requester's form if it is substantially similar to Form W-9.
WHAT IS BACKUP WITHHOLDING?--Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions. This
is called "backup withholding." Payments that could be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee pay, and certain payments from
fishing boat operators. Real estate transactions are not subject to backup
withholding.
If you give the requester your correct TIN, make the proper certifications, and
report all your taxable interest and dividends on your tax return, your payments
will not be subject to backup withholding. Payments you receive will be subject
to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS tells the requester that you furnished an incorrect TIN, or
3. The IRS tells you that you are subject to backup withholding because you
did not report all your interest and dividends on your tax return (for
reportable interest and dividends only), or
4. You do not certify to the requester that you are not subject to backup
withholding under 3 above (for reportable interest and dividend accounts opened
after 1983 only), or
5. You do not certify your TIN.
Certain payees and payments are exempt from backup withholding and information
reporting. See below.
HOW TO GET A TIN: If you do not have a TIN, apply for one immediately. To apply,
get Form SS-5, Application for a Social Security Number Card (for individuals),
from your local office of the Social Security Administration, or Form SS-4,
Application for Employer Identification Number (for businesses and all other
entities), from your local IRS office.
If you do not have a TIN, check the box titled "Applied For" in the space for
the TIN, sign and date the form, and give it to the requester. Generally, you
will then have 60 days to get a TIN and give it to the requester. If the
requester does not receive your TIN within 60 days, backup withholding, if
applicable, will begin and continue until you furnish your TIN.
NOTE: CHECKING THE BOX TITLED "APPLIED FOR" ON THE FORM MEANS THAT YOU HAVE
ALREADY APPLIED FOR A TIN OR THAT YOU INTEND TO APPLY FOR ONE SOON.
As soon as you receive your TIN, complete another Form W-9, include your TIN,
sign and date the form, and give it to the requester.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Individuals (including sole proprietors) are not exempt from backup withholding.
Corporations are exempt from backup withholding for certain payments, such as
interest and dividends.
If you are exempt from backup withholding, you should still complete this form
to avoid possible erroneous backup withholding. Enter your correct TIN in Part
1, write "Exempt" in Part II, and sign and date the form. If you are a
nonresident alien or a foreign entity not subject to backup withholding, give
the requester a completed Form W-8, Certificate of Foreign Status.
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in (1)
through (13) and a person registered under the Investment Advisers Act of 1940
who regularly acts as a broker are exempt. Payments subject to reporting under
sections 6041 and 6041A are generally exempt from backup withholding only if
made to payees described in items (1) through (7), except a corporation that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (2) through (6) are exempt from backup
withholding for barter exchange transactions, patronage dividends, and payments
by certain fishing boat operators. (1) A corporation. (2) An organization exempt
from tax under section 501(a), or an IRA, or a custodial account under section
403(b)(7). (3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities. (5) A foreign government
or any of its political subdivisions, agencies, or instrumentalities. (6) An
international organization or any of its agencies or instrumentalities. (7) A
foreign central bank of issue. (8) A dealer in securities or commodities
required to register in the United States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures Trading
Commission. (10) A real estate investment trust. (11) An entity registered at
all times during the tax year under the Investment Company Act of 1940. (12) A
common trust fund operated by a bank under section 584(a). (13) A financial
institution. (14) A middleman known in the investment community as a nominee or
listed in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List. (15) A trust exempt from tax under section 664
or described in section 4947.
<PAGE>
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct TIN to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
Payments that are not subject to information reporting are also not subject to
backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045,
6049, 6050A, and 6050N, and their regulations.
PRIVACY ACT NOTICE.--Section 6109 requires you to give your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, cancellation of debt, or
contributions you made to an IRA. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. You must provide
your TIN whether or not you are required to file a tax return. Payers must
generally withhold 31% of taxable interest, dividend, and certain other payments
to a payee who does not give a TIN to a payer. Certain penalties may also apply.
PENALTIES
(1) FAILURE TO FURNISH TIN.--If you fail to furnish your TIN to a requester, you
are subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
(4) MISUSE OF TINS.--If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE>
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER
TO SELL SHARES. THE OFFER IS BEING MADE SOLELY BY THE OFFER TO PURCHASE DATED
MARCH 18, 1997 AND THE RELATED LETTER OF TRANSMITTAL, AND ANY AMENDMENTS AND
SUPPLEMENTS THERETO, AND IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM
OR ON BEHALF OF, HOLDERS OF SHARES TENDERING IN ANY JURISDICTION IN WHICH THE
MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE SECURITIES, BLUE SKY OR OTHER LAWS OF SUCH JURISDICTIONS.
NOTICE OF OFFER TO PURCHASE FOR CASH ALL
OUTSTANDING SHARES OF CLASS A AND CLASS B COMMON STOCK
OF
TPC CORPORATION
AT
$13.41 NET PER SHARE
BY
POWER ACQUISITION COMPANY
A WHOLLY OWNED SUBSIDIARY OF
PACIFICORP HOLDINGS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, EASTERN TIME, ON MONDAY, APRIL 14, 1997,
UNLESS THE OFFER IS EXTENDED.
Power Acquisition Company, a Delaware corporation (the "Purchaser"), which
is a wholly owned subsidiary of PacifiCorp Holdings, Inc., a Delaware
corporation ("PHI"), is offering to purchase all of the outstanding shares of
Class A Common Stock, $.01 par value, and Class B Common Stock, $.01 par value
(collectively, the "Shares"), of TPC Corporation, a Delaware corporation (the
"Company"), at a purchase price of $13.41 per Share, net to the seller 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 in the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer").
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW), THAT
NUMBER OF SHARES THAT WOULD REPRESENT A MAJORITY OF ALL OUTSTANDING SHARES
DETERMINED ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE. CERTAIN OTHER
CONDITIONS TO THE OFFER ARE DESCRIBED IN SECTION 13 OF THE OFFER TO PURCHASE.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
March 11, 1997 (the "Merger Agreement") by and among PHI, the Purchaser and the
Company pursuant to which, after the expiration of the Offer and the
satisfaction of the conditions contained in the Merger Agreement, the Purchaser
will be merged into the Company (the "Merger") and each outstanding Share, other
than Shares held by the Purchaser, PHI or any other subsidiary of PHI and Shares
held by stockholders who perfect any available appraisal rights under Delaware
law, would be converted into the right to receive an amount in cash equal to the
price per Share paid pursuant to the Offer.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MERGER AGREEMENT AND
THE MAKING OF THE OFFER BY THE PURCHASER, AND HAS DETERMINED THAT THE TERMS OF
THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF,
<PAGE>
THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER.
The term "Expiration Date" means 12:00 Midnight, Eastern time, on Monday,
April 14, 1997 unless and until the period during which the Offer is open shall
have been extended in accordance with the terms of the Merger Agreement, in
which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended, shall expire.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when the Purchaser gives oral or written notice to IBJ Schroder Bank & Trust
Company, which is acting as the depositary (the "Depositary") of the Purchaser's
acceptance for payment of such Shares pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefore
with the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payments from the Purchaser and transmitting such payments
to stockholders whose Shares have been accepted for payment. Under no
circumstances will interest on the purchase price for tendered shares be paid,
regardless of any delay in making the payment after the Expiration Date.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
certificates representing such Shares (the "Share Certificates"), or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility" and
collectively the "Book-Entry Transfer Facilities") pursuant to the procedures
set forth in Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal
(or a facsimile thereof), properly completed and duly executed, with any
required signature guarantees, and (iii) any other documents required by the
Letter of Transmittal.
If by 12:00 Midnight Eastern time, on April 14, 1997 (or any date and time
then set as the Expiration Date), any or all of the conditions to the Offer have
not been satisfied or waived, the Purchaser reserves the right (but shall not be
obligated), subject to the applicable rules and regulations of the Securities
and Exchange Commission ("Commission") and subject to the limitations in the
Merger Agreement, to (a) terminate the Offer and not accept for payment or pay
for any Shares and return all tendered Shares to tendering stockholders, (b)
waive all the unsatisfied conditions and accept for payment and pay for all
Shares validly tendered prior to the Expiration Date and not theretofore
withdrawn, (c) extend the Offer and, subject to the right of Stockholders to
withdraw Shares until the Expiration Date, retain the Shares that have been
tendered during the period or periods for which the Offer is extended or (d)
amend the Offer. See Section 11 of the Offer to Purchase. Under no circumstances
will interest be paid on the purchase price for tendered Shares, whether or not
the Purchaser exercises its right to extend the Offer. Any extension, amendment,
or termination will be followed as promptly as practicable by public
announcement thereof, such announcement to be no later than 9:00 a.m., Eastern
time, on the next business day after the previously scheduled Expiration Date of
the Offer.
Except as described below and in Section 4 of the Offer to Purchase, tenders
of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant
to the Offer may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by the Purchaser pursuant to the Offer,
may also be withdrawn at any time after May 16, 1997. For withdrawal to be
effective, a written, telegraphic, telex, or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses set
forth on the back cover of the Offer to Purchase. Any notice of withdrawal must
specify the name of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the registered holder, if
different from that of the person who tendered such Shares. If Share
Certificates to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such Certificates, the serial
number shown on such Certificates
2
<PAGE>
must be submitted to the Depositary and the signature(s) on the notice of
withdrawal must be guaranteed by an Eligible Institution (as defined in Section
3 of the Offer to Purchase) unless such Shares have been tendered for the
account of any Eligible Institution. If Shares have been tendered pursuant to
the procedure for Book-Entry Transfer as set forth in Section 3 of the Offer to
Purchase, any notice of withdrawal must specify the name and number of the
account of the Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's procedures.
All questions as to the form and validity (including the time of receipt) of any
notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of the Shares. The Offer to Purchase and the related Letter of
Transmittal are being mailed to the record holders of Shares whose names appear
on the Company's stockholder list and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the stockholder list or, if applicable, who are
listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH HOLDERS OF SHARES SHOULD READ BEFORE MAKING ANY
DECISION WITH RESPECT TO THE OFFER.
Questions and requests for copies of the Offer to Purchase and the related
Letter of Transmittal and all other tender offer materials may be directed to
the Information Agent as set forth below, and copies will be furnished promptly
at the Purchaser's expense. The Purchaser will not pay any fees or commissions
to any broker or dealer or any other person (other than the Information Agent)
for soliciting tenders of Shares pursuant to the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
GEORGESON & COMPANY INC.
WALL STREET PLAZA
88 PINE STREET, 30TH FLOOR
NEW YORK, NY 10005
BANKERS AND BROKERS CALL COLLECT: (212) 440-9800
ALL OTHERS CALL TOLL FREE: (800) 223-2064
3
<PAGE>
NOTICE OF GUARANTEED DELIVERY
TO
TENDER SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK
OF
TPC CORPORATION
As set forth in Section 3 of the Offer to Purchase (as defined below), this
instrument or one substantially equivalent hereto must be used to accept the
Offer (as defined below) if certificates for Shares (as defined below) are not
immediately available or the certificates for Shares and all other required
documents cannot be delivered to the Depositary prior to the Expiration Date (as
defined in Section 1 of the Offer to Purchase) or if the procedure for delivery
by book-entry transfer cannot be completed on a timely basis. This instrument
may be delivered by hand or transmitted by telegram, telex, facsimile
transmission or mail to the Depositary.
THE DEPOSITARY FOR THE OFFER IS:
<TABLE>
<S> <C> <C>
IBJ Schroder Bank & Trust Company
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
(FOR ELIGIBLE INSTITUTIONS ONLY)
PO BOX 84 (212) 858-2611 ONE STATE STREET
BOWLING GREEN STATION NEW YORK, NEW YORK 10004
NEW YORK, NEW YORK 10274-0084 ATTENTION: REORGANIZATION
ATTENTION: REORGANIZATION DEPT. OPERATIONS DEPT. SECURITIES
PRCESSING WINDOW SC-1
TO CONFIRM RECEIPT
(212) 858-2103
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OR TELEX NUMBER OTHER
THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tenders to Power Acquisition Company, a Delaware
corporation (the "Purchaser"), upon the terms and subject to the conditions set
forth in the Offer to Purchase dated March 18, 1997 (the "Offer to Purchase")
and in the related Letter of Transmittal (which together constitute the
"Offer"), receipt of which is hereby acknowledged, the number of shares of
common stock, $.01 par value (the "Shares," which term includes the Class A
Common Stock and Class B Common Stock, as applicable), indicated below of TPC
Corporation, a Delaware corporation, pursuant to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase.
<TABLE>
<S> <C>
Signature(s) -------------------------------- Address(escrows) ---------------------------
Name(s) ----------------------------------- -------------------------------------------
Zip Code
Area Code and Tel. No(s). -------------------
-------------------------------------------
Please Type or Print
Number of Shares --------------------------
Certificate Nos. (If Available) (Check one if Shares will be tendered by book-
entry transfer)
/ / The Depository Trust Company
- -------------------------------------------
/ / Philadelphia Depository Trust Co.
- -------------------------------------------
Dated -------------------------------------
</TABLE>
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States, guarantees delivery to the Depositary of either the certificates
evidencing all tendered Shares, in proper form for transfer, or delivery of
Shares pursuant to the procedure for book-entry transfer into the Depositary's
account at The Depository Trust Company or the Philadelphia Depository Trust
Company (each a "Book-Entry Transfer Facility"), in either case together with
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees and any other required
documents, all within three New York Stock Exchange trading days after the date
hereof.
<TABLE>
<S> <C>
- -------------------------------------------
Name of Firm -------------------------------------------
Authorized Signature
- -------------------------------------------
Address Name -------------------------------------
Please Type or Print
Title --------------------------------------
- -------------------------------------------
Zip Code
Dated -------------------------------------
Area Code and Tel. No. ---------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS FORM--CERTIFICATES ARE TO BE
DELIVERED WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
OF
TPC CORPORATION
AT
$13.41 NET PER SHARE
BY
POWER ACQUISITION COMPANY
A WHOLLY OWNED SUBSIDIARY OF
PACIFICORP HOLDINGS, INC.
THE OFFER AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME,
ON MONDAY, APRIL 14, 1997 UNLESS THE OFFER IS EXTENDED.
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We are asking you to contact your clients for whom you hold shares of Class
A Common Stock or Class B Common Stock, $.01 par value (collectively, the
"Shares"), of TPC Corporation, a Delaware corporation (the "Company"). Please
bring to their attention as promptly as possible the offer being made by Power
Acquisition Company (the "Purchaser"), a Delaware corporation and a wholly owned
subsidiary of PacifiCorp Holdings, Inc. ("PHI"), to purchase all of the
outstanding Shares, at a purchase price of $13.41 per Share net to the seller 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 in the related
Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer").
Enclosed for your information and for forwarding to your clients, for whose
account you hold Shares registered in your name or in the name of your nominee,
or hold Shares registered in their own names, are copies of the following
documents:
1. The Offer to Purchase dated March 18, 1997;
2. The Letter of Transmittal to be used in accepting the Offer.
Facsimile copies of the Letter of Transmittal may be used to accept the
Offer;
3. A printed form of letter which may be sent to your clients for whose
account you hold Shares in your name or in the name of your nominee, with
space provided for obtaining such client's instructions with regard to the
Offer;
4. A Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available or if the procedure
for book-entry transfer cannot be completed on a timely basis;
<PAGE>
5. Letter from TPC Corporation with attached Schedule 14D-9 (without
exhibits);
6. Guidelines of the Internal Revenue Service for certification of
Taxpayer Identification Number on Substitute Form W-9; and
7. Return envelope addressed to IBJ Schroder Bank & Trust Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MERGER AGREEMENT (AS
DESCRIBED IN THE OFFER TO PURCHASE) AND THE MAKING OF THE OFFER BY THE
PURCHASER, AND HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE
FAIR TO, AND IN THE BEST INTEREST OF, THE COMPANY'S STOCKHOLDERS AND RECOMMENDS
THAT THE STOCKHOLDERS ACCEPT THE OFFER.
We are asking you to contact your clients for whom you hold Shares
registered in your name (or in the name of your nominee) or who hold Shares
registered in their own names. Please bring the Offer to their attention as
promptly as possible. The Purchaser will not pay any fees or commissions to any
broker or dealer or any other person (other than the Information Agent) for
soliciting tenders of Shares pursuant to the Offer. You will be reimbursed by
the Purchaser for customary mailing expenses incurred by you in forwarding any
of the enclosed materials to your clients. The Purchaser will pay or cause to be
paid any stock transfer taxes payable on the sale and transfer of Shares to it
or its order, except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME, ON MONDAY, APRIL 14, 1997 UNLESS THE
OFFER IS EXTENDED.
In order to take advantage of the Offer, (1) a duly executed and properly
completed Letter of Transmittal, and, if necessary, any other required documents
should be sent to the Depositary and (2) either certificates representing the
tendered Shares should be delivered to the Depositary, or such Shares should be
tendered by book-entry transfer into the Depositary's account at one of the
book-entry transfer facilities (as defined in the Offer to Purchase), all in
accordance with the instructions set forth in the Letter of Transmittal and the
Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents to the Depositary prior
to the expiration of the Offer or to comply with the book-entry transfer
procedures on a timely basis, a tender may be effected by following the
guaranteed delivery procedures specified in Section 3 of the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed to
the Information Agent at the address and telephone number as set forth on the
back cover page of the Offer to Purchase.
Additional copies of the above documents may be obtained from the
Information Agent, at the address and telephone number set forth on the back
cover of the Offer to Purchase.
Very truly yours,
POWER ACQUISITION COMPANY
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON THE AGENT OF THE PURCHASER, PHI, THE COMPANY OR THE DEPOSITARY, OR
AS AGENT OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON
TO MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO, OR USE ANY
DOCUMENT IN CONNECTION WITH, THE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL AND THE DOCUMENTS INCLUDED
HEREWITH.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
OF
TPC CORPORATION
AT
$13.41 NET PER SHARE
BY
POWER ACQUISITION COMPANY
A WHOLLY OWNED SUBSIDIARY OF
PACIFICORP HOLDINGS, INC.
THE OFFER AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME, ON MONDAY, APRIL 14, 1997
UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated March 18, 1997
(the "Offer to Purchase") and the related Letter of Transmittal relating to an
offer by Power Acquisition Company, a Delaware corporation ("Purchaser"), and a
wholly owned subsidiary of PacifiCorp Holdings, Inc., to purchase all of the
outstanding shares of Class A Common Stock and Class B Common Stock, $.01 par
value (collectively, the "Shares"), of TPC Corporation, a Delaware corporation
(the "Company"), at a purchase price of $13.41 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase and in the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer"). We are
the holder of record of Shares held by us for your account. A tender of such
Shares can be made only by us as the holder of record and pursuant to your
instructions. The Letter of Transmittal is furnished to you for your information
only and cannot be used by you to tender Shares held by us for your account.
We request instructions as to whether you wish to have us tender on your
behalf any or all of such Shares held by us for your account, pursuant to the
terms and conditions set forth in the Offer to Purchase.
Your attention is invited to the following:
1. The tender price is $13.41 per Share, net to you in cash.
2. The Offer is being made for all of the outstanding Shares.
3. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the expiration of the Offer a
majority of the outstanding Shares (on a fully diluted basis).
4. The Offer and withdrawal rights will expire at 12:00 Midnight,
Eastern time, on Monday, April 14, 1997 unless the Offer is extended.
<PAGE>
5. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer.
The Offer is not being made to, nor will tenders be accepted from, or on
behalf of, holders of Shares residing in any jurisdiction in which the making or
acceptance thereof would not be in compliance with the laws of such
jurisdiction.
If you wish to have us tender any or all of the Shares held by us for your
account, please instruct us by completing, executing and returning to us the
instruction form contained in this letter. If you authorize us to tender your
Shares, all such Shares will be tendered unless otherwise specified in such
instruction form. Your instruction should be forwarded to us in ample time to
permit us to submit a tender on your behalf prior to the expiration of the
Offer.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
ALL OF THE OUTSTANDING SHARES OF
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
OF
TPC CORPORATION
The undersigned acknowledge(s) receipt of your letter enclosing the Offer to
Purchase dated March 18, 1997 (the "Offer to Purchase") and the related Letter
of Transmittal pursuant to an offer by Power Acquisition Company, a Delaware
corporation, to purchase all of the outstanding shares of Class A Common Stock
and Class B Common Stock, $.01 par value (collectively, the "Shares"), of TPC
Corporation, a Delaware corporation.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares which are held by you for the
account of the undersigned), upon the terms and subject to the conditions set
forth in the Offer to Purchase and in the related Letter of Transmittal
furnished to the undersigned.
<TABLE>
<S> <C>
Number of Shares SIGN HERE
to be Tendered:
- -------------- shares --------------------------------------------
Signature(s)
--------------------------------------------
--------------------------------------------
Please print name(s)
--------------------------------------------
--------------------------------------------
Address
--------------------------------------------
Area Code & Telephone Number
--------------------------------------------
Tax Identification or Social Security
Number(s)
</TABLE>
<PAGE>
PACIFICORP ANNOUNCES AGREEMENT TO ACQUIRE TPC CORPORATION
PORTLAND, Ore., March 12 -- PacifiCorp announced today that its wholly-owned
subsidiary, PacifiCorp Holdings, Inc. (PHI), has entered into an agreement to
acquire TPC Corporation, a natural gas gathering, processing, storage and
marketing company based in Houston, Texas. PHI, through a subsidiary, will
commence a cash tender offer on Tuesday, March 18, 1997 to purchase all
outstanding shares of TPC common stock for $13.41 per share. Following
completion of the tender offer, TPC will become a wholly-owned subsidiary of
PHI, through a cash merger at the same price. The total purchase price is
expected to be approximately $288 million.
TPC Corporation has built a business around gas gathering systems in and
near the Gulf of Mexico with related processing facilities, and in salt dome
storage projects at the Moss Bluff market hub in Texas and the Egan market hub
in Louisiana. Its other core business is natural gas marketing to utilities in
the Midwest and Northeast.
"This transaction is key in establishing PacifiCorp as a 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.
"The TPC assets and skills compliment our extensive electric and coal assets
and skills which we believe give us a competitive advantage in energy markets,"
he said.
PacifiCorp is already by far the highest volume investor-owned wholesaler of
electric energy west of the Mississippi River. The company's vast western
electric transmission system interconnects with over 60 other utilities and the
company has built a dominant position in western wholesale electricity markets.
With the formation of PacifiCorp Power Marketing in 1995, the company
dedicated itself to replicating its western wholesale business in the eastern
United States. PacifiCorp is pursing an agreement with Big Rivers Electric
Corporation to lease and operate its four western Kentucky coal-fired plants.
Already PacifiCorp is one of a handful of electricity market makers in eastern
energy markets.
"Customers tell us they want to deal with an energy provider who can take
care of their total energy needs. Now we can," said Dennis Steinberg, PacifiCorp
senior vice president of global sales, marketing and energy trading. "So we have
taken this significant step toward building gas capabilities into our energy
marketing portfolio."
PacifiCorp selected TPC because it has the value-enhancing aspects of the
natural gas industry that it desires most. Gathering, processing and storage
assets and marketing skills best fit the company's strategies for competing in
eastern energy markets.
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.
The combination of TPC and PacifiCorp makes us a formidable competitor in
eastern energy markets."
The tender offer will be conditioned upon the tender of TPC shares which
represent at least a majority of the outstanding shares. The tender offer and
merger are also subject to the conditions of the Hart-Scott-Rodino Antitrust
Act.
PacifiCorp, based in Portland, Oregon, serves 1.4 million retail customers
in the west and 550,000 retail customers in Australia. It conducts wholesale
power transactions with more than 100 utilities in North America. For the year
ended December 31, 1996, PacifiCorp had revenues of $4.3 billion and net income
of $475 million. PacifiCorp expects that the acquisition of TPC will be slightly
dilutive to its earnings in 1997 and accretive thereafter.
<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
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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
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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
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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:
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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.
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(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
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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
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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;
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(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
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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
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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
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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
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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.
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(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
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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.
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(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.
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(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
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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.
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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.
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(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
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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
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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
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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);
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(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).
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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.
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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").
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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.
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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
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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.
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(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
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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
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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.
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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
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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.
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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
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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.
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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):
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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
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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.
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(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
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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.
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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
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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
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<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>
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