-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FTf0NeqOXfRZS/wQrkO2wHbkC83paR4vLhJDE+dMYQweTfZXQ4602OS+gjqhB81w ycLSthQ7J7HwMs5gWCj1cg== 0000912057-97-009199.txt : 19970319 0000912057-97-009199.hdr.sgml : 19970319 ACCESSION NUMBER: 0000912057-97-009199 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19970318 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TPC CORP CENTRAL INDEX KEY: 0000868576 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PETROLEUM & PETROLEUM PRODUCTS (NO BULK STATIONS) [5172] IRS NUMBER: 760091595 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: 1934 Act SEC FILE NUMBER: 005-41566 FILM NUMBER: 97558449 BUSINESS ADDRESS: STREET 1: 200 WESTLAKE PARK BLVD STREET 2: SUITE 1000 CITY: HOUSTON STATE: TX ZIP: 77079 BUSINESS PHONE: 7135976200 MAIL ADDRESS: STREET 1: 200 WESTLAKE PARK BLVD STREET 2: SUITE 1000 CITY: HOUSTON STATE: TX ZIP: 77079 FORMER COMPANY: FORMER CONFORMED NAME: TEJAS POWER CORP DATE OF NAME CHANGE: 19930328 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PACIFICORP /OR/ CENTRAL INDEX KEY: 0000075594 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 930246090 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: 700 NE MULTNOMAH STE 1600 CITY: PORTLAND STATE: OR ZIP: 97232 BUSINESS PHONE: 5037312000 FORMER COMPANY: FORMER CONFORMED NAME: PACIFICORP /ME/ DATE OF NAME CHANGE: 19890628 FORMER COMPANY: FORMER CONFORMED NAME: PC/UP&L MERGING CORP DATE OF NAME CHANGE: 19890628 SC 14D9 1 SCHEDULE 14D-9 [TPC LETTERHEAD] March 18, 1997 Dear Stockholder: On March 11, 1997, TPC Corporation ("TPC") entered into a merger agreement with PacifiCorp Holdings, Inc. ("PHI") and one of its subsidiaries that provides for the acquisition of TPC by PHI. Under the terms of the merger agreement, a PHI subsidiary has commenced a tender offer for all outstanding shares of TPC common stock at $13.41 per share. YOUR BOARD OF DIRECTORS HAS APPROVED THE PHI OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF TPC'S STOCKHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT ALL TPC STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR COMMON STOCK TO PHI. In arriving at its recommendation, the Board of Directors gave careful consideration to a number of factors. These factors included, among other things, the opinion dated March 11, 1997 of Lehman Brothers Inc., financial advisor to TPC, that the cash consideration to be offered to TPC stockholders pursuant to the offer and the merger is fair to such stockholders from a financial point of view. Attached to this letter is a copy of the Company's Solicitation/Recommendation Statement on Schedule 14D-9. Also enclosed is the offer to purchase of PHI's subsidiary, together with related materials. These documents set forth the terms and conditions of the offer and other important information. We encourage you to read the enclosed materials carefully. On behalf of myself, the other members of management and the directors of TPC, I want to thank you for the support you have given the Company. Sincerely, Larry W. Bickle CHAIRMAN AND CHIEF EXECUTIVE OFFICER - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 TPC CORPORATION (Name of Subject Company) TPC CORPORATION (Name of Person(s) Filing Statement) CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE CLASS B COMMON STOCK, PAR VALUE $.01 PER SHARE (Titles of Classes of Securities) CUSIP NO. 872616107 (with respect to the Class A Common Stock) CUSIP NO. N/A (with respect to the Class B Common Stock) (CUSIP Numbers of Classes of Securities) ------------------------ M. SCOTT JONES GENERAL COUNSEL TPC CORPORATION 200 WESTLAKE PARK BOULEVARD, SUITE 1000 HOUSTON, TEXAS 77079 (281) 597-6200 (Name, address and telephone number of person authorized to receive notice and communications on behalf of the person(s) filing statement) WITH A COPY TO: STEPHEN A. MASSAD BAKER & BOTTS, L.L.P. 910 LOUISIANA ONE SHELL PLAZA HOUSTON, TEXAS 77002-4995 (713) 229-1475 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 1. SECURITY AND SUBJECT COMPANY. The name of the subject company is TPC Corporation, a Delaware corporation ("TPC"). The address of the principal executive offices of TPC is 200 WestLake Park Boulevard, Suite 1000, Houston, Texas 77079. The titles of the classes of equity securities to which this Schedule relates are (i) TPC's Class A Common Stock, par value $.01 per share (the "Class A Common Stock") and (ii) TPC's Class B Common Stock, par value $.01 per share (the "Class B Common Stock" and together with the Class A Common Stock, the "Common Stock"). ITEM 2. TENDER OFFER OF THE BIDDER. This Schedule relates to the tender offer by Power Acquisition Company, a Delaware corporation (the "Offeror"), and a wholly owned subsidiary of PacifiCorp Holdings, Inc., a Delaware corporation ("PHI"), to purchase (i) all outstanding shares of Common Stock at the purchase price of $13.41 per share of Common Stock, net to the tendering holder (pre-tax) in cash upon the terms and subject to the conditions set forth in the Offer to Purchase dated March 18, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer"). The Offer is disclosed in a Tender Offer Statement on Schedule 14D-1 dated March 18, 1997. According to the Offer to Purchase, the principal executive offices of the Offeror and PHI are located at 700 N.E. Multnomah, Portland, Oregon 97232. PHI is a wholly owned subsidiary of PacifiCorp, an Oregon corporation ("PacifiCorp"). The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of March 11, 1997 (the "Merger Agreement"), among TPC, PHI and the Offeror. A copy of the Merger Agreement is filed as Exhibit 1 to this Schedule and is incorporated herein by reference in its entirety. For a summary of the material terms of the Merger Agreement, see Annex I to this Schedule. The Merger Agreement provides that following the completion of the Offer, the Offeror will be merged into TPC, with TPC continuing as a wholly owned subsidiary of PHI (the "Merger"). In the Merger, all remaining shares of Common Stock not tendered in the tender offer (other than shares of Common Stock owned by TPC, or any subsidiary of TPC, Offeror, PHI or any other subsidiary of PHI and shares of Common Stock held by stockholders who perfect any available appraisal rights under the Delaware General Corporation Law) will be converted into the right to receive $13.41 per share in cash. ITEM 3. IDENTITY AND BACKGROUND. (a) Identity. The name and business address of TPC, which is the person filing this Schedule, are set forth in Item 1 above. (b) Contracts. Except as otherwise described in this Schedule or in the exhibits or schedules hereto, to the knowledge of TPC, as of the date hereof, there are no material contracts, agreements, arrangements or understandings, or any actual or potential conflicts of interest, between TPC or its affiliates and (i) TPC or its executive officers, directors or affiliates, or (ii) the Offeror, PHI or their executive officers, directors or affiliates. Certain information with respect to certain contracts, agreements, arrangements or understandings between TPC and certain of its directors, executive officers and affiliates is set forth in Annexes I and III hereto and is incorporated herein by reference. Descriptions of how outstanding options to purchase Common Stock, some of which are held by officers and directors of TPC, will be treated in connection with the Offer and the Merger, and of provisions in the Merger Agreement dealing with the indemnification of and insurance for officers and directors of TPC and certain employee benefit and employment matters are set forth in Annex I, "Description of Certain Agreements--Merger Agreement" under the captions "Stock 2 Options," "Directors," "Directors/Officers Indemnification and Insurance," and "Employment Matters," which are incorporated herein by reference. Michael E. McMahon, a director of TPC, is a Managing Director of Lehman Brothers Inc. ("Lehman Brothers") (see Item 5 to this Schedule, "Persons to be Retained, Employed or to be Compensated"). ITEM 4. THE SOLICITATION OR RECOMMENDATION. (a) Recommendation. THE BOARD HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF TPC. THE BOARD RECOMMENDS THAT ALL HOLDERS OF COMMON STOCK ACCEPT THE OFFER AND TENDER ALL OF THEIR COMMON STOCK PURSUANT TO THE OFFER. The Board's determination and recommendation were made by the unanimous vote of the eight directors present at the Board's March 11, 1997 meeting. The ninth member of TPC's Board advised the chairman after the meeting that he concurred with the Board's decisions. The Board's recommendation is based in part on the oral opinion delivered by Lehman Brothers to the Board on March 11, 1997, that, as of such date, the cash consideration to be offered to the holders of Common Stock pursuant to the Offer and the Merger is fair to such holders from a financial point of view. Lehman Brothers subsequently confirmed its opinion in writing. The full text of such opinion, which sets forth the assumptions made, the matters considered and the limitations on the review undertaken by Lehman Brothers, is set forth as Annex II hereto and is incorporated herein by reference. A copy of the letter to TPC's stockholders communicating the Board's recommendation is filed as Exhibit 2 to this Schedule and is incorporated herein by reference. (b) Background and Reasons for the Recommendation. At a meeting of the Board on May 15, 1996, the Board, at the suggestion of certain of its stockholders and directors, discussed possibilities for increasing stockholder value, considering TPC's results and prospects, developments in the industries in which TPC operates and market conditions as a whole. The Board instructed management of TPC to engage Lehman Brothers to begin a preliminary analysis of TPC. In the Fall of 1996 Lehman Brothers contacted a limited number of parties that it believed might be interested in exploring a strategic transaction with TPC. On November 1, 1996, the Board established a special committee of independent directors (the "Special Committee") to participate in and oversee this process. At its November 12, 1996 meeting, the Board determined, given all available information, to formally explore and investigate potential transactions. The Board instructed management of TPC and Lehman Brothers to establish a formal process, subject to the review and oversight of the Special Committee, to explore TPC's strategic alternatives for increasing stockholder value, including the possible sale or merger of all or a portion of TPC. On November 12, 1996, TPC publicly announced that it had engaged Lehman Brothers to assist it in exploring strategic alternatives, including a possible sale or merger of all or a part of TPC. The press release stated, however, that the Board has not made a determination that TPC would be sold or merged or that such a transaction would be in the best interests of the stockholders. During the course of this process, Lehman Brothers identified and contacted numerous gas and electric utility companies, interstate pipeline companies, midstream natural gas companies and other companies, both domestic and foreign, that it believed might have an interest in acquiring or merging with TPC. Interested parties, including an affiliate of PHI, signed confidentiality agreements and received descriptive information about TPC and its subsidiaries. Interested parties were asked to submit preliminary indications of interest by December 20, 1996. Following submission of preliminary indications of interest, the Special Committee invited certain parties, including the PHI affiliate, to visit TPC's data room, receive management presentations and then submit definitive proposals for the acquisition of TPC for cash or 3 stock. These requests to bid included a form of transaction agreement on which the participants were invited to comment. Bids were submitted by interested parties on February 14, 1997 (including such parties' comments to the proposed form of transaction agreement). PHI's initial proposal was that, subject to certain conditions, it acquire TPC in a stock-for-stock merger in which each share of Common Stock would be converted into common stock of PacifiCorp, PHI's parent, having a market value at the time of consummation of the merger of $13.00 per share of Common Stock. TPC's legal and financial advisors analyzed the proposals received and contacted certain participants or their advisors to clarify various matters prior to the Special Committee's meeting on February 18, 1997. In such discussions, representatives of PHI indicated that PacifiCorp was precluded by certain regulatory constraints from issuing new shares of its stock to acquire TPC; rather, PHI proposed to use cash to repurchase shares of PacifiCorp common stock in the open market for delivery to the stockholders of TPC in the merger. PHI advised TPC that it estimated it would take 75 to 90 business days to acquire all such shares. The Special Committee convened, with representatives of management and legal and financial advisors, on February 18, 1997 to evaluate the outcome of the process and each of the proposals received. With respect to each proposal, the Special Committee considered, among other things, the type and amount of consideration offered, the proposed revisions to the form of transaction agreement that TPC had distributed, the nature and timing of any necessary regulatory approvals, the federal income tax consequences of the proposal to TPC's stockholders and the risks of nonconsummation of the proposal. After discussion, the Special Committee instructed Lehman Brothers to further explore the proposals made by PHI and certain other parties and to determine the maximum amount per share each such party was willing to offer. With respect to PHI's initial proposal, the Special Committee concluded, based on materials included with PHI's proposal regarding certain TPC balance sheet assumptions, that PHI might be willing to increase its offer price to approximately $13.45 per share in light of anticipated year-end 1996 balance sheet information compared to PHI's assumptions. The Special Committee also expressed its concern regarding the risk of delay in consummating a transaction resulting from the need for PHI to make open market purchases of the necessary amount of PacifiCorp common stock prior to the mailing of proxy materials to TPC stockholders, including the possibility of delays beyond the time frame anticipated by PHI. The Special Committee also discussed the differences to PHI between a cash acquisition and a stock-for-stock merger when PHI would be required as a preliminary step to acquire its shares for cash, including the fact that either such transaction would be accounted for as a purchase. In addition, based on the aforesaid discussions with advisors, the Special Committee concluded that PHI would probably prefer to pursue an all cash transaction. Based on this review and evaluation, the Special Committee instructed its advisors to determine whether PHI would be willing to acquire the TPC Common Stock for $13.45 per share in cash in a tender offer to be followed by a second step merger. Further discussions with PHI and such other parties determined by the Special Committee were held following the February 18 meeting of the Special Committee. PHI responded preliminarily on February 18 that it preferred an all cash transaction and would be willing to increase the price paid in such a transaction to a price in the range of $13.40 to $13.45 per share, subject to (i) satisfactory resolution of certain confirmatory due diligence items, including the financial information underlying PHI's assumptions on price, (ii) resolution of certain issues regarding the form of proposed transaction agreement and (iii) approval by the boards of directors of PHI and PacifiCorp. Following that discussion, TPC transmitted to PHI a proposed form of merger agreement revised to reflect a two-step cash transaction. Representatives of PHI and TPC, together with their respective legal and financial advisors, met in person on February 20 and by phone on February 21 to discuss the foregoing matters. 4 On February 24, 1997, TPC's financial and legal advisors presented the Special Committee with an update on the course of discussions with PHI and the other parties. The Special Committee concluded that PHI's proposal, including the proposed form of merger agreement and assuming that it involved a per share price in the range of $13.40 to $13.45, was the most attractive proposal from the standpoint of TPC's stockholders that had been received. The Special Committee also concluded that if such a proposal could be finalized, it should be presented to the full Board. Accordingly, the Special Committee instructed management and TPC's advisors to facilitate the completion of PHI's remaining confirmatory due diligence items and to seek to resolve expeditiously any remaining issues, including the form of proposed merger agreement. The Special Committee also instructed Lehman Brothers to remain in contact with the other interested parties in the event a satisfactory final agreement with PHI could not be reached. Over the course of the next ten days, including at meetings between the parties on March 3 and 4, 1997, PHI proceeded to complete its remaining confirmatory due diligence items and the parties proceeded to resolve substantially all issues regarding the form of proposed merger agreement. PHI advised TPC that the boards of directors of PHI and PacifiCorp would be convened on March 11, 1997 to consider approval of the transaction. TPC scheduled a meeting of its Board for the same day. On March 6, 1997, management of PHI advised Lehman Brothers that management of PHI would be willing to recommend to the boards of directors of PHI and PacifiCorp that the parties execute a definitive agreement for the acquisition of TPC in an all cash, two-step transaction at a price of $13.41 per share of Common Stock. Lehman Brothers responded that such a proposal would be presented to the TPC Board. That evening, TPC distributed to each member of its Board information concerning the potential transaction, PHI and its affiliates, and a draft of the proposed merger agreement in its then currently negotiated form. TPC's Board met on the afternoon of March 11, 1997. At the meeting, the Board received presentations from management and TPC's legal and financial advisors regarding the proposals received for the purchase of TPC as well as the results of the negotiation of the Merger Agreement with PHI. In addition, Lehman Brothers delivered its oral opinion (which was subsequently confirmed in writing) that, as of that date and subject to the matters described by it, the cash consideration to be offered to the holders of Common Stock pursuant to the Offer and the Merger was fair to such holders from a financial point of view. The Board also considered TPC's business, financial condition, results of operations, current business strategy and future prospects, recent and historical market prices for the Common Stock and other matters. In addition, Lehman Brothers reviewed and updated its presentations made earlier to the Special Committee and the Board. During the course of the meeting, TPC was advised that the boards of directors of PacifiCorp and PHI had approved the Merger Agreement, the Offer and the Merger. At the meeting, the Board approved the Merger Agreement and the Merger and resolved to recommend the Offer to TPC's stockholders. Immediately after the conclusion of the meeting, PHI, the Offeror and TPC executed the Merger Agreement, pursuant to which the Offeror agreed to make the Offer. In addition, a stockholder agreement by and among PHI, the Offeror, Larry W. Bickle, John A. Strom and J. Chris Jones (the "Stockholder Agreement") was executed, pursuant to which such three individuals agreed to tender their shares of Common Stock in the Offer and to sell such shares to the Offeror, at the price paid in the Offer, subject to certain conditions. The parties issued press releases publicly announcing the transaction before the opening of business on March 12, 1997. See Annex I, "Description of Certain Agreements--Merger Agreement," below for additional summary information regarding the terms and conditions of the Merger Agreement and the Stockholder Agreement. In reaching the conclusions and recommendations described above, the Board considered a number of factors in addition to those already described, including, among other things, the following: (i) The financial and other terms and conditions of the Offer and the Merger Agreement; 5 (ii) The recommendation of the Offer by the Special Committee based upon its independent review of the proposals received by TPC; (iii) The oral opinion delivered by Lehman Brothers to the Board on March 11, 1997 (subsequently confirmed in writing) that, as of such date and on the basis of and subject to the matters described by it, the cash consideration to be offered to the holders of Common Stock pursuant to the Offer and the Merger was fair to such holders from a financial point of view (see Annex II hereto); (iv) The conclusion of the Board, based on the advice of Lehman Brothers, that the cash consideration offered for the Common Stock in the Offer and Merger was higher in value than the consideration offered in any other definitive proposal received in TPC's process of exploring strategic alternatives; (v) The belief of the Board that, in view of (i) the November 12, 1996 public announcement that TPC had hired Lehman Brothers to explore strategic alternatives, including the possible sale or merger of TPC, (ii) the number of parties directly contacted by management and Lehman Brothers and (iii) the number of parties who participated in the process and received information with respect to TPC, it was unlikely that any party potentially interested in submitting a proposal to acquire TPC had not been afforded an opportunity to do so; (vi) The fact that the $13.41 per share price to be received by TPC's stockholders pursuant to the Offer and the Merger represents a substantial premium over (i) the closing market price of $8.88 for the Class A Common Stock on November 12, 1996, the last trading day prior to TPC's press release regarding its process for exploring strategic alternatives, and (ii) the closing market price of $10.88 for the Class A Common Stock on March 10, 1997, the last trading day prior to the date on which the Board approved the Offer; (vii) The fact that, pursuant to the terms of the Merger Agreement, the Board is entitled, prior to the consummation of the PHI Offer, to terminate the Merger Agreement and withdraw its recommendation of the Offer in order to approve an alternative transaction with a third party on terms more favorable to TPC's stockholders from a financial point of view than the Offer and the Merger taken together; provided that TPC is obligated to pay to PHI a fee of $9,000,000 upon any such termination (see "Termination" under "Description of Certain Agreements--Merger Agreements" in Annex I); and (viii) The fact that the Stockholder Agreement terminates by its terms if the Merger Agreement is terminated by either PHI or TPC. The foregoing discussion of the information and factors considered by the Board is not intended to be exhaustive. In view of the variety of factors considered in connection with its evaluation of the Offer and the Merger, the Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination. In addition, individual members of the Board may have given different weights to different factors. ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. Pursuant to an engagement letter dated July 17, 1996 (the "Engagement Letter"), TPC retained Lehman Brothers as its general financial advisor in connection with its review of its strategic and financial options regarding (a) any transaction or series or combination of transactions other than in the ordinary course of business, whereby, directly or indirectly, control of TPC or its businesses, or a material amount of any of their respective assets, is transferred for consideration (as hereinafter defined), including, without limitation, by means of a sale or exchange of capital stock or assets, a merger or consolidation, a tender or exchange offer, a leveraged buy-out, a minority investment the formation of a joint venture or partnership, or any similar transaction ( "Sale Transaction") and (b) any transaction or series or combination of transactions, other than in the ordinary course of business, whereby, directly or indirectly, the control of 6 another company or business or of a material amount of any of their respective assets is transferred for consideration by means of a sale or exchange of capital stock, the formation of a joint venture or partnership (or other new entity) or any similar transaction, but specifically excluding any transaction or series or combination of transactions involving a purchase or merger or consolidation of the whole Company or a sale of all or substantially all of the assets of TPC ("Other Transaction") (Sale Transactions and Other Transactions are sometimes collectively referred to as "Transactions" or singularly as a "Transaction"). "Consideration" is defined in the Engagement Letter as the gross value of all cash, securities and other property paid directly or indirectly by an acquiror to a seller or sellers in connection with a Transaction or contributed by TPC or any other parties in the case of a Transaction involving a joint venture or strategic partnership. Consideration also includes the aggregate principal amount of any indebtedness for money borrowed assumed by an acquiror either contractually or by operation of law in connection with a Transaction. In the case of a Sale Transaction, consideration also includes proportionate consolidation of the net debt of Market Hub Partners based on TPC's equity interest therein. For such financial advisory services, TPC has paid or agreed to pay Lehman Brothers under the Engagement Letter as follows: (a) a retainer of $75,000 for the services rendered thereunder through September 30, 1996 and an additional amount of $75,000 as a retainer for the services rendered thereunder from and after October 1, 1996, through the remainder of the term thereof, payable on October 1, 1996 ($75,000 previously paid to Lehman Brothers pursuant to a prior engagement letter dated February 19, 1996 being credited against the retainer fees owed pursuant to this subparagraph (a)); and (b) for a Sale Transaction, Lehman Brothers is entitled to receive a transaction fee equal to 1% of the consideration involved in such Sale Transaction. The advisory fees paid pursuant to subparagraph (a) will be credited (but only once) against any transaction fee owed pursuant to subparagraph (b). The foregoing compensation is payable by TPC to Lehman Brothers at the closing of a Transaction, provided that compensation attributable to that part of the consideration which is contingent upon the occurrence of any future event is payable by TPC to Lehman Brothers at the earlier of (i) the receipt by the payee of such consideration and (ii) the time that the amount of such consideration can be determined. TPC has also agreed to reimburse Lehman Brothers for its reasonable direct, out-of-pocket expenses and to indemnify Lehman Brothers and certain related persons against certain liabilities resulting from or arising out of its performance under the Engagement Letter. Michael E. McMahon, a director of TPC, is a Managing Director of Lehman Brothers. Neither TPC nor any person acting on its behalf currently intends to employ, retain or compensate any other person to make solicitations or recommendations to security holders on their behalf concerning the Offer. ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES. (a) Transactions in Securities. To the knowledge of TPC, except as otherwise set forth in this Schedule, no transactions in the Common Stock have been effected during the past 60 days by TPC or by any executive officer, director, affiliate or subsidiary of TPC. Larry W. Bickle, Chairman and Chief Executive Officer of TPC contributed 157,147 shares of Common Stock to a newly formed charitable remainder unitrust on January 20, 1997. (b) Intent to Tender. To the knowledge of TPC, all of its executive officers, directors, affiliates or subsidiaries currently intend to tender pursuant to the Offer all shares of Common Stock that are held of record or beneficially owned by such persons. 7 ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY. (a) Negotiations. Except as set forth in this Schedule, no negotiation is being undertaken or is underway by TPC in response to the Offer which relates to or would result in (i) an extraordinary transaction, such as a merger or reorganization, involving TPC or any subsidiary thereof; (ii) a purchase, sale or transfer of a material amount of assets by TPC or any subsidiary thereof; (iii) a tender offer for or other acquisition of securities by or of TPC; or (iv) any material change in the present capitalization or dividend policy of TPC. (b) Transactions and Other Matters. Except as set forth in this Schedule, there are no transactions, Board resolutions, agreements in principle or signed contracts in response to the Offer that relate to or would result in one or more of the events referred to in Item 7(a) above. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the General Corporation Law of the State of Delaware provides generally and in pertinent part that a Delaware corporation may indemnify its directors and officers against expenses, judgments, fines, and settlements actually and reasonably incurred by them in connection with any civil, criminal, administrative, or investigative suit or action, except actions by or in the right of the corporation if, in connection with the matters in issue, they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and in connection with any criminal suit or proceeding, if in connection with the matters in issue, they had no reasonable cause to believe their conduct was unlawful. Section 145 further provides that in connection with the defense or settlement of any action by or in the right of the corporation, a Delaware corporation may indemnify its directors and officers against expenses actually and reasonably incurred by them if, in connection with the matters in issue, they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made in respect to any claim, issue, or matter as to which such person has been adjudged liable to the corporation, unless the Delaware Court of Chancery or other court in which such action or suit is brought approves such indemnification. Section 145 further permits a Delaware corporation to grant its directors and officers additional rights of indemnification through bylaw provisions and otherwise, and to purchase indemnity insurance on behalf of its directors and officers. Article Seven of the Amended and Restated Certificate of Incorporation of TPC and the Bylaws of TPC provide, in general, that the Company shall indemnify its officers and directors to the maximum extent permitted under applicable law. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT NO. DESCRIPTION - --------- -------------------------------------------------------------------------------------------------- *1 Agreement and Plan of Merger, dated as of March 11, 1997, among TPC, PHI and Offeror. **2 Letter to the stockholders of the Company dated March 18, 1997. *3 Stockholder Agreement, dated as of March 11, 1997, among PHI, the Offeror, Larry W. Bickle, J. Chris Jones and John A. Strom. *4 Letter Agreement, dated as of October 23, 1996, between Lehman Brothers Inc., on behalf of TPC Corporation, and PacifiCorp Power Marketing, Inc. *5 Resolutions of the Board of Directors of TPC Corporation establishing a Performance Bonus for Senior Executives. *6 Change in Control Agreement dated as of November 8, 1996 by and between TPC Corporation and Michael E. Calderone.
8
EXHIBIT NO. DESCRIPTION - --------- -------------------------------------------------------------------------------------------------- *7 Change in Control Agreement dated as of November 8, 1996 by and between TPC Corporation and Ronald H. Benson. *8 Change in Control Agreement dated as of November 8, 1996 by and between TPC Corporation and M. Scott Jones. *9 Change in Control Agreement dated as of November 8, 1996 by and between TPC Corporation and Robert D. Kincaid. *10 Change in Control Agreement dated as of November 8, 1996 by and between TPC Corporation and Joseph J. DiNorscia. *11 Change in Control Agreement dated as of November 8, 1996 by and between TPC Corporation and Marilyn I. Eckersley. *12 Change in Control Agreement dated as of November 8, 1996 by and between TPC Corporation and Patrick J. Peldner. *13 Change in Control Agreement dated as of November 8, 1996 by and between TPC Corporation and D. Hughes Watler, Jr. *14 Press Release of TPC Corporation dated March 12, 1997. **15 Opinion of Lehman Brothers dated March 11, 1997.
- ------------------------ * Filed herewith ** Included in copies mailed to Stockholders. 9 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. TPC CORPORATION By: /s/ LARRY W. BICKLE ----------------------------------------- Larry W. Bickle CHAIRMAN AND CHIEF EXECUTIVE OFFICER Dated: March 18, 1997 10 ANNEX I DESCRIPTION OF CERTAIN AGREEMENTS MERGER AGREEMENT. The following is a summary of the material terms of the Merger Agreement. This summary is not a complete description of the terms and conditions thereof and is qualified in its entirety by reference to the full text thereof, which is incorporated herein by reference and a copy of which has been filed as Exhibit 1 to this Schedule. Capitalized terms used in this Annex I and not otherwise defined in this Schedule have the meanings ascribed to them in the Merger Agreement. THE OFFER. The Merger Agreement provides that PHI will cause Offeror to commence and Offeror will commence the Offer at an amount per share specified in the recitals to the Merger Agreement or such greater amount per share paid pursuant to the Offer (the "Per Share Amount"). The Merger Agreement specifies certain conditions for the Offer, including, among other things, there being validly tendered and not withdrawn that number of Shares of TPC Common Stock that, when combined with any Shares already owned by PHI and its direct or indirect subsidiaries, represent at least the majority of the then outstanding Shares of TPC Common Stock on a fully diluted basis (including, without limitation, all shares issuable upon the conversion of any convertible securities or upon the exercise of any options, warrants or rights) (the "Minimum Condition"). Pursuant to the Merger Agreement, Offeror expressly reserves the right to change or waive any such condition, to increase the Per Share Amount, and to make any other changes in the terms and conditions of the Offer; provided however, that no change may be made which (A) decreases the Per Share Amount, (B) reduces the maximum number of Shares to be purchased in the Offer, (C) imposes conditions to the Offer in addition to those set forth in Annex A to the Merger Agreement (see "CONDITIONS TO THE OFFER" below), (D) changes or waives the Minimum Condition, (E) extends the Offer, except as described in the following sentence, (F) provides for a different Per Share Amount in respect of Class A Common Stock than in respect of Class B Common Stock, or (G) waives or changes the terms of the Offer in any manner adverse to the holders of Shares (other than PHI and its Subsidiaries). The Merger Agreement provides that the Offer will expire 20 business days after it is commenced, will be extended for an aggregate of up to 10 business days from the initial expiration date if requested by TPC and may be extended by Offeror for an aggregate of up to 20 business days from the expiration date (but no more than 20 business days therefrom) without the written consent of TPC, except that (i) the Offer may be extended without such consent for up to an aggregate of 30 days from the initial expiration date until the expiration or termination of the waiting period, if applicable, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the "HSR Act") and (ii) Offeror may extend the Offer, if at the time the Offer would otherwise expire, a 5 day cure period under clause (f) or (g) of Annex A to the Merger Agreement is in effect, to a date 5 days after the end of such 5 day cure period. THE MERGER. The Merger Agreement provides that, on the terms and subject to the conditions set forth in the Merger Agreement and in accordance with the relevant provisions of the Delaware General Corporation Law (the "DGCL"), as soon as practicable following the satisfaction or waiver, if permissible, of the conditions described below under "CONDITIONS TO THE MERGER." Offeror will be merged with and into TPC with TPC as the surviving corporation in the Merger (the "Surviving Corporation"). The Merger will become effective at the time of filing of a certificate of merger, or certificate of ownership and merger, as required by the DGCL (the "Effective Time"). At the Effective Time, each Share issued and outstanding immediately prior to the Effective Time (other than Shares owned by PHI, by Offeror or by any other direct or indirect subsidiary of PHI or of TPC, or held in the treasury of TPC, all of which will be canceled without any conversion thereof and no payment or distribution will be made with respect thereto, and the Shares owned by stockholders who have complied with all of the relevant provisions providing for appraisal rights under the DGCL) will be canceled and converted automatically into the right to receive an amount I-1 equal to the Per Share Amount in cash (the "Merger Consideration") net to the holder, without any interest thereon, and each share of common stock of Offeror issued and outstanding immediately prior to the Effective Time will be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation. STOCKHOLDERS MEETING. The Merger Agreement provides that, if required by applicable law in order to consummate the Merger, TPC will, subject to its fiduciary duties under applicable law duly call an annual or special meeting of its stockholders (the "Stockholders Meeting") as soon as practicable following the consummation of the Offer to consider and vote upon the adoption of the Merger and the Merger Agreement. The Merger Agreement provides that in the event that Offeror acquires at least 90% of the outstanding Shares pursuant to the Offer or otherwise, the parties will take all necessary and appropriate actions to cause the Merger to become effective as soon as practicable after the consummation of the Offer without a Stockholders Meeting in accordance with Section 253 of the DGCL. PHI has agreed to cause all the Shares purchased pursuant to the Offer and all other Shares beneficially owned by PacifiCorp, Offeror or any other Subsidiary of PacifiCorp, to be voted in favor of the Merger and the Merger Agreement. STOCK OPTIONS. The Merger Agreement provides that (a) TPC will use its best efforts to enter into an agreement with each holder of an employee or director stock option to purchase Shares (in each case, an "Option") that provides that, immediately after the date on which Offeror will have accepted for payment all Shares validly tendered and not withdrawn prior to the expiration date with respect to the Offer, each Option that is then outstanding, whether or not then exercisable or vested, will be canceled by TPC, and each holder of a canceled Option will be entitled to receive from Offeror at the same time as payment for Shares is made by Offeror in connection with the Offer, in consideration for the cancellation of such Option, an amount in cash equal to the product of (i) the number of Shares previously subject to such Option, whether or not then exercisable or vested, and (ii) the excess, if any, of the Per Share Amount over the exercise price per Share previously subject to such Option, reduced by any applicable withholding. REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains representations and warranties by TPC, relating to, among other things, (i) the organization of TPC and its Subsidiaries and other corporate matters, (ii) the capital structure of TPC, (iii) the authorization, execution, delivery and consummation of the transactions contemplated by the Merger Agreement, (iv) consents and approvals, (v) documents filed by TPC with the SEC and the accuracy of the information contained therein, (vi) the accuracy of the information contained in documents filed with the SEC in connection with the Offer and the Merger, (vii) litigation, (viii) environmental matters (ix) absence of material changes, and (x) taxes. In addition, the Merger Agreement contains representations and warranties by PHI and Offeror, relating to, among other things, (a) the organization and ownership of PHI and Offeror and other corporate matters, (b) the authorization, execution, delivery and consummation of the transactions contemplated by the Merger Agreement, (c) the accuracy of information contained in documents filed with the SEC in connection with the Offer and the Merger, (d) consents and approvals, (e) financial statements of PHI, (f) regulatory status and (g) absence of ownership of Shares. CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the Merger Agreement, TPC has agreed that, prior to the Effective Time, except as otherwise provided in the Merger Agreement or with the prior written consent of PHI, TPC will, and will cause each of its Subsidiaries to, conduct its operations only in the ordinary and usual course of business consistent with past practice. TPC has further agreed that it will use all reasonable efforts, and will cause each of its Subsidiaries to use all reasonable efforts, to (i) preserve intact the present business organization of TPC and its Subsidiaries, (ii) keep available the services of the present officers and employees of TPC and its Subsidiaries, and (iii) preserve the material relationships of TPC and its Subsidiaries with licensors, licensees, customers, suppliers, employees and any others having business dealings with TPC or any of its Subsidiaries. TPC has agreed that, unless otherwise contemplated or disclosed in the Merger Agreement or consented to by PHI, neither TPC nor any material subsidiary, can, between the date of the Merger Agreement and the Effective Time: (i) amend or otherwise change its I-2 charter or bylaws, (ii) issue, sell, pledge, dispose of, grant or encumber any shares of capital stock of any class of TPC or any Subsidiary, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest of TPC or any Subsidiary or, any assets and properties material to TPC and the Subsidiaries, taken as a whole, except for (a) sales of natural gas, in the ordinary course of business and in a manner consistent with past practice, by the marketing business of TPC or (b) pledges of assets and properties required by any financing document to which TPC or a Subsidiary is a party on the date of the Merger Agreement, (iii) declare, set aside, make or pay any dividend or other distribution with respect to any of its capital stock (except for such declarations, set-asides, dividends and other distributions made from any Subsidiary to TPC), (iv) reclassify, combine, split or subdivide, or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock, (v) acquire any corporation, partnership or other business organization or any division thereof or any material amount of assets, except for acquisitions of natural gas, in the ordinary course of business, by the marketing business of TPC; (vi) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for, the obligations of any person, or make any loans or advances, except borrowing in the ordinary course of business pursuant to any existing revolving credit agreement of TPC, (vii) enter into or amend any contract, agreement, commitment or arrangement with respect to any matter described in the foregoing clauses (v) and (vi), (viii) increase the compensation payable or to become payable to, or grant any severance or termination pay to, its officers, employees, directors or consultants, except pursuant to existing contractual arrangements, (ix) pay, discharge or satisfy any claim, liability or obligation other than in the ordinary course of business and consistent with past practice and other than liabilities reflected or reserved against in the consolidated balance sheet of TPC and the consolidated Subsidiaries as at December 31, 1996, including the notes thereto, or subsequently incurred in the ordinary course of business and consistent with past practice, (x) enter into any collective bargaining agreements or change accounting practices, (xi) make any contribution to the TPC ESOP in excess of the amount necessary to amortize existing loans from TPC over the remaining portion of the original seven year period of such loans, (xii) amend in any material respect or terminate any contract or agreement material to TPC and the Subsidiaries, or (xiii) agree to take in writing, or otherwise, any of the actions described in the foregoing clauses (i) through (xii) or any action which would result in any of the conditions to the Offer not being satisfied (other than as contemplated by the Merger Agreement). ACCESS. Pursuant to the Merger Agreement, TPC has agreed that it will (i) give PHI and Offeror and their authorized representatives reasonable access to all offices, properties and other facilities and to all books and records of TPC and its Subsidiaries, (ii) permit PHI and Offeror to make such inspections as it may reasonably require, and (iii) cause its officers and those of its Subsidiaries to furnish PHI and Offeror such financial and operating data and other information with respect to the business and properties of TPC and its Subsidiaries. In this regard, PHI and Offeror have agreed to comply with the terms of the Confidentiality Agreement between TPC and PacifiCorp Power Marketing dated October 23, 1996 (the "Confidentiality Agreement"). (See "Description of Certain Agreements--Confidentiality Agreement" in this Annex I.). ALTERNATIVE PROPOSALS. The Merger Agreement provides that until the earlier of the termination of the Merger Agreement or the Effective Time, TPC will not, and will cause its officers, directors, Subsidiaries, affiliates, representatives and agents, directly or indirectly, not to initiate, solicit or encourage, any proposal, offer or inquiry to acquire all or any substantial part of the business and properties of TPC or any capital stock of TPC whether by merger, purchase of assets, tender offer or otherwise, whether for cash, securities or any other consideration or combination thereof (any such transaction, an "Alternative Transaction"). TPC has agreed to cease and to cause to be terminated any existing discussions or negotiations regarding Alternative Transactions, with parties other than PHI and Offeror commenced before the date of the Merger Agreement. TPC has also agreed not to grant its consent to any party other than PHI and Offeror to take any action such party has agreed not to take pursuant to any "standstill" restrictions that are equivalent to the standstill provisions contained in the I-3 Confidentiality Agreement, or to provide any confidential or non-public information regarding TPC and its Subsidiaries to, or have discussions with, any person regarding an Alternative Transaction. Notwithstanding the foregoing, the Merger Agreement provides that if TPC receives an unsolicited proposal or indication of interest for or with respect to a potential Alternative Transaction (an "Alternative Proposal"), TPC may engage in discussions or negotiations regarding such Alternative Proposal and furnish confidential or non-public information concerning TPC or its Subsidiaries if in the reasonable, good faith judgment of the TPC Board of Directors, taking into account the advice of outside counsel, the failure to do so would violate the fiduciary duties of the TPC Board of Directors to the holders of Shares under applicable law, and if the Alternative Proposal is a tender offer, the TPC Board of Directors may take and disclose to TPC's stockholders a position contemplated by rule 14e-2 under the Exchange Act. The Merger Agreement also provides that TPC will inform PHI promptly of its receipt of any Alternative Proposal. DIRECTORS. The Merger Agreement provides that promptly upon the acceptance for payment of, and payment for, Shares by Offeror pursuant to the Offer, Offeror will be entitled to designate such number of directors on the TPC Board of Directors as will give Offeror, subject to compliance with Section 14(f) of the Exchange Act, a majority of such directors, and TPC will, at such time, cause Offeror's designees to be so elected by its existing Board of Directors; provided, however, that in the event that Offeror's designees are elected to the TPC Board of Directors, until the Effective Time such Board of Directors will have at least three directors who are directors of TPC on the date of the Merger Agreement (the "Independent Directors"); and provided further that, in such event, if the number of Independent Directors will be reduced below three for any reason whatsoever, the remaining Independent Directors or Director will designate a person to fill such vacancy who will be deemed to be an Independent Director for purposes of the Merger Agreement or, if no Independent Director then remains, the other directors will designate three persons to fill such vacancies who will not be officers or affiliates of TPC or any of its Subsidiaries or of PHI or any of its Subsidiaries, and such persons will be deemed to be Independent Directors for purposes of the Merger Agreement. In connection with the foregoing, TPC has agreed promptly, at the option of PHI, either to increase the size of TPC's Board of Directors and/or obtain the resignation of such number of its current directors as is necessary to enable Offeror's designees to be elected or appointed to TPC's Board of Directors as provided above. DIRECTORS/OFFICERS INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that, with certain limitations, the Certificate of Incorporation of the Surviving Corporation and each of its Subsidiaries will contain provisions no less favorable with respect to indemnification and advancement of expenses than are set forth in the Amended and Restated Certificate of Incorporation of TPC as of the date of execution of the Merger Agreement. The Merger Agreement provides that TPC will defend, indemnify and hold harmless, and after the Effective Time, the Surviving Corporation will defend, indemnify and hold harmless, certain present and former directors and officers of TPC as identified in the Merger Agreement to the full extent required or permitted under Delaware law. Pursuant to the Merger Agreement, such rights to be defended, indemnified and held harmless will continue in full force and effect without time limitation from and after the Effective Time for a period of six years after the Effective Time. The Merger Agreement provides further that, with certain limitations, the Surviving Corporation will, for six years from the Effective Time, maintain in effect the directors' and officers' liability insurance policies in force and existing at the time of the execution of the Merger Agreement. EMPLOYMENT MATTERS. The Merger Agreement provides that all employees of TPC and its subsidiaries prior to the Effective Time will be employed by the Surviving Corporation immediately after the Effective Time. However with certain limitations, PHI and the Surviving Corporation will not be obligated to continue employing such employees for any length of time thereafter unless obligated by contract. The employees of TPC and its Subsidiaries will also be granted service credit under any applicable employee benefit plan or program which recognizes service time. The Merger Agreement provides that for one year I-4 after the Effective Time, PHI will cause the Surviving Corporation to continue or cause to be continued without significant adverse change to any employee or former employee of TPC and its Subsidiaries all TPC Employee Benefit Plans and the TPC 401(k) Plan, except that PHI or the Surviving Corporation may, during such period, replace any of the TPC Employee Benefit Plans or the TPC 401(k) Plan with a plan that is substantially equivalent to or more favorable than the plan it replaces. The Merger Agreement provides that, to the extent permitted by the relevant provisions of the Internal Revenue Code of 1986 (the "Code"), PHI will maintain or cause to be maintained the TPC ESOP as a separate qualified plan or separate feature in a qualified plan solely for the benefit of the TPC ESOP participants and the employees of the business that was conducted by TPC prior to the Effective Time, until the notes issued by the TPC ESOP (the "ESOP Notes") are paid in full (prior to or at maturity). Employees who are TPC ESOP participants before the Effective Time and who are involuntarily terminated other than for cause will become fully vested upon termination and will be entitled to an allocation for the year of termination. If (i) PacifiCorp or its delegatee so elects, or (ii) certain Code provisions do not permit the TPC ESOP to be maintained as a separate plan or feature of a plan, PacifiCorp shall cause a matching contribution and a two percent of eligible compensation contribution to be made to repay the ESOP Notes. At any time, PacifiCorp or its delegatee may elect to prepay the ESOP Notes in full. The Merger Agreement provides certain protections and advantages (lump sum cash severance payment and continued health insurance coverage under Part 6 of ERISA) for the benefit of any employee of TPC or its Subsidiaries who is terminated from employment by the Surviving Corporation within 12 months after the Effective Time for any reason other than cause, or who is required to transfer to a job location that is more than 50 miles from his or her current job location or take a reduction in base rate pay, but refuses such transfer or reduction and terminates his or her employment with the Surviving Corporation. The above described benefits are to apply in lieu of severance benefits applicable under TPC's general severance policy, and do not apply to the named officers and key employees who are party to change in control agreements. CONDITIONS TO THE OFFER. Annex A to the Merger Agreement provides that notwithstanding any other provision of the Offer, Offeror shall not be required to accept for payment or pay for any Shares tendered pursuant to the Offer unless (i) the Minimum Condition shall have been satisfied and (ii) any applicable waiting period under the HSR Act shall have expired or been terminated. Furthermore, Offeror may terminate or amend the Offer and may postpone the acceptance for payment of and payment for Shares tendered, if at any time on or after the date of this Agreement, and prior to the acceptance for payment of Shares, any of the following conditions shall exist: (a) there shall have been issued and shall remain in effect any injunction, order or decree by any court or governmental authority, which (i) restrains or prohibits the making of the Offer or the consummation of the Merger, (ii) prohibits or limits ownership or operation by TPC, PHI or Offeror of all or any material portion of the business or assets of TPC and its Subsidiaries, taken as a whole, or PHI and its Subsidiaries, taken as a whole, or compels TPC, PHI or any of their Subsidiaries to dispose of or hold separate all or any material portion of the business or assets of TPC and its Subsidiaries, taken as a whole, or PHI and its Subsidiaries, taken as a whole, in each case as a result of the Transactions; (iii) imposes material limitations on the ability of PHI or Offeror to exercise effectively full rights of ownership of any Shares; or (iv) requires divestiture by PHI or Offeror of any material portion of the Shares; (b) there shall have been any action taken, or any statute, rule, regulation, order or injunction issued or otherwise applicable to (i) PHI, TPC or any Subsidiary or affiliate of PHI or TPC or (ii) any Transaction, by any court or governmental authority (other than, in the case of both (i) and (ii), the application of the waiting period provisions of the HSR Act to the Offer or the Merger), which results in any of the consequences referred to in clauses (i) through (iv) of paragraph (a) above; I-5 (c) there shall have occurred and be continuing (i) any general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange or in the over-the-counter market, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) a commencement of a war or armed hostilities involving the United States, (iv) any limitation (whether or not mandatory) by any governmental authority on the extension of credit by banks or other financial institutions, (v) in the case of any of the foregoing existing at the time of the commencement of the Offer, in the reasonable judgment of PHI, a material worsening thereof; (d) a tender offer or exchange offer for more than fifty percent (50%) of the Shares shall have been made or publicly proposed by a third party for a price in excess of the Per Share Amount; (e) the TPC Board of Directors or any committee thereof shall have withdrawn or modified in a manner adverse to PHI or Offeror its approval or recommendation of the Offer, the Merger or this Agreement or shall have approved or recommended another merger, consolidation, business combination with, or acquisition of TPC or all or substantially all its assets or another tender offer or exchange offer for Shares, or shall have resolved to do any of the foregoing; (f) TPC shall have failed to perform in any material respect any of its covenants in this Agreement and shall not have cured such default (provided 5 days written notice of such default shall have been given to TPC by PHI); (g) the representations and warranties of TPC shall fail to be true and correct in all material respects on and as of the date made or at such later time as the Merger Agreement provides, and such failure shall not have been cured in all material respects (provided 5 days written notice of such failure shall have been given to TPC by PHI); (h) the Merger Agreement shall have been terminated in accordance with its terms; (i) Offeror and TPC shall have agreed that Offeror shall terminate the Offer or postpone the acceptance for payment of or payment for Shares thereunder; or (j) since December 31, 1996, except as expressly contemplated by the Merger Agreement, disclosed in any form report or document required to be filed by TPC with the Securities and Exchange Commission since such date and prior to the date of the Merger Agreement or as set forth in a schedule to the Merger Agreement, there shall have been any event having, individually or in the aggregate, a change or effect that is reasonably likely to be materially adverse to the business, operations, properties, financial condition, assets or liabilities (including, without limitation, contingent liabilities) of TPC and the Subsidiaries taken as a whole, except for changes that affect the industries in which TPC and the Subsidiaries operate generally. CONDITIONS TO THE MERGER. Under the Merger Agreement, the respective obligations of each party to effect the Merger are subject to the satisfaction or waiver, where permissible, prior to the Effective Time of the following conditions: (i) the Merger Agreement shall have been adopted by the requisite vote of the stockholders of TPC in accordance with TPC's Amended and Restated Certificate of Incorporation and applicable law, if such vote is required, (ii) no United States or state statute, rule, regulation, executive order, decree or injunction shall have been enacted, entered, promulgated or enforced that has the effect of making the acquisition or ownership of the Shares illegal or otherwise prohibiting or materially restricting the consummation of the Merger, (iii) the waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated, and (iv) Offeror or its permitted assignee will have purchased all Shares validly tendered and not withdrawn pursuant to the Offer. TERMINATION. The Merger Agreement may be terminated at any time prior to the Effective Time (i) by mutual consent of the parties to the Merger Agreement, (ii) by TPC, upon approval of the TPC Board of Directors, if (1) Offeror shall have (A) failed to commence the Offer within ten days following the date of the Merger Agreement, (B) terminated the Offer without having accepted any Shares for I-6 payment thereunder or (C) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such failure to pay for Shares shall have been caused by or resulted from the failure of TPC to satisfy the conditions set forth in paragraph (f) or (g) of Annex A to the Merger Agreement or (2) prior to the purchase of Shares pursuant to the Offer, the TPC Board of Directors shall have withdrawn or modified in a manner adverse to Offeror or PHI its approval or recommendation of the Offer, the Merger Agreement or the Merger in order to approve the execution by TPC of a definitive agreement providing for an Alternative Transaction or in order to approve a tender offer or exchange offer for Shares by a third party, in either case on terms more favorable to TPC's stockholders from a financial point of view than the Offer and the Merger taken together, as determined by the TPC Board of Directors in the exercise of its good faith judgment and after consultation with its legal counsel and financial advisors; PROVIDED, HOWEVER, that termination as described in clause (2) will not be effective until TPC has made payment to PHI of the fee required to be paid as specified in the second sentence under the caption "FEES AND EXPENSES" below, (iii) by PHI if (1) due to an occurrence or circumstance that results in a failure to satisfy any condition set forth in Annex A to the Merger Agreement, Offeror shall have (A) failed to commence the Offer within ten days following the date of the Merger Agreement, (B) terminated the Offer without having accepted any Shares for payment or (C) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless any such failure listed above shall have been caused by or resulted from the failure of PHI or Offeror to perform in any material respect any material covenant or agreement of either of them contained in the Merger Agreement or the material breach by PHI or Offeror of any material representation or warranty of either of them contained in the Merger Agreement or (2) prior to the purchase of Shares pursuant to the Offer, the TPC Board of Directors or any committee thereof shall have withdrawn or modified in a manner adverse to Offeror or PHI its approval or recommendation of the Offer, the Merger Agreement or the Merger or shall have recommended another merger, consolidation, business combination with, or acquisition of, TPC or all or substantially all its assets or another tender offer or exchange offer for Shares, or shall have resolved to do any of the foregoing, or (iv) by either PHI, Offeror or TPC if the Merger is not consummated on or before the first anniversary of the date of the Merger Agreement; provided, however, that the party seeking to terminate the Merger Agreement as described in this clause (iv) is not willfully or negligently in material breach of the Merger Agreement. FEES AND EXPENSES. The Merger Agreement provides that, except as described in the following sentence, whether or not the Offer or the Merger is consummated, all costs and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby will be paid by the party incurring such expenses. The Merger Agreement provides further that, if the Merger Agreement is terminated by TPC as described in clause (ii)(2) under the caption "TERMINATION" above, or by PHI under the provision described in clause (iii)(2) under the caption "TERMINATION" above, TPC will pay to PHI a fee of $9,000,000 in cash. AMENDMENT. The Merger Agreement may be amended through a written instrument at any time prior to the Effective Time by the Board of Directors of the parties. The Merger Agreement provides certain special rules for the amendment of the Merger Agreement after the election or appointment of Offeror designees to the TPC Board of Directors. STOCKHOLDER AGREEMENT. Messrs. Larry W. Bickle, John A. Strom and J. Chris Jones, executive officer of TPC, are each party to a Stockholder Agreement dated March 11, 1997 with PHI and the Offeror. The Stockholder Agreement provides that each of Messrs. Bickle, Strom and Jones will tender his Shares into the Offer so long as the per Share amount is not less than $13.41 in cash (net to the seller). Additionally, each of Bickle, Strom and Jones has agreed to sell, and the Offeror has agreed to purchase, their Shares at a price per Share equal to $13.41, or such higher price per Share as may be offered by the Offeror in the Offer, provided that such obligations to purchase and sell are both subject to (i) the Offeror having accepted Shares for payment I-7 under the Offer and the Minimum Condition (minus any shares which are the subject of the Stockholder Agreement but are not purchased in the Offer) having been satisfied, and (ii) the expiration or termination of any applicable waiting period under the HSR Act. Each of Bickle, Strom and Jones has also agreed not to transfer or agree to transfer his Shares, grant a proxy for his Shares or enter into a voting agreement respecting them, or take any other action that would in any way restrict, limit or interfere with the performance of his obligations under the Stockholder Agreement or the transactions contemplated thereby. The Stockholder Agreement terminates upon the earlier of (i) the Merger Agreement being terminated by TPC, PHI or the Offeror, or (ii) the purchase and sale of the Shares of Bickle, Strom and Jones as described above. The foregoing summary of the Stockholder Agreement is qualified in its entirety by the text of the Stockholder Agreement, a copy of which is filed as Exhibit 3 to the Schedule 14D-9 and is incorporated herein by reference. CONFIDENTIALITY AGREEMENT. On October 23, 1996, TPC and PacifiCorp Power Marketing, Inc. ("PPM"), an affiliate of PHI, entered into a confidentiality agreement (the "Confidentiality Agreement") pursuant to which TPC agreed to provide to PPM and its representatives certain information and material concerning TPC, its subsidiaries and affiliates on a confidential basis. In consideration of such disclosure, PPM agreed that neither it nor its affiliates would solicit to employ any of the current officers and employees of TPC without TPC's prior written consent. PPM also agreed on behalf of itself and its affiliates to certain standstill provisions for a period of three years with respect to certain actions involving or leading to a transaction with TPC without the written consent or invitation of the Board. The foregoing summary of the Confidentiality Agreement is qualified in its entirety by the text of the Confidentiality Agreement, a copy of which is filed as Exhibit 4 to the Schedule 14D-9 and is incorporated herein by reference. I-8 ANNEX II LEHMAN BROTHERS March 11, 1997 Board of Directors TPC Corporation 200 West Lake Park Boulevard, Suite 1000 Houston, Texas 77079 Members of the Board: We understand that Pacificorp Holdings, Inc. ("PHI"), a wholly owned subsidiary of Pacificorp, and TPC Corporation ("TPC" or the "Company") have entered into an Agreement and Plan of Merger dated as of March 11, 1997 (the "Agreement"), pursuant to which ACo, a wholly owned subsidiary of PHI, will make a cash tender offer to acquire all the issued and outstanding shares of Class A and Class B common stock of TPC, par value $0.01 per share, for $13.41 per share net to the seller in cash (the "Tender Offer"). The Tender Offer will be conditional upon, among other things, the tender of shares of TPC common stock which represent at least a majority of the outstanding shares of TPC common stock on a fully diluted basis. Following consummation of the Tender Offer, each share of TPC stock which is outstanding and not purchased pursuant to the Tender Offer, will be converted into the right to receive $13.41 per share in cash pursuant to a merger of ACo with and into TPC (the "Merger", and together with the Tender Offer, the "Proposed Transaction"). The terms and conditions of the Proposed Transaction are set forth in more detail in the Agreement. We have been requested by the Board of Directors of the Company to render our opinion with respect to the fairness, from a financial point of view, to the Company's stockholders of the consideration to be offered to such stockholders in the Proposed Transaction. We have not been requested to opine as to, and our opinion does not in any manner address, the Company's underlying business decision to proceed with or effect the Proposed Transaction. In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and the specific terms of the Proposed Transaction, (2) publicly available information concerning Pacificorp and the Company that we believe to be relevant to our analysis including the Company's Form 10-K for the year ended December 31, 1996, (3) financial and operating information with respect to the business, operations and prospects of the Company furnished to us by the Company, (4) a trading history of the Company's common stock from January 1, 1992 to the present and a comparison of that trading history with those of other companies that we deemed relevant, (5) a comparison of the historical financial results and present financial condition of the Company with those of other companies that we deemed relevant, (6) a comparison of the financial terms of the Proposed Transaction with the financial terms of certain other recent transactions that we deemed relevant, and (7) the results of our efforts to solicit indications of interest and proposals from third parties with respect to a purchase of all or a part of the Company's business. In addition, we have had discussions with the management of the Company concerning its business, operations, assets, financial condition and prospects and have undertaken such other studies, analyses and investigations as we deemed appropriate. In arriving at our opinion, we have assumed and relied upon the accuracy and completeness of the financial and other information used by us without assuming any responsibility for independent verification of such information and have further relied upon the assurances of management of the Company that they are not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the financial projections of the Company, upon advice of the Company we have assumed II-1 that such projections have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company as to the future financial performance of the Company and that the Company will perform substantially in accordance with such projections. In arriving at our opinion, we have not conducted a physical inspection of the properties and facilities of the Company and have not made or obtained any evaluations or appraisals of the assets or liabilities of the Company. Our opinion necessarily is based upon market, economic and other conditions as they exist on, and can be evaluated as of, the date of this letter. Based upon and subject to the foregoing, we are of the opinion as of the date hereof that, from a financial point of view, the consideration to be offered to the stockholders of the Company in the Proposed Transaction is fair to such stockholders. We have acted as financial advisor to the Company in connection with the Proposed Transaction and will receive a fee for our services which is contingent upon the consummation of the Proposed Transaction. In addition, the Company has agreed to indemnify us for certain liabilities that may arise out of the rendering of this opinion. In the ordinary course of our business, we actively trade in the equity securities of the Company for our own account and for the accounts of our customers and, accordingly, may at any time hold a long or short position in such securities. Michael McMahon, a director TPC, is also a Managing Director of Lehman Brothers. This opinion is for the use and benefit of the Board of Directors of the Company and is rendered to the Board of Directors in connection with its consideration of the Proposed Transaction. This opinion is not intended to be and does not constitute a recommendation to any stockholder of the Company as to whether to accept the consideration to be offered to such stockholder in connection with the Proposed Transaction. Very truly yours, LEHMAN BROTHERS By: /s/ H.E. MCGEE III ----------------------------------------- H.E. McGee III MANAGING DIRECTOR II-2 ANNEX III TPC CORPORATION 200 WESTLAKE PARK BOULEVARD HOUSTON, TEXAS 77079 ------------------------ INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER ------------------------ NO VOTE OR OTHER ACTION OF TPC'S STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT. NO PROXIES ARE BEING SOLICITED AND YOU ARE REQUESTED NOT TO SEND TPC A PROXY. ------------------------ This Information Statement is being mailed on or about March , 1997 as part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of shares (the "Shares") of the Class A Common Stock, par value $.01 per share, and the Class B Common Stock, par value $.01 per share (the "Common Stock"), of TPC Corporation, a Delaware corporation ("TPC"). Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Schedule 14D-9. This Information Statement is being furnished in connection with the possible designation by PacifiCorp Holdings, Inc., a Delaware corporation ("PHI"), and the direct parent of Power Acquisition Company, a Delaware corporation ("Offeror") of persons (the "Offeror Designees") to the Board of Directors of TPC (the "Board"). Such designation is to be made pursuant to an Agreement and Plan of Merger dated March 11, 1997 (the "Merger Agreement") among TPC, PHI and Offeror. The Merger Agreement provides that promptly upon the acceptance for payment of, and payment for, Shares by Offeror pursuant to the Offer, Offeror will be entitled to designate such number of directors as will give Offeror, subject to compliance with Section 14(f) of the Exchange Act, a majority of such directors, and TPC will, at such time, cause Offeror's designees to be so elected by its existing Board; provided, however, that in the event that Offeror's designees are elected to the Board, until the Effective Time (as defined in the Merger Agreement) such Board will have at least three directors who are directors of TPC on the date of the Merger Agreement (the "Independent Directors"); and provided further that, in such event, if the number of Independent Directors will be reduced below three for any reason whatsoever the remaining Independent Directors will designate a person to fill such vacancy who will be deemed to be an Independent Director for purposes of the Merger Agreement or, if no Independent Director then remains, the other directors will designate three persons to fill such vacancies who will not be officers or affiliates of TPC or any of its subsidiaries or of PHI or any of its subsidiaries, and such persons will be deemed to be Independent Directors for purposes of the Merger Agreement. Subject to applicable law, TPC will take all action requested by PHI necessary to effect any such election. In connection with the foregoing, TPC will promptly, at the option of PHI, either increase the size of the Board and/or obtain the resignation of such number of its current directors as is necessary to enable Offeror's designees to be elected or appointed to the Board as provided above. The information contained in this Information Statement concerning PHI and the Offeror Designees has been furnished to TPC by such persons, and TPC assumes no responsibility for the accuracy or completeness of such information. III-1 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT GENERAL The outstanding voting securities of TPC as of March 7, 1997 consisted of 17,424,252 Shares of Class A Common Stock and 579,963 Shares of Class B Common Stock, with approximately 3,497,494 Shares reserved for issuance pursuant to outstanding stock options granted by TPC to key employees, directors and consultants. Each Share is entitled to one vote on matters other than the election of directors, in which case the holders of the Class A Common Stock are entitled to elect two members to the Board class being elected each year, and the holder of the Class B Common Stock is entitled to elect one member to the Board class being elected each year. The Board is divided into three classes serving staggered terms in accordance with TPC's Amended and Restated Certificate of Incorporation. BENEFICIAL OWNERS The following table and the information under "Stockholders' Agreements" below describe the ownership of Shares by each person known by TPC to own beneficially more than five percent of the Shares (including any "group" as that term is used in Section 13(d) (3) of the Exchange Act). Unless otherwise indicated, to TPC's knowledge, such persons have sole voting and investment power with respect to such Shares, and all such Shares are owned beneficially and of record by the person indicated. The table reflects the ownership of such Shares (including Shares that may be acquired within sixty days of March 7, 1997) at March 7, 1997. Certain of the information in the following table and set forth under "Stockholders' Agreements" was taken from materials filed with the SEC by certain owners of TPC's capital stock. Certain of the stockholders identified in the following table have entered into agreements regarding the disposition and voting of their capital stock as described under "Stockholders' Agreements" which may cause certain of the parties to such agreements to be deemed to have beneficial ownership of stock subject to such agreements. All of the percentages in the following table assume that the 579,963 outstanding shares of Class B Common Stock have been converted into the same number of Shares.
SHARES BENEFICIALLY OWNED AT MARCH 7, 1997 ----------------------- PERCENT OF NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER CLASS - ------------------------------------------------------------------------------------------- ---------- ----------- Foreign & Colonial Management Limited (1).................................................. 921,000 5.28% Exchange House Primrose Street London EC2A 2NY, England Gaz de France (2).......................................................................... 4,046,999 23.22% No. 32 Lookerman Square Suite L-100 Dover, Delaware 19901 Miami Valley Leasing, Inc. (3)............................................................. 1,000,000 5.74% Courthouse Plaza Southwest Dayton, Ohio 45402
III-2
SHARES BENEFICIALLY OWNED AT MARCH 7, 1997 ----------------------- PERCENT OF NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER CLASS - ------------------------------------------------------------------------------------------- ---------- ----------- NAR Group Limited (4)...................................................................... 1,546,000 8.87% Citco Building P.O. Box 662 Wickhams Cay Road Town, Tortola British Virgin Islands
- ------------------------ (1) Foreign & Colonial Management Limited ("F&C") is an investment advisor wholly owned by Hypo Foreign & Colonial Management (Holdings) Limited ("Holdings"). Both of these entities are organized under the laws of the United Kingdom. F&C and Holdings share voting and dispositive power with respect to the shares indicated as beneficially owned by F&C. (2) The Shares indicated as beneficially owned by Gaz de France ("GDF") are held of record by GDF US INCORPORATED, a Delaware corporation and an indirect wholly owned subsidiary of GDF. Messr. Abiteboul, a director of TPC, is President of GDF US INCORPORATED. These shares include 579,963 Shares issuable upon conversion of the Class B Common Stock now owned by GDF. (3) Miami Valley Leasing, Inc., an Ohio corporation ("Miami Valley"), is a wholly owned subsidiary of DPL Inc. ("DPL"), also an Ohio corporation. DPL is also the parent company of The Dayton Power and Light Company ("DP&L"), an Ohio corporation engaged in the business of generating, transmitting and selling electric energy and distributing natural gas in the State of Ohio. Mr. Thomas Jenkins is an officer of both DPL and DP&L, however, Mr. Jenkins disclaims any beneficial ownership to the Shares owned by Miami Valley. (4) The Shares beneficially owned by NAR Group Limited, a private investment holding company ("NAR"), are owned of record by Intercontinental Mining & Resources Incorporated, a British Virgin Islands company and a wholly owned subsidiary of NAR. NAR is a private investment holding company that is a joint venture between the family of Mr. Alan Quasha, and Compagnie Financiere Richemont A.G., a Swiss public company engaged in the tobacco, luxury goods, and other businesses. Mr. Quasha and his family may be deemed to beneficially own the shares reported as beneficially owned by NAR, however, Mr. Quasha and his family disclaim such beneficial ownership. STOCKHOLDERS' AGREEMENTS Effective June 14, 1991, TPC sold an aggregate of 565,065 Shares of Class B Common Stock, and preferred shares that are no longer outstanding, to GDF and certain other entities (which certain other entities no longer own any such shares). In connection with this transaction, Phemus Corporation, Intercontinental Mining & Resources Incorporated, a wholly owned subsidiary of NAR Group Limited, and another company that has since sold its Shares entered into a stockholders' agreement with GDF ("Stockholders' Agreement"). The Stockholders' Agreement provides, among other things, that so long as such stockholders own Shares, they will consult with GDF regarding the nomination of two directors to be elected by holders of the Shares. Such nominees must also be acceptable to TPC. Messrs. Jarvis and Pignatelli serve on TPC's Board in accordance with this arrangement. By letter agreement dated June 12, 1991, TPC agreed with the holders of the Class B Common Stock that if TPC granted any additional options under TPC's 1991 Stock Option Plan (the "1991 Plan") or sold any of the 375,000 Shares held in treasury on that date, TPC would issue additional Class B Common Stock to the holders of such stock equal to five percent of the options granted or treasury stock sold. Pursuant to this agreement and in connection with the grant of additional options under the 1991 Plan, TPC issued 9,079 additional shares of Class B Common Stock in 1992, 5,819 additional shares of Class B Common Stock in 1993, and no additional Class B Common Stock in 1994, 1995 or 1996. III-3 MANAGEMENT The following table describes the ownership of Shares by (i) each director of TPC, (ii) the Chief Executive Officer and each of the four most highly compensated executive officers of TPC, and (iii) all officers and directors of TPC as a group. Unless otherwise indicated, to TPC's knowledge, such persons have sole voting and investment power with respect to such shares and all such shares are owned beneficially and of record by the person indicated. The table reflects the ownership of such Shares (including Shares that may be acquired within sixty days after March 7, 1997) at March 7, 1997. Certain of the information in the following table was taken from materials filed with the SEC by certain owners of TPC's Common Stock. All of the percentages in the following table assume that the 579,963 Shares of Class B Common Stock have been converted into the same number of Shares.
SHARES BENEFICIALLY OWNED AT MARCH 7, 1997 ------------------------ PERCENT OF NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER CLASS - --------------------------------------------------------------------------------- ---------- ------------ Larry W. Bickle (1).............................................................. 580,293 3.2% John A. Strom (1)................................................................ 732,642 4.1% J. Chris Jones (1)............................................................... 634,140 3.5% Ronald H. Benson (1)............................................................. 27,700 0.2% Michael E. Calderone (1)......................................................... 39,602 0.2% Jean P. Abiteboul (2)(4)......................................................... 8,400 * W. J. Bowen (3).................................................................. 9,400 * Bernard Brelle (2)(4)............................................................ 2,400 * Robert Cosson (2)(4)............................................................. 8,400 * Roger L. Jarvis (2).............................................................. 8,400 * Thomas M. Jenkins (2)(5)......................................................... -- -- Michael E. McMahon (2)........................................................... 400 * James S. Pignatelli (3).......................................................... 8,900 * All officers and directors as a group (nineteen persons including those listed above) (6).............................................. 2,411,319 12.5%
- ------------------------ * Less than 0.1%. (1) Shares shown as beneficially owned by Messrs. Bickle, Strom, Jones, Benson, and Calderone include 567,313, 567,313, 567,313, 25,000 and 36,013 Shares, respectively, which each of them has the right to acquire within sixty days after March 7, 1997, through the exercise of stock options. (2) All Shares shown as beneficially owned are Shares which the named director has the right to acquire within sixty days after March 7, 1997, through the exercise of stock options. (3) Shares shown as beneficially owned by Messrs. Bowen and Pignatelli include 5,000 and 500 Shares, respectively, and the right to acquire 4,400 and 8,400 Shares, respectively, within sixty days after March 7, 1997, through the exercise of stock options. (4) Messrs. Abiteboul, Brelle and Cosson are affiliated with GDF, which beneficially owns 4,046,999 Shares, including 579,963 Shares issuable upon conversion of the Class B Shares now owned by GDF. (5) See footnote (3) to the table beginning on page III-2. (6) Shares shown as beneficially owned by the officers and directors of TPC as a group include 1,929,716 Shares which such officers and directors have the right to acquire within sixty days after March 7, 1997, through the exercise of stock options. III-4 THE BOARD OF DIRECTORS OFFEROR DESIGNEES PHI has informed TPC that each of the Offeror Designees listed below has consented to act as a director. To the best knowledge of TPC, none of the Offeror Designees or their associates beneficially owns any equity securities of TPC or has been involved in any transaction with TPC or any of its directors or executive officers that are required to be disclosed pursuant to the rules and regulations of the SEC. It is expected that, upon assuming office, the PHI Designees will thereafter constitute at least a majority of the Board of TPC. PHI may designate the following individuals to the Board of TPC. Each such individual's name, age as of the date hereof, present principal occupation or employment and five year employment history is set forth below.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT (AND PRINCIPAL NAME AGE CITIZENSHIP BUSINESS); MATERIAL POSITIONS HELD DURING PAST FIVE YEARS - ------------------------- --- ------------- ---------------------------------------------------------- John A. Bohling 53 U.S. Senior Vice President of PacifiCorp (since 1993); Executive Vice President of Pacific Power & Light Company (1991-1993); Director and Vice President of Power Acquisition Company (since March 1997) Richard T. O'Brien 42 U.S. Senior Vice President and Chief Financial Officer (since 1995) and Vice President (1993-1995) of PacifiCorp; Senior Vice President (since 1993) and Chief Financial Officer (since 1996) of PacifiCorp Holdings, Inc.; Chief Financial Officer (1992-1993) and Vice President and Treasurer (1989-1992) of NERCO, Inc., a former mining and resource subsidiary of PacifiCorp; Director and Vice President of Power Acquisition Company (since March 1997) Dennis P. Steinberg 50 U.S. Senior Vice President (since 1994) and Vice President (1990-1994) of PacifiCorp; Director and President of Power Acquisition Company (since March 1997) Donald N. Furman 40 U.S. Vice President of PacifiCorp (since February 1997); President of PacifiCorp Power Marketing, Inc., a power marketing and trading subsidiary of PacifiCorp Holdings, Inc. (since 1995); Assistant Vice President of PacifiCorp (1994-1995); Senior Vice President--Operations of Citizens Lehman Power LP (1991-1994); Vice President of Power Acquisition Company (since March 1997) William E. Peressini 40 U.S. Vice President (since 1996) and Treasurer (since 1994) of PacifiCorp; Treasurer of PacifiCorp Holdings, Inc. (since 1994); Executive Vice President of PacifiCorp Financial Services, Inc. (1992-1994); Senior Vice President and Chief Financial Officer of PacifiCorp Financial Services, Inc. (1989-1992)
III-5
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT (AND PRINCIPAL NAME AGE CITIZENSHIP BUSINESS); MATERIAL POSITIONS HELD DURING PAST FIVE YEARS - ------------------------- --- ------------- ---------------------------------------------------------- Brian D. Sickels 51 U.S. Vice President of PacifiCorp (since February 1997); Vice President of Power Systems, PacifiCorp (1995-1997); Assistant Vice President, PacifiCorp (1992-1994). He is also presently Senior Vice President and Chief Operating Officer of PacifiCorp Power Marketing, Inc.
CURRENT DIRECTORS The Board is currently comprised of nine directors: Larry W. Bickle, Roger L. Jarvis, Michael E. McMahon, Robert Cosson, Jean P. Abiteboul, W.J. Bowen, James S. Pignatelli, Bernard Brelle and Thomas M. Jenkins. The information set forth below is as of March 7, 1997. TPC's Amended and Restated Certificate of Incorporation and By-laws provide that the directors of TPC are to be classified into three classes, with the directors in each class serving for three-year terms and until their successors are elected, except that the initial terms of the directors of TPC expired, or will expire, at the 1996, 1997 and 1998 annual meeting of the stockholders of TPC, depending upon the particular class in which each such director was placed. The terms of the persons presently serving on the Board expire at the annual meetings of stockholders for the years indicated: Messrs. Michael E. McMahon, Roger L. Jarvis and Bernard Brelle: 1997; Messrs. W.J. Bowen, James S. Pignatelli and Jean P. Abiteboul: 1998; and Messrs. Larry W. Bickle, Thomas M. Jenkins and Robert Cosson: 1999. Jean P. Abiteboul, 45, is Vice President, Manager of the Major Projects Department of the International Division of Gaz de France. He has served as President of the United States subsidiary of Gaz de France since its formation in 1991. In addition, M. Abiteboul has acted as Chairman and Chief Executive Officer of NOVERGAZ (1994) Inc., a non-regulated gas company in Montreal, Canada, since May 1994. M. Abiteboul is a director of Northern New England Gas Corporation and Gaz Metropolitain. M. Abiteboul has served as a director of TPC since 1991. Larry W. Bickle, 51, has been Chairman of the Board of Directors and Chief Executive Officer of TPC since December 1990. Mr. Bickle was a co-founder of TPC and served as President of TPC from its formation in 1984 until February 1994. Mr. Bickle is also a director of St. Mary Land & Exploration Company. Mr. Bickle has been a director of TPC since 1984. W. J. Bowen, 74, has extensive experience in the energy industry. In May 1992, Mr. Bowen retired as Chairman of the Board of Transco Energy Company after an eighteen year career. Mr. Bowen is also a director of J.B. Poindexter & Co., Inc. and has served as a director of TPC since 1994. Bernard Brelle, 44, has been head of the Tariffs and Contracts Department of the Commercial Division of Gaz de France since 1993. From 1990 to 1992 he was Regional Manager of CFM, an affiliate company of Gaz de France. Mr. Brelle has been a director of TPC since 1995. Robert Cosson, 47, has been the President of Financial and Jurisdictional Services of Gaz de France since 1990. Mr. Cosson has been a director of TPC since 1991. Roger L. Jarvis, 42, has been the Chief Executive Officer of Spinnaker Exploration LLC since December 1996. Prior thereto, Mr. Jarvis was an independent consultant and private investor, and was President, Chief Executive Officer and a director of King Ranch, Inc., a privately-held company with interests in agribusinesses, oil and gas exploration and production, real estate development, and retail businesses. Mr. Jarvis has been a director of TPC since 1991. Thomas M. Jenkins, 46, is Group Vice President, Treasurer and Chief Financial Officer of DPL Inc., the parent company of The Dayton Power and Light Company ("DP&L"), which positions he has held since 1990. Mr. Jenkins is also Group Vice President and Chief Financial Officer of DP&L, which positions III-6 he has held since 1995. From 1990 to 1995, Mr. Jenkins was Group Vice President and Treasurer of DP&L. Mr. Jenkins has been a director of TPC since 1996. Michael E. McMahon, 49, is a Managing Director of Lehman Brothers, Inc. He was a Partner of Aeneas Group, Inc., a wholly owned subsidiary of Harvard Management Company, Inc., from January 1993 to September 1994. From December 1989 through 1992, Mr. McMahon was Managing Director and co-head of the Energy & Chemicals Group of Salomon Brothers Inc. Mr. McMahon also serves as a director of Triton Energy Corporation. Mr. McMahon has been a director of TPC since 1993. James S. Pignatelli, 53, has served as Senior Vice President and Chief Operating Officer of Tucson Electric since 1994. Mr. Pignatelli retired from Mission Energy Company in 1993, where he served as the President and Chief Executive Officer. Mr. Pignatelli is a director of BWIP International and has served as a director of TPC since 1991. THE BOARD OF DIRECTORS AND ITS COMMITTEES The business and affairs of TPC are managed under the direction of the Board. The Board has responsibility for establishing broad corporate policies and for the overall performance of TPC, rather than day-to-day operating details. The Board met ten times in 1996. The Board has regularly scheduled meetings during the year and meets at other times during the year as necessary to review significant developments affecting TPC and to act on matters requiring Board approval. In 1996, each of the directors attended at least seventy-five percent of the meetings of the Board and the committees on which he served except for Messrs. Brelle and Cosson whose attendance was below this threshold. BOARD COMMITTEES The Board has five standing committees which include an Executive Committee, an Audit Committee, a Compensation Committee, a Nominating Committee and a Strategic Planning Committee. Actions taken by a committee of the Board are reported to the Board of Directors at its next meeting. The Executive Committee consists of five directors. Although this Committee has very broad powers, it is intended that this committee only meet to take formal action on a specific matter when it would be impracticable to call a formal meeting of the Board. The Executive Committee, and all other committees of the Board, are prohibited by TPC's By-laws from taking certain major corporate actions. The members of the Executive Committee in 1996 were Messrs. Abiteboul, Bickle, Bowen, Jarvis and Pignatelli. In 1996, there were no Executive Committee meetings. The Audit Committee consists of three nonemployee directors. This committee recommends the appointment of a firm of independent certified public accountants to audit the accounting records of TPC each year. It reviews with representatives of the independent public accountants the auditing arrangements and scope of the independent public accountants' examination of the accounting records, results of those audits, their fees, and any problems identified by the independent public accountants regarding internal accounting controls, together with their recommendations. It also meets with TPC's Chief Financial Officer and its Controller to review reports on the functioning of TPC's programs for compliance with its policies and procedures regarding financial reporting and internal controls. The members of the Audit Committee in 1996 were Messrs. Jarvis, Jenkins and Pignatelli. The Audit Committee met three times in 1996. The Compensation Committee consists of four nonemployee directors. This Committee makes recommendations to the Board of Directors as to the salaries and annual bonuses of the Chief Executive Officer and the other elected officers, and reviews the salaries of certain other senior executives. It makes recommendations to the Board of Directors regarding grants of stock options to elected and other senior executive officers and other eligible employees and consultants, and reviews guidelines for the administration of TPC's incentive compensation programs. It also reviews and makes recommendations to the Board III-7 of Directors with respect to proposed compensation or benefits plans or programs, and periodically reviews the operations of such plans or programs. The members of the Compensation Committee in 1996 were Messrs. Abiteboul, Bowen, Jarvis and McMahon. The Compensation Committee met three times in 1996. The Nominating Committee consists of three directors. This Committee identifies, evaluates, and nominates potential individuals to stand for election as directors of TPC as an opening on the Board occurs. The members of the Nominating Committee in 1996 were Messrs. Bickle, Cosson and Jarvis. The Nominating Committee did not meet in 1996. The Strategic Planning Committee consists of five directors. This Committee determines the focus of TPC's annual business plan, as well as establishes and monitors TPC's strategic goals throughout the year. The members of the Strategic Planning Committee in 1996 were Messrs. Abiteboul, Bickle, Bowen, McMahon and Pignatelli. The Strategic Planning Committee met two times in 1996. DIRECTOR NOMINATION PROCEDURES The By-Laws provide that nominations for election of directors by the stockholders will be made by the Board or by any stockholder entitled to vote in the election of directors generally. The By-Laws require that stockholders intending to nominate candidates for election as directors deliver written notice thereof to the Secretary of TPC not later than eighty days in advance of the meeting of stockholders; provided however, that in the event that the date of the meeting is not publicly announced by TPC by an inclusion in a filing with the SEC pursuant to Section 13(a) or 14(a) of the Exchange Act, by mail, or by press release more than ninety days prior to the meeting, notice by the stockholder to be timely must be delivered to the Secretary of TPC not later than the close of business on the tenth day following the day on which such announcement of the date of the meeting was so communicated. The By-Laws further require that the notice by the stockholder set forth certain information concerning such stockholder and the stockholder's nominees, including their names and addresses, a representation that the stockholder is entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, the class and number of shares of TPC's stock owned or beneficially owned by such stockholder, and such other information as would be required to be included in a proxy statement soliciting proxies for the election of the nominees of such stockholder and the consent of each nominee to serve as a director of TPC if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with these requirements. Similar procedures prescribed by the By-laws are applicable to stockholders desiring to bring any other business before an annual meeting of stockholders. DIRECTOR COMPENSATION Employee directors are not compensated for their services as a director of TPC. In 1996, each nonemployee director was paid $3,000 per quarter, $1,000 per Board meeting attended and $500 for each committee meeting attended. Nonemployee directors participate in both the Non-Management Director Stock Option Plan (the "1992 Director Plan") and the 1995 Stock Option Plan for Non-Employee Directors (the "1995 Director Plan"), which were respectively adopted on February 4, 1992 and February 13, 1995. The 1992 Director Plan provides for nonqualified stock options to purchase up to 100,000 Shares, in the aggregate, by TPC's outside directors. The 1995 Director Plan provides for nonqualified stock options to purchase up to 48,000 Shares, in the aggregate, by TPC's outside directors. Under the 1992 Director Plan, each director, on the date of the Board meeting following his initial election to the Board, is granted an option to purchase 10,000 Shares, which option vests ratably over a five year period. Under the 1995 Director Plan, on May 15th of each year (or the first succeeding business day thereafter) each nonemployee director receives an annual option grant to purchase 2,000 Shares, which III-8 options also vest ratably over five years. The exercise price for the options granted under both the 1992 Director Plan and the 1995 Director Plan is the fair market value of TPC's Shares on the date of grant. EXECUTIVE OFFICERS Larry W. Bickle, 51, Chairman of the Board and Chief Executive Officer. For Mr. Bickle's business background, see the "Board of Directors" above. John A. Strom, 43, a co-founder of TPC, has served as its President since February 1994. From April 1992 until February 1994, Mr. Strom served as Senior Vice President of TPC, and from 1984 to March 1992, as Vice President--Marketing of TPC. J. Chris Jones, 41, has served as Chief Financial Officer of TPC since February 1996, and Senior Vice President and Chief Operating Officer since May 1993. From January 1986 until May 1993, Mr. Jones served as Vice President and Chief Financial Officer of TPC. Marilyn I. Eckersley, 42, has been Vice President--Administration since February 1996. From May 1994 to February 1996, Mrs. Eckersley served as Manager--Administration, and prior thereto held various administrative positions with TPC. Joseph J. DiNorscia, 44, has been Vice President--Risk Management of TPC since February 1994. Mr. DiNorscia joined TPC in 1990 as Manager of Portfolio Services. Prior to joining TPC, Mr. DiNorscia served as Manager of Risk Management and Strategy Development for Lyondell Petrochemical Company. Robert D. Kincaid, 36, has been Treasurer of TPC since 1992. From 1990 to 1991, he was associated with EnCap Partners, a private partnership engaged in the management of institutional debt and equity funds for energy related investments. Michael E. Calderone, 40, has been Vice President--Gas Marketing of TPC since February 1994. Mr. Calderone joined TPC in 1992 as Manager of Transportation and Exchange and, since that time, has held the positions of Director of Profit Optimization and Manager of Marketing. Patrick J. Peldner, 48, has been Vice President--Power Marketing of TPC since July 1996 and Vice President--Storage from February 1994 to July 1996. Mr. Peldner joined TPC in October 1992 as Manager of Storage Development. Prior to joining TPC, Mr. Peldner was Vice President of Property Acquisitions and a member of the executive committee for Nicor Oil and Gas Corporation from 1987 to 1992. M. Scott Jones, 42, joined TPC in November 1992 as Vice President, General Counsel and Secretary. Mr. Jones was a shareholder of the Houston, Texas law firm of Dickerson, Carmouche & Jones prior to that time. Ronald H. Benson, 51, has been Vice President--Corporate Development of TPC since November 1994. From March 1993 to November 1994, Mr. Benson acted as an independent consultant in the energy business. Mr. Benson was President of Phibro Energy Production Inc. from December 1989 to March 1993. D. Hughes Watler, Jr., 48, joined TPC as Controller in September 1995. Prior to joining TPC, Mr. Watler was Chief Financial Officer of Texoil, Inc. from 1992 to 1995, and prior thereto was a partner with the accounting firm, Price Waterhouse. EXECUTIVE COMPENSATION The following table sets forth information with respect to the Chief Executive Officer and the other four most highly compensated executive officers of TPC (the "Named Officers") for the fiscal year ended December 31, 1996. III-9 SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ANNUAL COMPENSATION AWARDS ------------------------------------------- --------------- OTHER ANNUAL SHARES ALL OTHER SALARY COMPENSATION UNDERLYING COMPENSATION NAME AND PRINCIPAL POSITION YEAR ($)(1) BONUS($)(1) ($)(3) OPTIONS (#)(4) ($)(5) - -------------------------------------------- --------- ------------ ------------ --------------- --------------- ------------- Larry W. Bickle............................. 1996 162,000 189,200 9,973 35,000 3,136 Chairman of the Board and 1995 157,500 62,235(2) 10,728 10,000 9,492 Chief Executive Officer 1994 108,000 137,699 12,668 50,000 19,310 John A. Strom............................... 1996 162,000 189,200 9,973 35,000 3,136 President 1995 157,500 62,235(2) 10,728 10,000 9,492 1994 108,000 137,699 12,668 50,000 19,310 J. Chris Jones.............................. 1996 162,000 189,200 9,973 35,000 3,566 Senior Vice President, Chief 1995 157,500 62,235(2) 10,728 10,000 9,492 Financial Officer and 1994 108,000 137,699 12,668 50,000 19,310 Chief Operating Officer Ronald H. Benson............................ 1996 84,000 341,000 1,192 15,000 4,224 Vice President--Corporate 1995 84,000 59,485(2) 243 -- 1,053 Development 1994 3,500 -- -- 50,000 -- Michael E. Calderone........................ 1996 106,800 147,050 685 15,000 4,199 Vice President--Gas Marketing 1995 87,508 84,571(2) 2,322 25,000 9,492 1994 84,000 92,288 3,669 57,125 3,669
- ------------------------ (1) Amounts include cash compensation earned and received by the Named Officers as well as amounts deferred under TPC's 401(k) Plan. (2) A portion of each Named Officer's third quarter 1995 bonus was deferred until the first quarter of 1996. The amounts deferred for each of the Named Officers, respectively, was $105,750, $105,750, $105,750, $300,000 and $100,000. (3) Amounts shown include car allowances paid to the Named Officers, the value of financial planning services and the payment of insurance premiums for long-term disability coverage. (4) All options awarded in 1994, 1995 and 1996 were granted under the terms of TPC's 1994 Stock Option Plan (the "1994 Plan"). III-10 (5) Amounts shown are derived from TPC contributions to its 401(k) Plan and to its ESOP. The respective amounts paid under each plan are shown in the following table. TPC's ESOP contributions to each of the Named Officers for 1996 will not be calculated until the second quarter of 1997.
NAME YEAR 401 (K)($) ESOP ($) - --------------------------------------------------------------- --------- ----------- ----------- Larry W. Bickle................................................ 1996 3,136 -- 1995 2,310 7,182 1994 2,310 17,000 John A. Strom.................................................. 1996 3,136 -- 1995 2,310 7,182 1994 2,310 17,000 J. Chris Jones................................................. 1996 3,566 -- 1995 2,310 7,182 1994 2,310 17,000 Ronald H. Benson............................................... 1996 4,224 -- 1995 1,053 -- 1994 -- -- Michael E. Calderone........................................... 1996 4,199 -- 1995 2,310 7,182 1994 1,785 1,884
The following table shows, as to the Named Officers, information about option grants in the last fiscal year. TPC does not grant any stock appreciation rights. The fair value of each option grant is estimated as of the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: a risk-free interest rate of 6.206%, expected volatility of 33%, a dividend yield of 0% and an expected option term of four years. No gain to the options is possible without an increase in stock price which will benefit all stockholders proportionately. Actual gains, if any, on option exercises and common stockholdings are dependent on the future performance of the Shares. There can be no assurance that the actual realized values will not be greater or less than potential realizable values shown in this table. OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS -------------------------------------------------------- PERCENT OF TOTAL SHARES OPTIONS UNDERLYING GRANTED TO EXERCISE OR GRANT DATE OPTIONS GRANTED EMPLOYEES BASE PRICE EXPIRATION PRESENT VALUE NAME (#)(1) IN 1996 ($/SH)(2) DATE ($) - -------------------------------- --------------- ----------- ------------- ----------- ---------------- Larry W. Bickle................. 35,000 8.5% 8.25 5/15/06 102,212 John A. Strom................... 35,000 8.5% 8.25 5/15/06 102,212 J. Chris Jones.................. 35,000 8.5% 8.25 5/15/06 102,212 Ronald H. Benson................ 15,000 3.7% 8.25 5/15/06 43,805 Michael E. Calderone............ 15,000 3.7% 8.25 5/15/06 43,805
(1) Option granted under the 1994 Plan. Options generally are nontransferable and vest ratably over four years. (2) The exercise price is the closing market price per share of the Shares on the date of grant, as reported on the New York Stock Exchange Composite Tape. III-11 The following table shows aggregate fiscal year-end option values for the Named Officers. No options were exercised during the last fiscal year by any of the Named Officers. TPC does not grant any stock appreciation rights. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
VALUE OF UNEXERCISED IN-THE-MONEY NUMBER OF SHARES OPTIONS AT UNDERLYING UNEXERCISED YEAR-END SHARES OPTIONS AT YEAR-END ($)(1) ACQUIRED ON VALUE -------------------------- ---------- NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE - --------------------------------- ----------------------- --------------------- ----------- ------------- ---------- Larry W. Bickle.................. 0 0 567,313 67,500 2,611,345 John A. Strom.................... 0 0 567,313 67,500 2,611,345 J. Chris Jones................... 0 0 567,313 67,500 2,611,345 Ronald H. Benson................. 0 0 25,000 40,000 -- Michael E. Calderone............. 0 0 36,013 63,112 2,100 NAME UNEXERCISABLE - --------------------------------- ------------- Larry W. Bickle.................. 26,620 John A. Strom.................... 26,250 J. Chris Jones................... 26,250 Ronald H. Benson................. 11,250 Michael E. Calderone............. 12,650
- ------------------------ (1) Based on the closing market price of $9.00 per Share as reported on the New York Stock Exchange Composite Tape for December 31, 1996. These amounts do not reflect the actual amounts, if any, which may be realized in the future upon exercise of stock options and should not be considered indicative of future stock performance. SENIOR EXECUTIVE PERFORMANCE BONUS AND SEVERANCE PACKAGE Messrs. Larry Bickle, John Strom and Chris Jones (the "Senior Executives"), upon the consummation of a change in control of TPC prior to December 31, 1997, are entitled to receive a cash bonus measured by their performance in obtaining a premium to the then current market price for TPC's Shares in such a transaction. The transactions contemplated by the Schedule 14D-9 constitute a change of control for those purposes. If the entire company is sold for a per Share price equal to $15.50, the Senior Executives will each receive a Performance Bonus equal to two times his Base Amount (being the respective Senior Executive's base amount on the date of the consummation of the change in control as determined in accordance with Section 280G of the Internal Revenue Code of 1986, as amended (the "Code")). A per Share price between $10.50 and $15.50 will entitle each of the Senior Executives to a performance bonus equal to the interpolated value; I.E., four-tenths of their Base Amount for each dollar of per Share value between $10.50 and $15.50. For example, a per Share sales price of $12.00 results in a Performance Bonus equal to six-tenths of the Senior Executive's Base Amount. In addition thereto, if a per Share price in excess of $15.50 is received, each of the Senior Executives will be entitled to an additional one-half of the Base Amount for each dollar of Share value in excess of $15.50. If the entire company is sold for a per Share price less than or equal to $10.50, the Senior Executives will not receive any performance bonus. Each Senior Executive will also be entitled to a severance payment equal to his respective Base Amount in accordance with TPC's severance policy, plus the cost to continue his medical and dental health benefits for up to two years following the consummation of the transaction. The value of the benefits to be paid to any one of the Senior Executives, as a result of a change of control in TPC, shall be limited so that such amounts would not be subject to the excise tax on "excess parachute payments" imposed by Section 4999 of the Code. It is currently estimated that Mr. Bickle will receive approximately $690,000, Mr. Strom will receive approximately $681,000 and Mr. Jones will receive approximately $684,000 as a performance bonus and severance payment upon the consummation of the change in control of TPC, and, in each case, the medical and dental health benefits described above. III-12 A copy of the resolutions adopted by the Board establishing the foregoing benefits is attached as Exhibit 5 to the Schedule 14D-9 and is incorporated herein by reference. CHANGE OF CONTROL AGREEMENTS TPC is a party to a change in control agreement (a "Change in Control Agreement") with Michael E. Calderone, Ronald H. Benson and [28] other officers, key employees, affiliate employees and consultants (each a "Named Executive") of TPC. The Senior Executives are not parties to the Change in Control Agreement. Under the Change in Control Agreement, if, prior to the expiration or termination thereof, a change in control (as defined in the Change in Control Agreement) occurs, each Named Executive would be entitled to receive (i) a retention bonus equal to a specified multiple of their Base Amount, and (ii) in the case of certain of the Named Executives, if, thereafter TPC or, in certain circumstances, the Named Executive, terminates the Named Executive's employment and, in the case of termination by TPC, "cause" for such termination does not exist, a cash severance benefit equal to a specified multiple of the Named Executive's Base Amount, as provided in the respective agreement of each Named Executive. Each Named Executive who is entitled to a severance payment would also be entitled to continuing group medical and dental insurance coverage for a period of twenty-four months following such termination at no cost to the Named Executive. In the event that any Named Executive's receipt of all payments under the Change in Control Agreement would subject such Named Executive to the excise tax imposed by Section 4999 of the Code, then the aggregate present value of all payments to such Named Executive shall be reduced so that such amounts would not be subject to the excise tax imposed by Section 4999 of the Code. The Change in Control Agreements with the Named Executives will expire on November 8, 1997, provided however, that the term shall automatically be extended without further action by the parties for additional one year periods, unless TPC gives a Named Executive six months' written notice of its intent not to extend the current term of the respective Change in Control Agreement. For Messrs. Calderone and Benson, the retention bonus shall be equal to (i) one times the Base Amount and two-thirds times the Base Amount, respectively, equaling approximately $177,000 for Mr. Calderone and $131,000 for Mr. Benson and (ii) the severance compensation shall be equal to two times the Base Amount and four-thirds times the Base Amount, respectively, equaling, upon a qualified termination of employment following consummation of the Offer, approximately $354,000 for Mr. Calderone and $263,000 for Mr. Benson. A copy of the Change in Control Agreements with the executive officers of TPC are attached as Exhibits 6-13 to the Schedule 14D-9 and are incorporated herein by reference. ACCELERATION AND TREATMENT OF OPTIONS The Merger Agreement provides that (a) TPC will use its best efforts to enter into an agreement with each holder of an employee or director stock option to purchase Shares (in each case, an "Option") that provides that, immediately after the date on which Offeror will have accepted for payment all Shares validly tendered and not withdrawn prior to the expiration date with respect to the Offer (the "Tender Offer Acceptance Date"), each Option that is then outstanding, whether or not then exercisable or vested, will be canceled by TPC, and each holder of a canceled Option will be entitled to receive from Offeror at the same time as payment for Shares is made by Offeror in connection with the Offer, in consideration for the cancellation of such Option, an amount in cash equal to the product of (i) the number of Shares previously subject to such Option, whether or not then exercisable or vested, and (ii) the excess, if any, of the Per Share Amount over the exercise price per Share previously subject to such Option, reduced by any applicable withholding. III-13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS RELATIONSHIP WITH MHP. In December 1994, TPC formed Market Hub Partners, Inc. and Market Hub Partners, L.P. (collectively referred to as Market Hub Partners or MHP) with subsidiaries of NIPSCO Industries, Inc., New Jersey Resources Corporation, DPL Inc., and Public Service Enterprise Group, Incorporated. Subsidiaries of TPC and these four companies own the stock of Market Hub Partners, Inc., the 1% general partner of Market Hub Partners, L.P., and are the limited partners of Market Hub Partners. MHP owns and operates two natural gas market centers located in Texas and Louisiana and it is anticipated that MHP will construct, own and operate three such additional natural gas market centers. Miami Valley Leasing, Inc. ("Miami Valley"), is a wholly owned subsidiary of DPL Inc. ("DPL") and the beneficial owner of 5.74% of TPC's Shares as of March 7, 1997. Miami Valley Market Hub, Inc., a wholly owned subsidiary of Miami Valley, is a stockholder of MHP's corporate general partner and a limited partner of MHP. Mr. Thomas M. Jenkins, a director of TPC, is an officer of DPL. DPL is also the parent company of Miami Valley Resources, Inc., an Ohio corporation ("MVR"), which entered into a storage contract with MHP in September 1995 for storage services at MHP's Egan facility in Louisiana. The contract provides MVR with firm monthly withdrawal and injection capacity, with a term that expires in March 1999. The demand charges payable to MHP for the full term of the contract are estimated to be $792,000. The commodity charges payable to MHP under the contract are not currently estimable, as they will depend upon MVR's actual usage of the storage facility. The demand charges and the commodity charges under this contract are comparable with the demand and commodity charges included in storage contracts between MHP and nonaffiliated parties. RELATIONSHIP WITH GDF. In 1991, TPC entered into a Technical Cooperation Agreement with GDF Technology U.S, Incorporated ("GDF Tech"), a wholly owned subsidiary of GDF and a holder of 3,467,036 Shares of Class A Common Stock and 579,963 Shares of Class B Common Stock. The Agreement granted TPC access to technology under a consulting arrangement which was renewed in 1994. In 1996, TPC paid $366,000 in fees to GDF Tech under this Agreement. The renewed technology agreement with GDF Tech expires in April 1999, and may be terminated by the Company at any time upon six months' notice. TPC anticipates that total minimum fees of approximately $1,257,000 will be expensed ratably over the remaining term of the agreement. RELATIONSHIP WITH LEHMAN BROTHERS, INC. In November 1996, the Board retained Lehman Brothers, Inc. to assist it in exploring strategic alternatives for increasing shareholder value, including the possible sale or merger of all or part of TPC. Assuming the successful completion of a change in control of TPC, Lehman Brothers will receive a fee from TPC for its services. Mr. McMahon, a director of TPC since 1993, is a managing director of Lehman Brothers. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Section 16(a) of the Exchange Act requires TPC's directors and executive officers, and persons who own more than ten percent of a registered class of TPC's equity securities, to file reports of ownership and changes in ownership of shares of TPC's stock with the SEC. Directors, officers and greater than ten percent stockholders are required by the SEC Regulations to furnish TPC with copies of all Section 16(a) reports they file. Based on TPC's review of the copies of such reports received by it, and written representations from certain reporting persons that no Form 5s were required for those persons, TPC believes that, from January 1 through December 31, 1996, its directors, officers and greater than ten percent stockholders complied with all applicable filing requirements of Section 16(a), with the exceptions of Messrs. Jarvis and Jenkins. III-14 EX-1 2 EXHIBIT 1 AGREEMENT AND PLAN OF MERGER TPC CORPORATION, PACIFICORP HOLDINGS, INC. AND POWER ACQUISITION COMPANY EXECUTED ON MARCH 11, 1997 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- 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- SCHEDULES Schedule 2.7.............. Stock Option Loans Schedule 3.1.............. Subsidiaries Schedule 3.3.............. Capitalization Schedule 3.5.............. No Conflict Schedule 3.6.............. Compliance Schedule 3.7.............. SEC Reporting Requirements Schedule 3.8.............. Absence of Certain Changes or Events Schedule 3.9.............. Litigation Schedule 3.10............. Employee Benefit Plans Schedule 3.13............. Tax Matters Schedule 3.14............. Environmental Matters Schedule 3.15............. Brokers Schedules 3.16 and 4.7.... Regulatory Status Schedule 5................ Conduct of Business Schedule 9.4(h)........... Permitted Encumbrances -i- SCHEDULE OF DEFINED TERMS DEFINED TERM SECTION OR EXHIBIT 1935 Act................................................. Section 3.16 affiliate................................................ Section 9.4(a) Agreement................................................ Preamble Alternative Proposal..................................... Section 6.4(b) Alternative Transaction.................................. Section 6.4(a) beneficial owner......................................... Section 9.4(c) best efforts............................................. Section 9.4(b) business day............................................. Section 9.4(d) Certificate of Merger.................................... Section 2.2 Certificates............................................. Section 2.9(b) Closing ................................................. Section 2.2 Confidentiality Agreement................................ Section 6.3(c) Contamination............................................ Section 9.4(e) control.................................................. Section 9.4(f) controlled by............................................ Section 9.4(f) Delaware Law............................................. Section 2.1 Dissenting Share......................................... Section 2.8(a) Effective Time........................................... Section 2.2 Environmental Laws....................................... Section 3.14(a) ERISA.................................................... Section 3.10(a) Exchange Act............................................. Section 1.2(b) GAAP..................................................... Section 3.7(b) HSR Act.................................................. Section 3.5(b) Hazardous Substances..................................... Section 9.4(g) Indemnified Parties...................................... Section 6.5(b) Independent Directors.................................... Section 6.11 IRS...................................................... Section 3.13(b) Lehman Brothers.......................................... Section 1.2(a) Material Adverse Effect.................................. Section 3.1 Material Subsidiaries.................................... Section 3.1 Merger................................................... Recitals Merger Consideration..................................... Section 2.6(a) Minimum Condition........................................ Section 1.1(a) Offer.................................................... Recitals Offer Documents.......................................... Section 1.1(b) Offer to Purchase........................................ Section 1.1(b) Option................................................... Section 2.7 Parent................................................... Preamble -i- DEFINED TERM SECTION OR EXHIBIT Parent Parties........................................... Preamble Paying Agent............................................. Section 2.9(a) Per Share Amount......................................... Section 1.1(a) Permitted Encumbrances................................... Section 9.4(h) person................................................... Section 9.4(i) Proxy Statement.......................................... Section 4.4 Returns.................................................. Section 3.13(a) Schedule 14D-1........................................... Section 1.1(b) Schedule 14D-9........................................... Section 1.2(b) SEC...................................................... Section 1.1(b) Securities Act........................................... Section 3.7(a) Shares................................................... Recitals Stockholders Meeting..................................... Section 6.1(a) ACo...................................................... Preamble Subsidiaries............................................. Section 9.4(i) Subsidiaries............................................. Section 3.1 Subsidiary............................................... Section 9.4(i) Subsidiary............................................... Section 3.1 Surviving Corporation.................................... Section 2.1 Taxes.................................................... Section 3.13(f) Tender Offer Acceptance Date............................. Section 2.7 TPC...................................................... Preamble TPC 401(k) Plan.......................................... Section 3.10(a) TPC Board of Directors................................... Recitals TPC Common Stock......................................... Recitals TPC Employee Benefit Plans............................... Section 3.10(c) TPC ESOP................................................. Section 3.10(a) TPC ERISA Affiliate...................................... Section 3.10(a) TPC Preferred Stock...................................... Section 3.3 TPC SEC Reports.......................................... Section 3.7(a) TPC Stockholder Approval................................. Section 6.1 Transactions............................................. Section 1.2(a) under common control with................................ Section 9.4(f) ANNEX A Conditions to the Offer -ii- AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER, executed this 11th day of March, 1997 (this "AGREEMENT"), is by and among PacifiCorp Holdings, Inc, a Delaware corporation ("PHI") and a wholly owned subsidiary of PacifiCorp, an Oregon corporation ("Parent"), Power Acquisition Company, a Delaware corporation and a direct or indirect wholly owned subsidiary of PHI ("ACO," and together with PHI, the "PHI PARTIES"), and TPC Corporation, a Delaware corporation ("TPC"). RECITALS: A. The boards of directors of PHI, ACo and TPC have each determined that it is in the best interests of their respective stockholders for ACo to acquire TPC upon the terms and subject to the conditions set forth herein. B. In furtherance of such acquisition, it is proposed that ACo shall make a cash tender offer (the "OFFER") to acquire all the issued and outstanding shares (the "SHARES") of Class A Common Stock, par value $.01 per share, and Class B Common Stock, par value $.01 per share of TPC (collectively, "TPC COMMON STOCK"), for $13.41 per Share net to the seller in cash, without interest thereon, upon the terms and subject to the conditions of this Agreement and the Offer. C. The boards of directors of PHI and ACo have each approved the making of the Offer and the transactions relating thereto. D. The board of directors of TPC (the "TPC BOARD OF DIRECTORS") has approved the making of the Offer and resolved, subject to the terms and conditions contained herein, to recommend that holders of Shares tender their Shares pursuant to the Offer. E. The boards of directors of PHI, ACo and TPC have each approved the merger (the "MERGER") of ACo with and into TPC in accordance with applicable Delaware law following the consummation of the Offer and upon the terms and subject to the conditions set forth herein. F. Larry W. Bickle, John A. Strom and J. Chris Jones, stockholders of TPC, have agreed to tender all of their TPC Common Stock pursuant to the Offer. AGREEMENT: In consideration of the mutual promises contained herein, the benefits to be derived by each party hereunder and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, PHI, ACo and TPC agree as follows: -1- ARTICLE I THE OFFER 1.1. THE OFFER. (a) Provided that this Agreement shall not have been terminated in accordance with Section 8.1 and none of the events set forth in ANNEX A shall have occurred or be existing (unless such event shall have been waived by ACo), PHI shall cause ACo to commence, and ACo shall commence, the Offer at the amount per Share specified in the recitals of this Agreement or such greater amount per share paid pursuant to the Offer (the "PER SHARE AMOUNT") as promptly as reasonably practicable after the date hereof, but in no event later than five business days after the public announcement of ACo's intention to commence the Offer. The Offer shall expire 20 business days after it is commenced, shall be extended for an aggregate of up to 10 business days from the initial expiration date if requested by TPC and may be extended by ACo for an aggregate of up to 20 business days from the initial expiration date (but not more than 20 business days therefrom) without the written consent of TPC, except that (i) the Offer may be extended without such consent for up to an aggregate of 30 days from the initial expiration date until the expiration or termination of the waiting period, if applicable, under the HSR Act (as defined in Section 3.5(b)) and (ii) ACo may extend the Offer, if, at the time the Offer would otherwise expire, a 5 day cure period under clause (f) or (g) of Annex A is in effect, to a date 5 days after the end of such 5 day cure period. The obligation of ACo to accept for payment and pay for Shares tendered pursuant to the Offer shall be subject only to (i) the condition (the "MINIMUM CONDITION") that at least the number of Shares that, when combined with the Shares already owned by Parent and its wholly owned Subsidiaries, constitute a majority of the then outstanding Shares on a fully diluted basis (including, without limitation, all Shares issuable upon the conversion of any convertible securities or upon the exercise of any options, warrants or rights, whether or not vested or exercisable) shall have been validly tendered and not withdrawn prior to the expiration of the Offer and (ii) the satisfaction or waiver of the other conditions set forth in ANNEX A. ACo expressly reserves the right to change or waive any such condition, to increase the Per Share Amount, and to make any other changes in the terms and conditions of the Offer; PROVIDED, HOWEVER, that (notwithstanding Section 8.4) no change may be made which (A) decreases the Per Share Amount, (B) reduces the maximum number of Shares to be purchased in the Offer, (C) imposes conditions to the Offer in addition to those set forth in ANNEX A, (D) changes or waives the Minimum Condition, (E) extends the Offer, except as expressly provided above, (F) provides for a different Per Share Amount in respect of Class A Common Stock than in respect of Class B Common Stock, or (G) waives or changes the terms of the Offer in any manner adverse to the holders of Shares (other than PHI and its Subsidiaries). The Per Share Amount shall, subject to applicable withholding of taxes, be net to the seller in cash, without interest thereon, upon the terms and subject to the conditions of the Offer. Subject to the terms and conditions of the Offer (including, without limitation, the Minimum Condition), ACo shall accept for payment and pay, as promptly as practicable after expiration of the Offer, for all Shares validly tendered and not withdrawn. -2- (b) As soon as reasonably practicable on the date of commencement of the Offer, ACo shall file with the Securities and Exchange Commission (the "SEC") and disseminate to holders of Shares to the extent required by law a Tender Offer Statement on Schedule 14D-1 (together with all amendments and supplements thereto, the "SCHEDULE 14D-1") with respect to the Offer and the other Transactions (as defined below). The Schedule 14D-1 shall contain or shall incorporate by reference an offer to purchase (the "OFFER TO PURCHASE") and forms of the related letter of transmittal and any related summary advertisement (the Schedule 14D-1, the Offer to Purchase and such other documents, together with all supplements and amendments thereto, being referred to herein collectively as the "OFFER DOCUMENTS"). PHI, ACo and TPC agree to correct promptly any information provided by any of them for use in the Offer Documents which shall have become false or misleading, and PHI and ACo further agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. TPC and its counsel shall be given an opportunity to review and comment on the Offer Documents and any amendments thereto prior to the filing thereof with the SEC. PHI and ACo will provide TPC and its counsel with a copy of any written comments or telephonic notification of any oral comments PHI or ACo may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt thereof and will provide TPC and its counsel with a copy of any written responses and telephonic notification of any oral response of PHI, ACo or their counsel. In the event that the Offer is terminated or withdrawn by ACo, PHI and ACo shall cause all tendered Shares to be returned to the registered holders of the Shares represented by the certificate or certificates surrendered to the Paying Agent (as defined in Section 2.9). 1.2. COMPANY ACTION. (a) TPC hereby approves of and consents to the Offer and represents that (i) the TPC Board of Directors, at a meeting duly called and held, has (A) determined that this Agreement and the transactions contemplated hereby, including, without limitation, each of the Offer and the Merger (the "TRANSACTIONS"), are fair to and in the best interests of the holders of Shares (other than Parent and its Subsidiaries), (B) approved and adopted this Agreement and the Transactions and (C) resolved to recommend, subject to the conditions set forth herein, that the stockholders of TPC accept the Offer and approve and adopt this Agreement and the Transactions; and (ii) Lehman Brothers, Inc. ("LEHMAN BROTHERS") has delivered to the TPC Board of Directors a written opinion that the consideration to be received by the holders of Shares pursuant to each of the Offer and the Merger is fair to such holders from a financial point of view. TPC has been authorized by Lehman Brothers, subject to prior review by such financial advisor, to include the fairness opinion of Lehman Brothers (or references thereto) in the Offer Documents and in the Schedule 14D- 9 (as defined in Section 1.2(b)) and the Proxy Statement referred to in Section 4.4. Subject to the fiduciary duties of the TPC Board of Directors under applicable law, TPC hereby consents to the inclusion in the Offer Documents of the recommendation of the TPC Board of Directors described above. (b) As soon as reasonably practicable on the date of commencement of the Offer, TPC shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto, the "SCHEDULE 14D-9") containing, subject only to the -3- fiduciary duties of the TPC Board of Directors under applicable law, the recommendation of the TPC Board of Directors described in Section 1.2(a) and shall disseminate the Schedule 14D-9 to the extent required by Rule 14d-9 promulgated under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and any other applicable federal securities laws. TPC, PHI and ACo agree to correct promptly any information provided by any of them for use in the Schedule 14D-9 which shall have become false or misleading, and TPC further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. PHI, ACo and their counsel shall be given an opportunity to review and comment on the Schedule 14D-9 and any amendments thereto prior to the filing thereof with the SEC. TPC will provide PHI and ACo and their counsel with a copy of any written comments or telephonic notification of any oral comments TPC may receive from the SEC or its staff with respect to Schedule 14D-9 promptly after the receipt thereof and will provide PHI and ACo and their counsel with a copy of any written responses and telephonic notification of any oral response of TPC or its counsel. (c) TPC shall promptly furnish ACo with mailing labels containing the names and addresses of all record holders of Shares and with security position listings of Shares held in stock depositories, each as of the most recent date reasonably practicable, together with all other available listings and computer files containing names, addresses and security position listings of record holders and non-objecting beneficial owners of Shares as of the most recent date reasonably practicable. TPC shall furnish ACo with such additional information, including, without limitation, updated listings and computer files of stockholders, mailing labels and security position listings, and such other assistance as PHI, ACo or their agents may reasonably request in connection with the Transactions. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer or the Merger, PHI and ACo shall hold in confidence the information contained in such labels, listings and files, shall use such information only in connection with the Transactions, and, if this Agreement shall be terminated in accordance with Section 8.1, shall deliver promptly to TPC all copies of such information then in their possession and shall certify in writing to TPC its compliance with this Section 1.2(c). ARTICLE II THE MERGER 2.1. THE MERGER. Upon the terms and subject to the conditions set forth in Article VII, and in accordance with the Delaware General Corporation Law ("DELAWARE LAW"), at the Effective Time (as defined in Section 2.2), ACo shall be merged with and into TPC. As a result of the Merger, the separate corporate existence of ACo shall cease and TPC shall continue as the surviving corporation of the Merger (the "SURVIVING CORPORATION"). 2.2. EFFECTIVE TIME; CLOSING. As promptly as practicable after the satisfaction or, if permissible, waiver of the conditions set forth in Article VII, the parties hereto shall cause the -4- Merger to be consummated by filing this Agreement or a certificate of merger (in either case, the "CERTIFICATE OF MERGER") with the Secretary of State of the State of Delaware in such form as is required by, and executed in accordance with the relevant provisions of, Delaware Law (the date and time of such filing being the "EFFECTIVE TIME"). Prior to such filing, a closing (the "CLOSING") shall be held at the offices of Baker & Botts, L.L.P. in Houston, Texas, or such other place as the parties shall agree, for the purpose of confirming the satisfaction or waiver, as the case may be, of the conditions set forth in Article VII. The date of the closing is herein called the "CLOSING DATE." 2.3. EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of Delaware Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of TPC and ACo shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of TPC and ACo shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation. 2.4. CERTIFICATE OF INCORPORATION; BYLAWS. (a) Subject to the requirements of Section 6.5, at the Effective Time, the Certificate of Incorporation of ACo shall be the Certificate of Incorporation of the Surviving Corporation, and Article I of the Certificate of the Surviving Corporation shall be amended to read as follows: "The name of the corporation is TPC Corporation." (b) Subject to the requirements of Section 6.5, the Bylaws of ACo, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter amended as provided by law, the Certificate of Incorporation of the Surviving Corporation and such Bylaws. 2.5. DIRECTORS AND OFFICERS. The directors of ACo immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation, and the officers of TPC immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified. 2.6. CONVERSION OF SECURITIES. At the Effective Time, by virtue of the Merger and without any action on the part of ACo, TPC or the holders of any of the Shares: (a) Each Share issued and outstanding immediately prior to the Effective Time (other than any Shares to be canceled pursuant to Section 2.6(b) and any Dissenting Shares (as defined in Section 2.8)) shall be canceled and shall be converted automatically into the right to receive an amount equal to the Per Share Amount in cash (the "MERGER CONSIDERATION") payable, without interest, to the holder of such Share, upon surrender, in the manner provided in Section 2.9, of the certificate that formerly evidenced such Share; -5- (b) Each Share held in the treasury of TPC and each Share owned by ACo or PHI, or any direct or indirect wholly owned Subsidiary of PHI or of TPC immediately prior to the Effective Time shall be canceled without any conversion thereof and no payment or distribution shall be made with respect thereto; and (c) Each share of common stock, par value $.01 per share, of ACo issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation. 2.7. EMPLOYEE STOCK OPTIONS. (a) TPC shall use its best efforts to enter into an agreement with each holder of an employee or director stock option to purchase Shares (in each case, an "OPTION") that provides that, immediately after the date on which ACo shall have accepted for payment all Shares validly tendered and not withdrawn prior to the expiration date with respect to the Offer (the "TENDER OFFER ACCEPTANCE DATE"), each Option that is then outstanding, whether or not then exercisable or vested, shall be canceled by TPC, and each holder of a canceled Option shall be entitled to receive from ACo at the same time as payment for Shares is made by ACo in connection with the Offer, in consideration for the cancellation of such Option, an amount in cash equal to the product of (i) the number of Shares previously subject to such Option, whether or not then exercisable or vested, and (ii) the excess, if any, of the Per Share Amount over the exercise price per Share previously subject to such Option, reduced by any applicable withholding. (b) If the Tender Offer Acceptance Date has not occurred by May 1, 1997 TPC may, upon approval of its Board of Directors, enter into loan arrangements with any employee of TPC and its Subsidiaries who is a holder of an Option that would expire on or prior to May 8, 1997 and who elects to exercise that Option prior to the Tender Offer Acceptance Date to provide the option holder with a loan amount sufficient to satisfy the exercise price and applicable federal income taxes payable as a result of the exercise. The terms of the loan arrangements made available to holders of Options shall be no more favorable to the holders than those approved by the Board of Directors of TPC and set forth in SCHEDULE 2.7. 2.8. DISSENTING SHARES. (a) Notwithstanding anything in this Agreement to the contrary, no Share, the holder of which shall not have voted in favor of the Merger and shall have properly complied with the provisions of Section 262 of the Delaware Law as to appraisal rights (a "DISSENTING SHARE"), shall be deemed converted into and to represent the right to receive Merger Consideration hereunder; and the holders of Dissenting Shares, if any, shall be entitled to payment, solely from the Surviving Corporation, of the appraised value of such Dissenting Shares to the extent permitted by and in accordance with the provisions of Section 262 of the Delaware Law; PROVIDED, HOWEVER, that (i) if any holder of Dissenting Shares shall, under the circumstances permitted by the Delaware Law, subsequently deliver a written withdrawal of his or her demand for appraisal of such Dissenting Shares, (ii) if any holder fails to establish his or her entitlement to rights to payment as provided in such Section 262 or (iii) if neither any holder of Dissenting Shares nor the Surviving Corporation has filed a petition demanding a determination of the value of all Dissenting Shares within the time provided in such Section 262, such holder or holders (as the case may be) shall -6- forfeit such right to payment for such Dissenting Shares pursuant to such Section 262 and each such Dissenting Share shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration, without any interest thereon, upon surrender, in the manner provided in Section 2.9, of the certificate or certificates that formerly evidenced such Shares. (b) TPC shall give PHI (i) prompt notice of any written demands for appraisal of any TPC Common Stock, attempted withdrawals of such demands and any other instruments received by TPC relating to stockholders' rights of appraisal and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the Delaware Law. TPC shall not, except with the prior written consent of PHI, voluntarily make any payment with respect to any demands for appraisal of TPC Common Stock, offer to settle or settle any such demands or approve any withdrawal of any such demands. 2.9. SURRENDER OF SHARES; STOCK TRANSFER BOOKS. (a) Prior to the Effective Time, ACo shall designate a bank or trust company reasonably satisfactory to TPC to act as agent (the "PAYING AGENT") for the holders of Shares in connection with the Merger to receive the funds to which holders of Shares shall become entitled pursuant to Section 2.6(a). Immediately prior to the Effective Time, PHI shall cause ACo to have sufficient funds to deposit, and shall cause ACo to deposit in trust with the Paying Agent, cash in the aggregate amount equal to the product of (i) the number of shares outstanding immediately prior to the Effective Time (other than Shares owned by PHI or ACo and Dissenting Shares) and (ii) the Per Share Amount. Such funds shall be invested by the Paying Agent as directed by the Surviving Corporation, PROVIDED, HOWEVER, that such investments shall be in obligations of or guaranteed by the United States of America or of any agency thereof and backed by the full faith and credit of the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors Services, Inc. or Standard & Poor's Corporation, respectively, or in deposit accounts, certificates of deposit or banker's acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar time deposits purchased from, commercial banks with capital, surplus and undivided profits aggregating in excess of $100 million (based on the most recent financial statements of such bank which are then publicly available at the SEC or otherwise); PROVIDED, HOWEVER, that no loss on any investment made pursuant to this Section 2.9 shall relieve PHI or the Surviving Corporation of its obligation to pay the Per Share Amount for each Share outstanding immediately prior to the Effective Time. (b) Promptly after the Effective Time, PHI shall cause the Surviving Corporation to mail to each person who was, at the Effective Time, a holder of record of Shares entitled to receive the Merger Consideration pursuant to Section 2.6(a) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the certificates evidencing such Shares (the "CERTIFICATES") shall pass, only upon proper delivery of the Certificates to the Paying Agent) and instructions for use in effecting the surrender of the Certificates pursuant to such letter of transmittal. Upon surrender to the Paying Agent of a Certificate, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each Share formerly -7- evidenced by such Certificate, and such Certificate shall then be canceled. No interest shall accrue or be paid on the Merger Consideration payable upon the surrender of any Certificate for the benefit of the holder of such Certificate. If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered Certificate is registered on the stock transfer books of TPC, it shall be a condition of payment that the Certificate so surrendered shall be endorsed properly or otherwise be in proper form for transfer and that the person requesting such payment shall have paid all transfer and other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such taxes either have been paid or are not applicable. The Surviving Corporation shall pay all charges and expenses, including those of the Paying Agent, in connection with the distribution of the Merger Consideration. (c) At any time following the third month after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds which had been made available to the Paying Agent and not disbursed to holders of Shares (including, without limitation, all interest and other income received by the Paying Agent in respect of all funds made available to it) and, thereafter, such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) only as general creditors thereof with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by them. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of a Share for any Merger Consideration delivered in respect of such Share to a public official pursuant to any abandoned property, escheat or other similar law. (d) At the close of business on the day of the Effective Time, the stock transfer books of TPC shall be closed and, thereafter, there shall be no further registration of transfers of Shares on the records of TPC. From and after the Effective Time, the holders of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares except as otherwise provided herein or by applicable law. ARTICLE III REPRESENTATIONS AND WARRANTIES OF TPC TPC hereby represents and warrants to PHI and ACo that: 3.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of TPC and each entity in which TPC has an direct or indirect, equity or ownership interest which represents twenty percent (20%) or more of the aggregate equity or ownership interest in such entity (each, a "SUBSIDIARY," and collectively, the "SUBSIDIARIES") has been duly organized and is validly existing and in good standing under the laws of the jurisdiction of its organization and has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so organized, existing or in good standing or to have such power, authority and governmental approvals would not, individually -8- or in the aggregate, have a Material Adverse Effect (as defined below). TPC and each Subsidiary is duly qualified or licensed as a foreign corporation or limited partnership to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good standing that would not, individually or in the aggregate, have a Material Adverse Effect. When used in connection with TPC or any Subsidiary, the term "MATERIAL ADVERSE EFFECT" means any change or effect that is reasonably likely to be materially adverse to the business, operations, properties, financial condition, assets or liabilities (including, without limitation, contingent liabilities) of TPC and the Subsidiaries taken as a whole. A true and complete list of all the Subsidiaries, together with the jurisdiction of incorporation of each Subsidiary and the percentage of the outstanding capital stock of each Subsidiary owned by TPC and each other Subsidiary, is set forth in SCHEDULE 3.1. Except as disclosed in SCHEDULE 3.1, TPC does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for, any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity, other than indirect equity and similar interests held for investment which are not, in the aggregate, material to TPC. The term "MATERIAL SUBSIDIARIES" means those Subsidiaries indicated as material on SCHEDULE 3.1. Except for the Material Subsidiaries, no Subsidiary is material to the business, operations or financial condition of TPC or has any material assets or liabilities. 3.2. CHARTER AND BYLAWS. TPC has heretofore furnished to PHI a complete and correct copy of the charter and the bylaws or equivalent organizational documents, each as amended to date, of TPC and each Material Subsidiary. Such charter, bylaws and equivalent organization documents are in full force and effect. Neither TPC nor any Material Subsidiary is in violation of any provision of its charter, bylaws or equivalent organizational documents. 3.3. CAPITALIZATION. The authorized capital stock of TPC consists of 25,000,000 shares of Class A Common Stock, par value $.01 per share, 5,000,000 shares of Class B Common Stock, par value $.01 per share, and 26,000 shares of Preferred Stock, par value $.01 per share ("TPC PREFERRED STOCK"). As of December 31, 1996, (i) 17,424,252 shares of Class A Common Stock and 579,963 shares of Class B Common Stock were issued and outstanding, all of which were validly issued, fully paid and nonassessable, (ii) 470,000 shares of Class A Common Stock were held in treasury, (iii) 3,800,479 shares of Common Stock were reserved for issuance pursuant to Options and (iv) 579,963 shares of Common Stock were reserved for issuance as shares of Class A Common Stock upon conversion of shares of Class B Common Stock. As of the date hereof, no shares of TPC Preferred Stock were issued and outstanding. As of December 31, 1996, options covering 3,508,818 shares of Common Stock were outstanding. Since December 31, 1996 to the date of this Agreement, TPC has not issued any shares of capital stock or granted any options covering, or other rights to purchase directly or indirectly, shares of capital stock. Except as set forth in this Section 3.3 or on SCHEDULE 3.3, there are no options, warrants or other rights, agreements, arrangements or commitments of any character obligating TPC or any Subsidiary to issue or sell any shares of capital stock of, or other equity interests in, TPC or any Subsidiary. All shares subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. Except as -9- set forth in SCHEDULE 3.3, there are no outstanding contractual obligations of TPC or any Subsidiary to repurchase, redeem or otherwise acquire any shares of capital stock of TPC or any Subsidiary or to provide funds to, or make any investment, (in the form of a loan, capital contribution or otherwise) in, any Subsidiary or any other person. Each outstanding share of capital stock of each Material Subsidiary that is a corporation is duly authorized, validly issued, fully paid and nonassessable and, except as set forth in SCHEDULE 3.3, each such share and the partnership interests owned by TPC or any Subsidiary are owned free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on TPC's or such other Subsidiary's voting rights, charges and other encumbrances of any nature whatsoever, except for Permitted Encumbrances (as defined in Section 9.4). 3.4. AUTHORITY; DUE AUTHORIZATION; BINDING AGREEMENT. (a) TPC has all requisite corporate power and authority to carry on its business as presently conducted, to enter into this Agreement and to perform its obligations under this Agreement subject, with respect to the Merger, to stockholder approval if required under applicable law. (b) The execution, delivery and performance of this Agreement and the consummation of the Transactions have been duly and validly authorized by all requisite corporate action on the part of TPC (other than, with respect to the Merger, the approval and adoption of this Agreement by the affirmative vote of the stockholders of TPC to the extent required by Delaware Law and the filing and recordation of appropriate merger documents as required by Delaware Law). (c) This Agreement has been duly executed and delivered by TPC and all documents and instruments required hereunder to be executed and delivered by TPC at the Closing will be duly executed and delivered by TPC. This Agreement and all such documents and instruments constitute legal, valid and binding obligations of TPC enforceable in accordance with their terms, subject, however, to the effects of bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 3.5. NO VIOLATION; CONSENTS. (a) Except as set forth on SCHEDULE 3.5, the consummation of the Transactions will not violate or cause a default under (i) any provision of the governing documents of TPC or a Subsidiary, (ii) any provision of any material contract or agreement or of any bank loan, indenture or credit agreement, in each case to which TPC or a Subsidiary is a party, (iii) assuming the governmental filings, approvals, consents and authorizations referred to in Section 3.5(b) are duly and timely made or obtained and that the approval of the Merger and this Agreement by the stockholders of TPC in accordance with Delaware law is duly obtained, any applicable law, ordinance, rule or regulation of any governmental authority or (iv) any applicable order, writ, judgment or decree of any court or other competent authority, except for such violations, defaults or other occurrences which do not, individually or in the aggregate, have a Material Adverse Effect. -10- (b) Except for (i) any required filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the "HSR ACT"), and filing and recordation of appropriate merger documents as required by Delaware Law, (ii) any governmental consents necessary for transfers of permits and licenses, and (iii) as otherwise set forth on SCHEDULE 3.5, no authorization, consent or approval of or filing with any governmental authority is required to be obtained or made by TPC or a Subsidiary for the execution and delivery by TPC of this Agreement or the consummation by TPC of the Transactions. Except as set forth in SCHEDULE 3.5, no authorization, consent or approval of any nongovernmental third party is required to be obtained by TPC or any Subsidiary for the execution and delivery by TPC of this Agreement or the consummation by TPC of the Transactions, except where failure to obtain such consents, approvals or authorizations would not prevent or delay consummation of the Offer or the Merger, or otherwise prevent TPC from performing its obligations under this Agreement, and would not, individually or in the aggregate, have a Material Adverse Effect. 3.6. COMPLIANCE. Neither TPC nor any Subsidiary is in conflict with, or in default or violation of, (a) except with respect to Environmental Laws, which are addressed exclusively in Section 3.14, any applicable law, rule, regulation, order, judgment or decree or (b) except as set forth in SCHEDULE 3.6, any material note, bond, mortgage, indenture, contract, or agreement to which TPC or any Subsidiary is a party, except for any such conflicts, defaults or violations that do not, individually or in the aggregate, have a Material Adverse Effect. TPC and each of the Subsidiaries has all permits, licenses, certificates of authority, orders and approvals of, and has made all filings, applications, and registrations with, federal, state, local or foreign government or regulatory bodies that are required in order to permit it to carry on its business as presently conducted, the absence of which individually or in the aggregate would reasonably be expected to have a Material Adverse Effect. 3.7. SEC FILINGS; FINANCIAL STATEMENTS. (a) TPC has filed in a timely manner all forms, reports and documents required to be filed by it with the SEC since January 1, 1995 (collectively, the "TPC SEC REPORTS"). The TPC SEC Reports were prepared in all material respects in accordance with the requirements of the Securities Act of 1933, as amended (the "SECURITIES ACT"), or the Exchange Act, as the case may be, and the rules and regulations thereunder, and none of the TPC SEC Reports, as of the date it was filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. No Subsidiary is currently required to file any form, report or other document with the SEC under Section 12 of the Exchange Act. (b) The consolidated financial statements (including, any notes thereto) contained in the TPC SEC Reports were prepared in accordance with United States generally accepted accounting principles applied on a consistent basis ("GAAP") throughout the periods indicated (except as may be indicated in the notes thereto and except that financial statements included with quarterly reports on Form 10-Q do not contain all GAAP notes to such financial statements) and each fairly presented the consolidated financial position, results of operations and changes in stockholders' equity and cash flows of TPC and the consolidated Subsidiaries as at the respective -11- dates thereof and for the respective periods indicated therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments). The financial statements of TPC and its Subsidiaries as of and for the month ended January 31, 1997 heretofore delivered to PHI were prepared in accordance with TPC's past practices and procedures for monthly financial statements, consistent with the accounting methods, principles and practices in effect at December 31, 1996. 3.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1996, TPC and the Subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice and, since such date, except as expressly contemplated by this Agreement or disclosed in any TPC SEC Report filed since such date and prior to the date of this Agreement or as set forth in SCHEDULE 3.8, there has not been (a) any event having, individually or in the aggregate, a Material Adverse Effect except for changes that affect the industries in which TPC and the Subsidiaries operate generally, (b) any change by TPC in its accounting methods, principles or practices, (c) any declaration, setting aside or payment of any dividend or distribution in respect of any capital stock of TPC or any redemption, purchase or other acquisition of any of its securities, or (d) any increase in or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option (including, without limitation, the granting of stock options, stock appreciation rights, performance awards or restricted stock awards), stock purchase or other employee benefit plan, or any other increase in the compensation payable or to become payable to any officers or key employees of TPC or any Subsidiary. 3.9. LITIGATION. Except as disclosed in SCHEDULE 3.9, (a) there is no action, administrative proceeding, lawsuit or governmental inquiry directed against TPC or any Subsidiary pending and publicly filed, or, to TPC's knowledge, threatened, except for such matters as individually or in the aggregate if determined adversely to TPC and the Subsidiaries, would not have a Material Adverse Effect, (b) there is no action, administrative proceeding, lawsuit or governmental inquiry pending and publicly filed or, to TPC's knowledge, threatened against TPC or any Subsidiary that could materially hinder or impede the consummation of the Transactions, and (c) there is no judgment or settlement obligation outstanding that is directed specifically against TPC or the Subsidiaries that would have the effect referred to in clauses (a) or (b). 3.10. EMPLOYEE BENEFIT PLANS. (a) Except for the plan (the "TPC 401(k) PLAN") maintained by TPC pursuant to Section 401(k) of the Internal Revenue Code of 1986 (the "Code") and the employee stock ownership plan maintained by TPC (the "TPC ESOP"), neither TPC nor any Subsidiary or any trade or business (whether or not incorporated) which is under common control, or which is treated as a single employer, with TPC under 414(b), (c), (m) or (o) of the Code ("TPC ERISA AFFILIATE") maintains any "employee pension plan" as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The TPC 401(k) Plan and the TPC ESOP have been determined by the IRS to be exempt from federal income taxation under Section 501 of the Code, and nothing has occurred with respect to the operation of the TPC 401(k) Plan or the TPC ESOP that could reasonably be expected to cause the loss of such qualification or exemption or the imposition of any material liability, penalty, or tax under ERISA or the Code. -12- (b) Neither TPC nor any Subsidiary nor any TPC ERISA Affiliate maintains or contributes to any plan that is (i) covered by Title IV of ERISA, (ii) subject to the minimum funding requirements of Section 412 of the Code, (iii) a "multi-employer plan" as defined in Section 3(37) of ERISA, (iv) subject to Section 4063 OR 4064 of ERISA, or (v) funded by a voluntary employees' beneficiary association within the meaning of Code Section 501(c)(9). (c) SCHEDULE 3.10(c) lists all the "employee benefit plans," as defined in Section 3(3) of ERISA and all other material employee compensation and benefit arrangements or payroll practices, including, without limitation, severance pay, sick leave, vacation pay, salary continuation for disability, consulting or other compensation agreements, retirement, deferred compensation, bonus, long-term incentive, stock option, stock purchase, hospitalization, medical insurance, life insurance and scholarship programs maintained by TPC or any Subsidiary or to which TPC or any Subsidiary has contributed or is obligated to contribute thereunder (all such plans, other than the TPC 401(k) Plan and the TPC ESOP, being hereinafter referred to as the "TPC EMPLOYEE BENEFIT PLANS"). SCHEDULE 3.10(c) also lists all Options outstanding as of the date hereof, together with the names of the holders thereof and the exercise prices thereof. (d) The TPC Employee Benefit Plans, the TPC 401(k) Plan and the TPC ESOP have been maintained, in all material respects, in accordance with their terms and with all provisions of ERISA (including rules and regulations thereunder) and other applicable federal and state law, and neither TPC nor any Subsidiary nor any "party in interest" or "disqualified person" with respect to the TPC Employee Benefit Plans, the TPC 401(k) Plan or the TPC ESOP has engaged in a "prohibited transaction" within the meaning of Section 4975 of the Code or Section 406 of ERISA, except where any of the foregoing would not reasonably be expected to have a Material Adverse Effect. (e) Except as disclosed in SCHEDULE 3.10(e) or set forth in Sections 2.7 or 6.10, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment becoming due to any employee or group of employees of TPC; (ii) increase any benefits otherwise payable under any TPC Employee Benefit Plan, the TPC 401(k) Plan or the TPC ESOP or (iii) result in the acceleration of the time of payment, accrual or vesting of any such benefits. Except as disclosed on SCHEDULE 3.10(e), there are no severance agreements or employment agreements between TPC or any Subsidiary and any employee of TPC or such Subsidiary. (f) No stock or other security issued by TPC or any Subsidiary forms or has formed a material part of the assets of the TPC 401(k) Plan or any TPC Employee Benefit Plan. (g) TPC and the Subsidiaries have not incurred any liability under, and have complied in all respects with, the Worker Adjustment Retraining Notification Act and the regulations promulgated thereunder and do not reasonably expect to incur any such liability as a result of actions taken or not taken prior to the consummation of the Offer. -13- (h) Except as disclosed in SCHEDULE 3.10(h), neither TPC nor any of the Subsidiaries is a party to an agreement that provides for the payment of any amount that would constitute an "excess parachute payment" within the meaning of Section 280G of the Code. 3.11. OFFER DOCUMENTS; SCHEDULE 14D-9. Neither the Schedule 14D-9 nor any information supplied by TPC for inclusion in the Offer Documents shall, at the respective times the Schedule 14D-9, the Offer Documents, or any amendments or supplements thereto are filed with the SEC or are first published, sent or given to stockholders of TPC, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by TPC with respect to information supplied by ACo or PHI for inclusion in the Schedule 14D-9. The Schedule 14D-9 shall comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations thereunder. 3.12. PROPERTIES. (a) TPC and the Subsidiaries have sufficient title or leasehold interests to all properties and assets which they purport to own, including, without limitation, all assets and properties reflected in the December 31, 1996 financial statements and TPC SEC Reports, to conduct their respective businesses as currently conducted, and hold such properties and assets free and clear of all liens and encumbrances except for Permitted Encumbrances or except where the failure so to have such title or interests or so to hold such properties and assets would not, individually or in the aggregate, have a Material Adverse Effect. Without limiting the generality of the foregoing, TPC and the Subsidiaries own sufficient title or leasehold interests in real property free and clear of liens and encumbrances except for Permitted Encumbrances, to (i) expand the Egan Storage facility to a total working storage Capacity of 12BCF of gas, (ii) expand the Moss Bluff storage facility to a total working storage capacity of 10BCF of gas, and (iii) develop the proposed Tioga storage facility with a total working storage capacity of 10BCF of gas. (b) With respect to any water rights owned by TPC or any Subsidiary which are material to operations or development of the property of TPC and the Subsidiaries, such water rights are adequate to continue operations as presently conducted. (c) All personal property of TPC or any Subsidiary has been maintained in an operable state of repair adequate to maintain normal operations in a manner consistent with past practices, except such failures to maintain as would not, individually or in the aggregate, have a Material Adverse Effect. Except as provided in this Section 3.12 or in Section 3.14, TPC MAKES NO AND DISCLAIMS ANY REPRESENTATION OR WARRANTY, WHETHER EXPRESS OR IMPLIED, AND WHETHER BY COMMON LAW, STATUTE OR OTHERWISE, AS TO (I) THE QUALITY, CONDITION OR OPERABILITY OF ANY PERSONAL PROPERTY OR EQUIPMENT, (II) ITS MERCHANTABILITY, (III) ITS FITNESS FOR ANY PARTICULAR PURPOSE OR (IV) ITS CONFORMITY TO MODELS OR SAMPLES OF MATERIALS AND, EXCEPT AS PROVIDED IN THIS SECTION 3.12 OR IN SECTION 3.14, ALL PERSONAL -14- PROPERTY AND EQUIPMENT IS DELIVERED "AS IS, WHERE IS" IN THE CONDITION IN WHICH THE SAME EXISTS. 3.13. TAXES. (a) Except as set forth on SCHEDULE 3.13(a), (i) each of TPC, each of the Subsidiaries and any affiliated, combined or unitary group of which any such entity is or was a member has timely (taking into account any extensions) filed all federal and all material state, local and foreign returns, declarations, reports, estimates, information returns and statements ("RETURNS") required to be filed in respect of any Taxes (as defined below), and has timely paid all Taxes that are shown by such Returns to be due and payable, (ii) each of TPC and the Subsidiaries has established reserves that are adequate in the aggregate for the payment of all material Taxes not yet due and payable with respect to the results of operations of TPC and the Subsidiaries through the date hereof, and complied in all material respects with all applicable laws, rules and regulations relating to the payment and withholding of Taxes. (b) SCHEDULE 3.13(b) sets forth the last taxable period through which the federal income Tax Returns of TPC and the Subsidiaries have been examined by the Internal Revenue Service ("IRS") or otherwise closed. Except to the extent being contested in good faith, all material deficiencies asserted as a result of such examinations and any examination by any applicable state or local taxing authority have been paid, fully settled or adequately provided for in TPC's most recent audited financial statements. Except as provided for in the TPC SEC Reports, no material federal, state or local income or franchise tax audits or other administrative proceedings or court proceedings are presently pending with regard to any Taxes for which TPC or any of the Subsidiaries would be liable, and no material deficiency which has not yet been paid for any such Taxes has been proposed, asserted or assessed against TPC or any of the Subsidiaries with respect to any period other than as set forth in SCHEDULE 3.13(b). (c) Except as disclosed on SCHEDULE 3.13(c), neither TPC nor any of the Subsidiaries has executed or entered into (or prior to the close of business on the Closing Date will execute or enter into) with the IRS or any taxing authority (i) any agreement or other document extending or having the effect of extending the period for assessment or collection of any Tax for which TPC or any of the Subsidiaries would be liable or (ii) a closing agreement pursuant to Section 7121 of the Code or any similar provision of state or local income tax law that relates to TPC or any of the Subsidiaries. (d) Neither TPC nor any of the Subsidiaries has made an election under Section 341(f) of the Code or has agreed to have Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code) owned by TPC or any of the Subsidiaries. (e) Except as set forth in TPC SEC Reports or as disclosed on SCHEDULE 3.13(e), neither TPC nor any of the Subsidiaries is a party to, is bound by or has any obligation under any tax sharing agreement or similar agreement or arrangement. -15- For purposes of this Agreement, "Taxes" shall mean all federal, state, local, foreign and other taxes, charges, fees, levies, imposts, duties, licenses or other assessments, together with any interest, penalties, additions to tax or additional amounts imposed by any taxing authority. 3.14. ENVIRONMENTAL MATTERS. Except as described in SCHEDULE 3.14: (a) Each of TPC and the Subsidiaries is in compliance with all applicable federal, state and local laws (including common law), ordinances, rules and regulations relating to the environment including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. Section 9601, ET SEQ., as amended, the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901, ET SEQ., the Clean Air Act, 42 U.S.C. Section 7401, ET SEQ., as amended, the Federal Water Pollution Control Act, 33 U.S.C. Section 1251, ET SEQ., as amended, and the Oil Pollution Act of 1990, 33 U.S.C. Section 2701, ET SEQ. (collectively, the "ENVIRONMENTAL LAWS"), except for such instances of noncompliance that individually or in the aggregate do not have a Material Adverse Effect. (b) Each of TPC and the Subsidiaries has obtained all permits, licenses, franchise authorities, consents and approvals, made all filings and maintained all material data, documentation and records necessary for owning and operating its assets and business as it is presently conducted under all applicable Environmental Laws, and all such permits, licenses, franchises, authorities, consents, approvals and filings remain in full force and effect, except for such matters that individually or in the aggregate do not have a Material Adverse Effect. (c) There are no pending or, to TPC's knowledge, threatened claims, demands, actions, administrative proceedings, lawsuits or, to TPC's knowledge, investigations against TPC or the Subsidiaries under any Environmental Laws. (d) TPC has provided access to PHI to complete copies of any and all environmental reports prepared by third parties for TPC or its Subsidiaries whether or not such reports are otherwise subject to an applicable privilege. (e) None of TPC or the Subsidiaries has transported or arranged for the transportation of any Hazardous Substances to any location which is: (i) listed on the EPA's National Priorities List of Hazardous Waste Sites (the "National Priorities List") or on any similar state list; (ii) listed for possible inclusion on the National Priorities List or on any similar state list; or (iii) to the knowledge of TPC, the subject of any regulatory action which may lead to claims against TPC or any of the Subsidiaries under any Environmental Law which could in the case of clauses (i), (ii) or (iii), individually or in the aggregate, a Material Adverse Effect. (f) None of the real property owned or operated by TPC or any Subsidiary is: (i) listed on the National Priorities List or on any similar state list; (ii) listed for possible inclusion on the National Priorities list or on any similar state list; or (iii) to the knowledge of TPC, the subject of any regulatory action which may lead to claims against TPC or any of the Subsidiaries under any Environmental Law. -16- (g) No part of any of the real property owned or operated by TPC or any Subsidiary is now being used, or has been used, by TPC or any Subsidiaries, as a landfill, dump or other disposal, storage, transfer or handling area for Hazardous Substances, excepting, however, for the storage, transfer, handling and use of Hazardous Substances, and the disposal of brine, in the ordinary course of business of TPC and its Subsidiaries and in material compliance with Environmental Laws. (h) There is not now present any Contamination of any of the real property owned or operated by TPC or any Subsidiary which could have a Material Adverse Effect. TPC makes no representation in this Agreement regarding any compliance or failure to comply with, or any actual or contingent liability under, any Environmental Law, except as set forth in this Section 3.14. 3.15. BROKERS. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of TPC, except for the fees of Lehman Brothers, Inc. specified on Schedule 3.15. 3.16. REGULATORY STATUS. Except as set forth on SCHEDULE 3.16, neither TPC nor any Subsidiary is (a) a "public utility company," a "holding company," a "Subsidiary company" or an "affiliate" of any public utility company within the meaning of Section 2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the Public Utility Holding Company Act of 1935, as amended (the "1935 ACT") or (b) subject to regulation as a natural gas company, public utility company or public service company (or similar designation) by the Federal Energy Regulatory Commission or any other federal, state or foreign governmental agency or authority. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PHI AND ACO PHI and ACo hereby, jointly and severally, represent and warrant to TPC that: 4.1. CORPORATE ORGANIZATION. (a) Each of Parent, PHI and ACo is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to have such power, authority and governmental approvals would not, individually or in the aggregate, have a material adverse effect on the ability of PHI and ACo to perform their obligations hereunder and to consummate the Transactions. (b) The authorized capital stock of ACo consists of 100 shares of common stock, per value $.01 per share, 100 shares of which are issued and outstanding. All of such issued and -17- outstanding shares are owned by PHI or by a wholly owned Subsidiary of PHI. All issued and outstanding capital stock of PHI is owned by Parent. 4.2. AUTHORITY; DUE AUTHORIZATION; BINDING AGREEMENT. (a) Each of PHI and ACo has all requisite corporate power and authority to carry on its business as presently conducted, to enter into this Agreement and to perform its obligations under this Agreement. (b) The execution, delivery and performance of this Agreement and the consummation of the Transactions have been duly and validly authorized by all requisite corporate action on the part of each of Parent, PHI and ACo (other than, with respect to the Merger, the filing and recordation of appropriate merger documents as required by Delaware Law). (c) This Agreement has been duly executed and delivered by each of PHI and ACo. This Agreement and all such documents and instruments delivered in connection herewith constitute legal, valid and binding obligations of each of PHI and ACo enforceable in accordance with their terms, subject, however, to the effects of bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 4.3. NO VIOLATION; CONSENTS. (a) The consummation of the Transactions will not violate, or cause a default under (i) any provision of the governing documents of Parent, PHI or ACo, (ii) any material provision of any material contract or agreement or of any bank loan, indenture or credit agreement, in each case to which Parent, PHI or ACo is a party, (iii) assuming the governmental filings, approvals, consents and authorizations referred to Section 4.3(b) are duly and timely made or obtained, any applicable law, ordinance, rule or regulation of any governmental authority or (iv) any applicable order, writ, judgment or decree of any court or other competent authority, except for such defaults or other occurrences which, individually or in the aggregate, would not prevent PHI and ACo from performing their respective obligations under this Agreement and consummating the Transactions. (b) Except for (i) any required filings under the HSR Act and the Exchange Act and filing and recordation of appropriate merger documents as required by Delaware Law, and (ii) any governmental consents necessary for transfers of permits and licenses, no authorization, consent or approval of or filing with any governmental authority is required to be obtained or made by Parent, PHI or ACo for the execution and delivery by PHI and ACo of this Agreement or the consummation by PHI and ACo of the Transactions. No authorization, consent or approval of any nongovernmental third party is required to be obtained by Parent, PHI or ACo for the execution and delivery by PHI and ACo of this Agreement or the consummation by PHI and ACo of the Transactions, except where failure to obtain such consents, approvals or authorizations would not -18- prevent or delay consummation of the Offer or the Merger, or otherwise prevent PHI or ACo from performing its obligations under this Agreement. 4.4. OFFER DOCUMENTS; PROXY STATEMENT. The Offer Documents will not, at the time the Offer Documents are filed with the SEC or are first published, sent or given to stockholders of TPC, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading. The information supplied by PHI for inclusion in the proxy statement to be sent to the stockholders of TPC in connection with the Stockholders Meeting (as defined below) (such proxy statement, as amended and supplemented, being referred to herein as the "PROXY STATEMENT") and Schedule 14D-9 will not, on the date the Proxy Statement or Schedule 14D-9 (or any amendment or supplement thereto) is first mailed to stockholders of TPC, at the time of the Stockholders Meeting, contain any statement which, at such time and in light of the circumstances under which it is made, is false or misleading with respect to any material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Stockholders Meeting which shall have become false or misleading; PROVIDED, HOWEVER, that PHI or ACo makes no representation or warranty with respect to information supplied by TPC for inclusion in any of the foregoing documents or the Offer Documents. The Offer Documents shall comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations thereunder. 4.5. BROKERS. No broker, finder or investment banker (other than New Harbor, Incorporated) is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of Parent, PHI or ACo. 4.6. FINANCING. PHI has, or will have available to it at the time ACo is required to pay for Shares under the terms of the Offer, and will make available to ACo, sufficient funds to permit ACo to acquire all the outstanding Shares in the Offer and the Merger. PHI has obtained commitments for such funds to the extent available cash is not expected to be sufficient. 4.7. REGULATORY STATUS. Parent is not a "holding company" within the meaning of Section 2(a)(7) of the 1935 Act. Neither PHI nor ACo is (a) a "public utility company," a "holding company," or a "subsidiary company" within the meaning of Section 2(a)(5), 2(a)(7) or 2(a)(8) of the 1935 Act or (b) subject to regulation as a public utility company or public service company (or similar designation) by the Federal Energy Regulatory Commission or any other federal, state or foreign governmental agency or authority. 4.8. OWNERSHIP OF SHARES. Neither Parent, PHI, ACo nor any of the other subsidiaries of Parent beneficially owns any Shares. 4.9. FINANCIAL STATEMENTS. The consolidated financial statements (including, any notes thereto) of PHI as of and for the period ended September 30, 1996, heretofore delivered to TPC, were prepared in accordance with GAAP throughout the periods indicated (except as may be -19- indicated in the notes thereto and except that such financial statements do not contain all GAAP notes to such financial statements) and fairly present the consolidated financial position, results of operations and changes in stockholders' equity and cash flows of PHI and its consolidated Subsidiaries as at the dates thereof and for the periods indicated therein (subject to normal and recurring year-end adjustments). ARTICLE V CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME TPC covenants and agrees that, between the date of this Agreement and the Effective Time, unless PHI shall otherwise agree in writing: (a) the businesses of TPC and the Subsidiaries shall be conducted only in, and TPC and the Subsidiaries shall not take any action except in, the ordinary course of business and in a manner consistent with past practice; (b) TPC shall use its best efforts to preserve substantially intact the business organization of TPC and the Subsidiaries, to keep available the services of the current officers, employees and consultants of TPC and the Subsidiaries and to preserve the current relationships of TPC and the Subsidiaries with customers, suppliers and other persons with which TPC or any Subsidiary has significant business relations; and (c) TPC shall maintain the assets of TPC and the Subsidiaries in good condition and repair, reasonable wear and tear accepted, and in material compliance with applicable governmental and regulatory agency requirements, and shall use its best efforts to maintain insurance with respect thereto of the same types and amounts currently in force. By way of amplification and not limitation, except as expressly contemplated or permitted by this Agreement or SCHEDULE 5, or to the extent that PHI shall otherwise consent in writing, neither TPC nor any Material Subsidiary shall, between the date of this Agreement and the Effective Time, directly or indirectly do, or propose to do, any of the following: (a) amend or otherwise change its charter or bylaws or equivalent organizational documents; (b) issue, sell, pledge, dispose of, grant, encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares of capital stock of any class of TPC or any Subsidiary, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of TPC or any Subsidiary (except for the issuance of Shares issuable pursuant to stock options outstanding on the date hereof or upon conversion of shares of Class B Common Stock) or (ii) any assets and properties material to TPC and the Subsidiaries, taken as a whole, except for (i) sales of natural gas, in the ordinary course of business and in a manner consistent with past practice, by the marketing business of TPC or (ii) pledges of assets and properties required by any financing document to which TPC or a Subsidiary is a party on the date hereof; (c) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock (except for such declarations, set-asides, dividends and other distributions made from any Subsidiary to TPC); -20- (d) reclassify, combine, split or subdivide, or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock; (e)(i) acquire (including, without limitation, by merger, consolidation or acquisition of stock or assets) any corporation, partnership or other business organization or any division thereof or any material amount of assets, except for acquisitions of natural gas, in the ordinary course of business, by the marketing business of TPC; (ii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person, or make any loans or advances, except borrowing in the ordinary course of business pursuant to any existing revolving credit agreement of TPC; or (iii) enter into or amend any contract, agreement, commitment or arrangement with respect to any matter set forth in this paragraph (e); (f) increase the compensation payable or to become payable to, or grant any severance or termination pay to, its officers, employees, directors or consultants, except pursuant to existing contractual arrangements, or enter into any employment, consulting or severance agreement with, any director, officer or other employee or consultant of TPC or any Subsidiary, or establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer, employee or consultant; (g) pay, discharge or satisfy any claim, liability or obligation (absolute or accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of liabilities reflected or reserved against in the consolidated balance sheet of TPC and the consolidated Subsidiaries as at December 31, 1996, including the notes thereto, or subsequently incurred in the ordinary course of business and consistent with past practice; or (h) enter into any collective bargaining agreements or change accounting practices; (i) make any contribution to the TPC ESOP in excess of the amount necessary to amortize existing loans from TPC over the remaining portion of the original seven year period of such loans; (j) amend in any material respect any contract or agreement material to TPC and the Subsidiaries, taken as a whole, or terminate any such material contract or agreement prior to the expiration of the term thereof; or (k) agree to take in writing, or otherwise, any of the actions described in paragraphs (a) through (j) of this Article V or any action which would result in any of the conditions to the Offer not being satisfied (other than as contemplated by this Agreement). -21- ARTICLE VI ADDITIONAL AGREEMENTS 6.1. STOCKHOLDERS MEETING. If TPC Stockholder Approval (as hereinafter defined) is required by law, then, subject to the fiduciary duties of the TPC Board of Directors under applicable law, TPC, acting through the TPC Board of Directors, shall, in accordance with applicable law and TPC's Certificate of Incorporation and Bylaws, (a) duly call, give notice of, convene and hold an annual or special meeting of its stockholders (the "STOCKHOLDERS MEETING") as soon as practicable following consummation of the Offer for the purpose of approving and adopting this Agreement and the Transactions, including, without limitation, the Merger (the "TPC STOCKHOLDER APPROVAL") and (b) include in the Proxy Statement the recommendation of the TPC Board of Directors that the stockholders of TPC approve and adopt this Agreement and the Transactions, including, without limitation, the Merger, and use its best efforts to obtain such approval and adoption. Notwithstanding the foregoing, if ACo or any other Subsidiary of Parent shall acquire at least 90% of the outstanding Shares, the parties shall, at PHI's request, take all necessary and appropriate actions to cause the Merger to become effective as soon as practicable after the consummation of the Offer without a Stockholders Meeting in accordance with Section 253 of Delaware Law. PHI agrees to cause all Shares purchased pursuant to the Offer and all other Shares beneficially owned by Parent, ACo or any other Subsidiary of Parent, to be voted in favor of the TPC Stockholder Approval. 6.2. PROXY STATEMENT. If TPC Stockholder Approval is required by law, then as soon as practicable following the purchase of all Shares validly tendered and not withdrawn pursuant to the Offer, TPC shall file the Proxy Statement with the SEC under the Exchange Act, and shall use its best efforts to have the Proxy Statement cleared by the SEC. PHI, ACo and TPC shall cooperate with each other in the preparation of the Proxy Statement, and TPC shall notify PHI of the receipt of any comments of the SEC with respect to the Proxy Statement and of any requests by the SEC for any amendment or supplement thereto or for additional information and shall provide to Parent promptly copies of all correspondence between TPC or any representative of TPC and the SEC. TPC shall give PHI and its counsel the opportunity to review the Proxy Statement prior to its being filed with the SEC and shall give PHI and its counsel the opportunity to review all amendments and supplements to the Proxy Statement and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC, and shall make any revisions to such documents reasonably requested by PHI. Each of TPC, PHI and ACo agrees to use its best efforts, after consultation with the other parties hereto, to respond promptly to all such comments of and requests by the SEC and to cause the Proxy Statement and all required amendments and supplements thereto to be mailed to the holders of Shares entitled to vote at the Stockholders Meeting at the earliest practicable time with the intent being to complete the Merger as soon as practicable following consummation of the Offer. -22- 6.3. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) To the extent not restricted by third-party agreement or applicable law, the PHI Parties and their employees, representatives, consultants, attorneys, agents, lenders and other advisors shall, subject to any necessary third-party approvals, and at their sole risk and expense, be given reasonable access during normal business hours to all facilities, properties, personnel, books and records of TPC and the Subsidiaries. The PHI Parties' investigation shall be conducted in a manner that minimizes any interference with TPC's or the Subsidiaries' operations. The PHI Parties may photocopy information they review at their own expense, subject to applicable third- party approvals. The PHI Parties agree to indemnify and hold TPC and the Subsidiaries harmless from any and all claims and liabilities, including costs and expenses for loss, injury to or death of any representative of the PHI Parties, and any loss, damage to or destruction of any property owned by TPC or the Subsidiaries or others (including claims or liabilities for loss of use of any property) resulting directly or indirectly from the action or inaction of any of the PHI Parties' representatives during any visit to the business or property sites of TPC or the Subsidiaries prior to the completion of the Offer, whether pursuant to this Section 6.3 or otherwise. None of the PHI Parties nor any of their employees, representatives, consultants, attorneys, agents, lenders or other advisors, shall conduct any environmental testing or sampling on any of the business or property sites of TPC or the Subsidiaries prior to the completion of the Offer without the prior written consent of TPC. (b) To the extent permitted by applicable law, in order to facilitate the continuing operation of TPC by PHI and ACo without disruption and to assist in an achievement of an orderly transition in the ownership and management of TPC, after completion of the Offer and until the Effective Time, TPC, PHI and ACo shall cooperate reasonably with each other to effect an orderly transition including, without limitation, with respect to communications with employees. (c) TPC shall, between the date hereof and the Effective Date, deliver to PHI complete copies of internal monthly financial and management report packages as published by TPC to include, but not limited to, statement of income, cash flow, balance sheet, capital expenditures, and administrative expenses. These statements are to be provided for TPC on a "consolidated basis" and for Market Hub Partners on a "combined basis." These statements shall be provided as soon as practicable, but no later than the 30th working day after the end of the reporting month. (d) TPC shall notify PHI in advance of TPC or its Subsidiaries entering into any material transactions, contracts or commitments (regardless of whether such transactions, contracts or commitments are otherwise permitted by this Agreement), and consult with PHI with regard to such transactions, contracts or commitments. (e) Any information obtained by the PHI Parties or their employees, representatives, consultants, attorneys, agents, lenders and other advisors under this Section 6.3 shall be subject to the confidentiality and use restrictions contained in that certain letter agreement between TPC and PacifiCorp Power Marketing dated October 23, 1996 (the "CONFIDENTIALITY AGREEMENT"). -23- 6.4. ALTERNATIVE PROPOSALS. (a) After the date hereof and prior to the Effective Time or earlier termination of this Agreement, TPC shall not, and shall not permit any of its Subsidiaries to, initiate, solicit or encourage, and TPC shall, and shall cause each of its Subsidiaries to, cause any officer, director or employee of, or any attorney, accountant, investment banker, financial advisor or other agent retained by it, not to initiate, solicit or encourage, any proposal or offer to acquire all or any substantial part of the business and properties of TPC or any capital stock of TPC whether by merger, purchase of assets, tender offer or otherwise, whether for cash, securities or any other consideration or combination thereof (any such transaction being referred to herein as an "Alternative Transaction"), or any inquiries with respect to an Alternative Transaction. TPC will immediately cease and cause to be terminated any existing discussions or negotiations with parties other than PHI and ACo commenced heretofore with respect to Alternative Transactions. Except to the extent permitted by Section 6.4(b) or 8.1(d) of this Agreement, TPC will not (i) grant its consent to any party other than PHI and ACo to take any action such party has agreed not to take pursuant to any "standstill" restrictions applicable to such party that are equivalent to the standstill provisions set forth in the second full paragraph on page 3 of the Confidentiality Agreement, or (ii) provide any confidential or non-public information concerning TPC or its Subsidiaries to, or have any discussions with, any person relating to an Alternative Transaction. (b) Notwithstanding the provisions of paragraph (a) above, in response to an unsolicited proposal or indication of interest for or with respect to a potential or proposed Alternative Transaction (an "Alternative Proposal"), (i) TPC may (x) engage in discussions or negotiations regarding such Alternative Proposal with the person who makes such Alternative Proposal, and (y) furnish to any such person (subject to the execution of a confidentiality agreement containing confidentiality provisions substantially similar to those of the Confidentiality Agreement), confidential or non-public information concerning TPC or its Subsidiaries if, in any such case described in clause (x) or (y), in the reasonable, good faith judgment of the TPC Board of Directors, taking into account the advice of outside counsel, the failure to do so would violate its fiduciary duties to the holders of TPC Common Stock under applicable law and (ii) if such Alternative Proposal is a tender offer, the TPC Board of Directors may take and disclose to TPC's stockholders a position contemplated by Rule 14e-2 under the Exchange Act. (c) TPC shall immediately notify PHI of receipt of any Alternative Proposal or any request for confidential or nonpublic information relating to TPC or its Subsidiaries in connection with an Alternative Proposal or for access to the properties, books or records of TPC or any Subsidiary by any person or entity that informs the TPC Board of Directors that it is considering making, or has made, an Alternative Proposal, and (unless the TPC Board of Directors concludes that it is inconsistent with its fiduciary duties under applicable law) shall keep PHI fully informed of the status and details of any such Acquisition Proposal, indication or request. -24- 6.5. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. (a) The Certificate of Incorporation of the Surviving Corporation and each of its Subsidiaries shall contain provisions no less favorable with respect to indemnification and advancement of expenses than are set forth in the Certificate of Incorporation of TPC as of the date of this Agreement, which provisions shall not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would affect adversely the rights thereunder of individuals who at any time from and after the date of this Agreement and to and including the Effective Time were directors, officers, employees, fiduciaries or agents of TPC or any of its Subsidiaries in respect of actions or omissions occurring at or prior to the Effective Time (including, without limitation, the matters contemplated by this Agreement), unless such modification is required by law. (b) TPC shall, to the fullest extent permitted under applicable law and regardless of whether the Merger becomes effective, indemnify and hold harmless, and, after the Effective Time, the Surviving Corporation shall, to the fullest extent permitted under applicable law, indemnify and hold harmless, each present and former director, officer, employee, fiduciary and agent of TPC and each Subsidiary (collectively, the "INDEMNIFIED PARTIES") against all costs and expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities and settlement amounts paid in connection with any threatened or actual claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), whether civil, criminal, administrative or investigative, arising out of or pertaining to any action or omission in their capacity as an officer, director, employee, fiduciary or agent (including, without limitation, any claim arising out of this Agreement or any of the transactions contemplated hereby), whether occurring before or after the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, for a period of six years after the later of the date of this Agreement or the Effective Time, in each case to the fullest extent permitted under Delaware Law (and shall pay any expenses in advance of the final disposition of any such action or proceeding to each Indemnified Party to the fullest extent permitted under Delaware Law, upon receipt from the Indemnified Party to whom expenses are advanced of any undertaking to repay such advances required under Delaware Law); provided, however, that neither TPC nor the Surviving Corporation shall be liable for any indemnification hereunder if the costs, expenses, judgment, fines, losses, claims, damages, liabilities or settlement amounts paid by an Indemnified Party arise out of or relate to (i) a situation in which the Indemnified Party did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of TPC or the Subsidiary, (ii) intentional misconduct or (iii) with respect to any criminal action or proceeding, the Indemnified Party had no reasonable cause to believe his conduct was unlawful. In the event of any such claim, action, suit, proceeding or investigation with respect to which indemnification is provided under the previous sentence, (i) the Indemnified Parties may retain counsel (including local counsel) satisfactory to them and TPC or the Surviving Corporation, as the case may be, shall pay the reasonable fees and expenses of such counsel, promptly after statements therefor are received and (ii) TPC and the Surviving Corporation shall use all reasonable efforts in the vigorous defense of any such matter; PROVIDED, HOWEVER, that neither TPC nor the Surviving Corporation shall be liable for any settlement effected without its written consent; and PROVIDED FURTHER that neither TPC nor the Surviving Corporation shall be obligated pursuant to this -25- Section 6.5(b) to pay the fees and expenses of more than one counsel (plus appropriate local counsel) for all Indemnified Parties in any single action unless there is, as determined by counsel to the Indemnified Parties, under applicable standards of professional conduct, a conflict or a reasonable likelihood of a conflict on any significant issue between the positions of any two or more Indemnified Parties, in which case such additional counsel (including local counsel) as may be required to avoid any such conflict or likely conflict may be retained by the Indemnified Parties at the expense of TPC or the Surviving Corporation; and PROVIDED FURTHER that, in the event that any claim for indemnification is asserted or made within such six-year period, all rights to indemnification in respect of such claim shall continue until the disposition of such claim. (c) TPC shall, from and after the date of this Agreement and to and including the Effective Time, and the Surviving Corporation shall, for six years from the Effective Time, maintain in effect the current directors' and officers' liability insurance policies maintained by TPC (PROVIDED that the Surviving Corporation may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are no less advantageous to such officers and directors so long as substitution does not result in gaps or lapses in coverage) with respect to matters occurring prior to the Effective Time; PROVIDED, HOWEVER, that in no event shall the Surviving Corporation be required to expend pursuant to this Section 6.5(c) more than an amount per year equal to 200% of current annual premiums paid by TPC for such insurance and, in the event the cost of such coverage shall exceed that amount, the Surviving Corporation shall purchase as much coverage as possible for such amount. (d) In the event TPC or the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then, and in each such case, proper provision shall be made so that the successors and assigns of TPC or the Surviving Corporation, as the case may be, shall assume the obligations set forth in this Section 6.5. (e) The Bylaws of the Surviving Corporation and each of its Subsidiaries shall contain the provisions with respect to indemnification and advancement of expenses at least as favorable, from the point of view of the indemnified parties, set forth in the Bylaws of TPC on the date of this Agreement, and such provisions shall not be amended, repealed or otherwise modified for a period of six years after the Effective Time in any manner that would affect adversely the rights thereunder of individuals who at any time from and after the date of this Agreement and to and including the Effective Time were directors, officers, employees, fiduciaries or agents of TPC or any of its Subsidiaries in respect of actions or omissions occurring at or prior to the Effective Time (including, without limitation, the transactions contemplated by this Agreement), unless such modification is required by law. (f) The Surviving Corporation shall pay all reasonable expenses, including attorneys' fees, that may be incurred by any Indemnified Party in enforcing the indemnity and other obligations provided in this Section 6.5. -26- (g) In the event that TPC or the Surviving Corporation should fail, at any time from and after the Effective Time, to comply with any of the foregoing obligations set forth in this Section 6.5, for any reason, PHI shall be responsible therefor and hereby agrees to perform such obligations unconditionally without regard to any defense or other basis for nonperformance which TPC or the Surviving Corporation may have or claim (except as would be prohibited by applicable Delaware Law), it being the intention of this subsection (g) that the officers, directors, employees, fiduciaries and agents of TPC and its Subsidiaries shall be fully indemnified, to the extent provided in this Section 6.5, and that the provisions of this subsection (g) be a primary obligation of PHI and not merely a guarantee by PHI of the obligations of TPC or ACo. (h) The obligations of TPC, PHI and/or the Surviving Corporation under this Section 6.5 shall not be terminated or modified in such a manner as to adversely affect any director, officer, employee, fiduciary and agent to whom this Section 6.5 applies without the consent of each affected director, officer, employee, fiduciary and agent (it being expressly agreed that the directors, officers, employees, fiduciaries and agents to whom this Section 6.5 applies shall be third-party beneficiaries of this Section 6.5). The rights of each Indemnified Party hereunder shall be in addition to any other rights such Indemnified Party may have under the charter or bylaws of TPC, under the Delaware Law or otherwise. 6.6. NOTIFICATION OF CERTAIN MATTERS. TPC shall give prompt notice to PHI, and PHI shall give prompt notice to TPC, of (i) the occurrence, or nonoccurrence, of any event the occurrence, or nonoccurrence, of which would be likely to cause any representation or warranty contained in this Agreement to be materially untrue or inaccurate and (ii) any failure of TPC, PHI or ACo, as the case may be, to comply with or satisfy in any material respect any covenant, condition or agreement required to be complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section 6.6 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. 6.7. FURTHER ACTION; BEST EFFORTS. Upon the terms and subject to the conditions hereof, and subject, in the case of TPC, to the fiduciary duties of its Board of Directors, each of the parties hereto shall (i) make promptly its respective filings, and thereafter make any other required submissions, under the HSR Act with respect to the Transactions, (ii) use its best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the Transactions, including, without limitation, using its best efforts to obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with TPC and the Subsidiaries as are necessary for the consummation of the Transactions and to fulfill the conditions to the Offer and the Merger and (iii) except as contemplated by this Agreement, use its best efforts not to take any action, or enter into any transaction, that would cause any of its representations or warranties contained in this Agreement to be untrue or result in a breach of any covenant made by it in this Agreement. In addition, TPC will use its best efforts to obtain prior to Closing all consents and waivers of the lenders under the loans referenced on Schedule 3.5 that are necessary to avoid the consummation of the Transactions (i) triggering an acceleration of such loans or a default under such loans or (ii) causing a breach of the covenants in -27- the agreements governing such loans. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement then in office shall use their best efforts to take all such action. 6.8. PUBLIC ANNOUNCEMENTS. PHI and TPC shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or the Transactions and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law or any listing agreement with a national securities exchange to which Parent, PHI or TPC is a party. 6.9. PHI GUARANTEE. PHI agrees to take all action necessary to cause ACo to perform all of ACo's, and the Surviving Corporation to perform all of the Surviving Corporation's, agreements, covenants and obligations under this Agreement and to consummate the Offer and the Merger on the terms and subject to the conditions set forth in this Agreement. PHI shall be liable for any breach of any representation, warranty, covenant or agreement of ACo and for any breach of this covenant. 6.10. EMPLOYEE MATTERS. (a) PHI and TPC agree that all employees of TPC and its Subsidiaries immediately prior to the Effective Time shall be employed by the Surviving Corporation immediately after the Effective Time, it being understood that PHI and the Surviving Corporation shall have no obligations to continue employing such employees for any length of time thereafter except pursuant to any agreements disclosed on SCHEDULE 3.10(e). PHI shall deem, and shall cause the Surviving Corporation to deem, the period of employment with TPC and Subsidiaries (and with predecessor employers with respect to which TPC and its Subsidiaries shall have granted service credit) to have been employment and service with PHI and the Surviving Corporation for benefit plan eligibility and vesting purposes for all of PHI's and the Surviving Corporation's employee benefit plans, programs, policies or arrangements to the extent service with PHI or the Surviving Corporation is recognized under any such plan, program, policy or arrangement. (b) For one year after the Effective Time, PHI will cause the Surviving Corporation to continue or cause to be continued without significant adverse change to any employee or former employee of TPC and its Subsidiaries all TPC Employee Benefit Plans and the TPC 401(k) Plan, except that PHI or the Surviving Corporation may, during such period, replace any of the TPC Employee Benefit Plans or the TPC 401(k) Plan with a plan that is substantially equivalent to or more favorable than the plan it replaces. The use of a matching contribution feature through the TPC ESOP as provided in (c) below shall be deemed to satisfy the requirement for continuation of the matching contribution feature of the TPC 401(k) Plan without adverse change. If the TPC and Subsidiary employees are covered by medical and dental plans of PHI or the Surviving Corporation, PHI shall waive, or cause the Surviving Corporation to waive, and shall cause the relevant insurance carriers and other third parties to waive, all restrictions and limitations for any medical condition existing as of the Effective Time of any of such employees and their eligible dependents for the -28- purpose of any such plans, but only to the extent that such condition would be covered by the relevant TPC Employee Benefit Plan if it were not a pre- existing condition and only to the extent of comparable coverage in effect immediately prior to the Effective Time. Further, PHI shall offer to each TPC and Subsidiary employee coverage under a group health plan which credits such employee towards the deductibles imposed under the group medical and dental plan of PHI or the Surviving Corporation, for the year during which the Effective Time occurs, with any deductibles already incurred during such year under the relevant TPC Employee Benefit Plan. (c) To the extent permitted under Sections 401(a) and 410(b)(1)(A) or (B) of the Code, PHI shall maintain or shall cause Parent or an affiliate of Parent to maintain the TPC ESOP as a separate qualified plan or a separate benefit feature in a qualified plan solely for the benefit of TPC ESOP participants and the employees of the business (the "TPC BUSINESS") that is conducted by TPC before the Effective Time as follows: (i) The separate plan or feature shall be maintained until the notes issued by the TPC ESOP (the "ESOP NOTES") are paid in full. Parent or a delegate may designate contributions to the separate plan or feature to be used to prepay the ESOP Notes in full or in part from time to time before maturity. (ii) The accounts of participants in the TPC ESOP or ESOP feature and the TPC ESOP suspense account shall be invested in employer securities within the meaning of Section 409(l) of the Code; provided, however that the participants in the TPC ESOP or ESOP feature shall be given a one-time election to redirect the investment of their accounts to investments other than employer securities, effective during the period beginning on the date all shares from the TPC ESOP suspense account have been allocated and ending on the date six months thereafter. (iii) Persons hired in normal course by the TPC Business after the Effective Time shall participate under substantially the same terms as employees of TPC before the Effective Time, except that (iv) below shall not apply to new hires. (iv) Participants before the Effective Time whose employment by the TPC Business and its affiliates is involuntarily terminated after the Effective Time for any reason other than for cause (as defined in Section 6.10(d)), (a) shall become fully vested on termination, and (b) shall be entitled to an allocation for the year of termination notwithstanding the hours of service requirement. (v) Parent or a delegate may elect to use matching contributions for the benefit of employees of the TPC Business under a qualified plan feature subject to section 401(m) of the Code to repay the ESOP Notes. Shares released from the ESOP suspense account relating to such matching contributions shall be allocated to matching contribution accounts of the employees of the TPC Business. If matching contributions are used to repay ESOP notes, the Parent or an affiliate shall make an additional contribution of not less than two percent of eligible compensation of employees of the TPC Business for the plan year. -29- If the requirements of section 401(a) or section 410(b)(1)(A) or (B) of the Code prevent Parent or an affiliate from maintaining the TPC ESOP as a separate qualified plan or a separate benefit feature in a qualified plan solely for the benefit of TPC ESOP participants and the employees of the TPC Business, PHI shall or shall cause Parent or an affiliate to effect the matching contribution and minimum two percent of eligible compensation contribution described in clause (v) above prior to the last date that the separate qualified plan or benefit feature may be maintained and as soon as practicable after Parent determines that the TPC ESOP cannot be maintained solely for the benefit of employees of the TPC Business. Parent shall determine annually whether the ESOP feature may continue to be maintained under section 410(b)(1)(A) or (B). In lieu of making the matching contributions, Parent or a delegate may elect to prepay the ESOP Notes in full on or before the end of the last year that the ESOP feature can be maintained solely for the benefit of the employees of the TPC business. (d) PHI agrees that, if any of the employees of TPC or its Subsidiaries is terminated from employment by the Surviving Corporation within 12 months after the Effective Time for any reason other than cause, or is required to transfer to a job location that is more than 50 miles from his or her current job location or to take a reduction in base rate of pay, but refuses such transfer or reduction and terminates his or her employment with the Surviving Corporation, then Parent shall provide, or shall cause the Surviving Corporation to provide, the employee with (i) a lump sum cash severance payment equal to two weeks' base pay in lieu of notice, plus three weeks' base pay for each year of service with TPC and its Subsidiaries (taking into account all service with predecessor employers that is considered by TPC and its Subsidiaries under its existing severance programs and rounding up any partial year of at least six months to one full year of service), with a total severance payment of not less than 12 weeks' base pay, and (ii) continued health insurance coverage for the employee and his or her dependents under Part 6 of Title I of ERISA (COBRA) at a cost to the employee that is not in excess of the cost of coverage for active employees of the Surviving Corporation who were formerly employed by TPC or its Subsidiaries. Such severance benefits may be conditioned on receipt of such forms, waivers and releases as PHI normally applies in such circumstances. Severance benefits under this Section 6.10(d) shall be in lieu of, and not in addition to, any severance benefits under existing TPC severance packages for employees attached as EXHIBIT 3.10(c)(1) to SCHEDULE 3.10(c), but shall not apply to employees that have severance benefits under individual agreements with TPC disclosed on SCHEDULE 3.10(e). For purposes of this Section 6.10(d), termination shall be for cause if it is for conduct such as fraud, embezzlement, theft, commission of a felony, or any other criminal act against PHI or the Surviving Corporation, or deliberate and substantial disregard of assigned duties and responsibilities. 6.11. DIRECTORS. Promptly upon the acceptance for payment of, and payment for, Shares by ACo pursuant to the Offer, ACo shall be entitled to designate such number of directors on the TPC Board of Directors as will give ACo, subject to compliance with Section 14(f) of the Exchange Act, a majority of such directors, and TPC shall, at such time, cause ACo's designees to be so elected by its existing Board of Directors; PROVIDED, HOWEVER, that in the event that ACo's designees are elected to the TPC Board of Directors, until the Effective Time such Board of Directors shall have at least three directors who are directors of TPC on the date of this Agreement (the "INDEPENDENT DIRECTORS"); and PROVIDED FURTHER that, in such event, if the number of Independent -30- Directors shall be reduced below three for any reason whatsoever, the remaining Independent Directors or Director shall designate a person to fill such vacancy who shall be deemed to be an Independent Director for purposes of this Agreement or, if no Independent Directors then remain, the other directors shall designate three persons to fill such vacancies who shall not be officers or affiliates of TPC or any of its Subsidiaries or of PHI or any of its Subsidiaries, and such persons shall be deemed to be Independent Directors for purposes of this Agreement. Subject to applicable law, TPC shall take all action requested by PHI necessary to effect any such election, including mailing to its stockholders an Information Statement containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and TPC agrees to make such mailing with the mailing of the Schedule 14D-9 (provided that ACo shall have provided to the Company on a timely basis all information required to be included in the Information Statement with respect to ACo's designees). In connection with the foregoing, TPC will promptly, at the option of PHI, either increase the size of TPC's Board of Directors and/or obtain the resignation of such number of its current directors as is necessary to enable ACo's designees to be elected or appointed to TPC's Board of Directors as provided above. ARTICLE VII CONDITIONS TO THE MERGER 7.1. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The respective obligations of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have been approved and adopted by the affirmative vote of the stockholders of TPC to the extent required by Delaware Law and the Certificate of Incorporation of TPC; (b) HSR ACT. Any waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated; (c) NO ORDER. No foreign, United States or state governmental authority or other agency or commission or foreign, United States or state court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which is then in effect and has the effect of making the acquisition of Shares by PHI or ACo or any affiliate of either of them illegal or otherwise preventing or prohibiting consummation of the Transactions; and (d) OFFER. ACo or its permitted assignee shall have purchased all Shares validly tendered and not withdrawn pursuant to the Offer; PROVIDED, HOWEVER, that neither PHI nor ACo shall be entitled to assert the failure of this condition if, in breach of this Agreement or the terms of the Offer, ACo fails to purchase any Shares validly tendered and not withdrawn pursuant to the Offer. -31- ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER 8.1. TERMINATION. This Agreement may be terminated and the Merger and the other Transactions may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of this Agreement and the transactions contemplated hereby by the stockholders of TPC: (a) by mutual agreement of PHI, ACo and TPC; (b) by the PHI Parties or TPC if the Effective Time shall not have occurred on or before the first anniversary of the date hereof; PROVIDED, HOWEVER, that no party shall be entitled to terminate this Agreement under this Section 8.1(b) if the Effective Time has failed to occur on or before such date because such party negligently or willfully failed or refused to perform or observe in any material respect its covenants and agreements hereunder; (c) by PHI if (i) due to an occurrence or circumstance that results in a failure to satisfy any condition set forth in ANNEX A hereto, ACo shall have (A) failed to commence the Offer within ten days following the date of this Agreement, (B) terminated the Offer without having accepted any Shares for payment thereunder or (C) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless any such failure listed above shall have been caused by or resulted from the failure of PHI or ACo to perform in any material respect any material covenant or agreement of either of them contained in this Agreement or the material breach by PHI or ACo of any material representation or warranty of either of them contained in this Agreement or (ii) prior to the purchase of Shares pursuant to the Offer, the TPC Board of Directors or any committee thereof shall have withdrawn or modified in a manner adverse to ACo or PHI its approval or recommendation of the Offer, this Agreement or the Merger or shall have recommended another merger, consolidation, business combination with, or acquisition of, TPC or all or substantially all its assets or another tender offer or exchange offer for Shares, or shall have resolved to do any of the foregoing; or (d) by TPC, upon approval of the TPC Board of Directors, if (i) ACo shall have (A) failed to commence the Offer within ten days following the date of this Agreement, (B) terminated the Offer without having accepted any Shares for payment thereunder or (C) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such failure to pay for Shares shall have been caused by or resulted from the failure of TPC to satisfy the conditions set forth in paragraph (f) or (g) of ANNEX A or (ii) prior to the purchase of Shares pursuant to the Offer, the TPC Board of Directors shall have withdrawn or modified in a manner adverse to ACo or PHI its approval or recommendation of the Offer, this Agreement or the Merger in order to approve the execution by TPC of a definitive agreement providing for an Alternative Transaction or in order to approve a tender offer or exchange offer for Shares by a third party, in either case on terms more favorable to TPC's stockholders from a financial point of view than the Offer and the Merger taken together, as determined by the TPC Board of Directors in the -32- exercise of its good faith judgment and after consultation with its legal counsel and financial advisors; PROVIDED, HOWEVER, that such termination under this clause (ii) shall not be effective until TPC has made payment to PHI of the fee required to be paid pursuant to Section 8.3(a). 8.2. EFFECT OF TERMINATION. In the event that the Effective Time does not occur as a result of any party hereto exercising its rights to terminate pursuant to this Article VIII, then this Agreement shall be null and void and, except as provided in Sections 8.3 and 9.1 or as otherwise expressly provided herein, no party shall have any rights or obligations under this Agreement, except that nothing herein shall relieve any party from liability for any willful or negligent failure or refusal to perform or observe in any material respect any agreement or covenant contained herein. In the event the termination of this Agreement results from the willful or negligent failure or refusal of any party to perform in any material respect any agreement or covenant herein or in the Offer, then the other party shall be entitled to all remedies available at law or in equity and shall be entitled to recover court costs and reasonable attorneys' fees in addition to any other relief to which such party may be entitled. 8.3. FEES AND EXPENSES. (a) If this Agreement is terminated pursuant to Section 8.1(c)(ii) or 8.1(d)(ii) then, in any such event, TPC shall pay PHI a fee of $9 million. Any such amount shall be paid in cash by wire transfer in immediately available funds not later than one business day after the occurrence of the termination event giving rise thereto. (b) All costs and expenses incurred in connection with this Agreement and the Transactions shall be paid by the party incurring such expenses, whether or not any Transaction is consummated. 8.4. AMENDMENT. This Agreement may be amended by the parties hereto by action taken by or on behalf of their respective Boards of Directors at any time prior to the Effective Time. After the election or appointment of ACo's designees to the TPC Board of Directors pursuant to Section 6.11 and prior to the Effective Time, the affirmative vote of a majority of the Independent Directors then in office shall be required to (i) amend or terminate this Agreement by TPC, (ii) exercise or waive any of TPC's rights or remedies hereunder or (iii) waive or extend the time for performance of any obligation of PHI or ACo hereunder. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. 8.5. WAIVER. At any time prior to the Effective Time, any party hereto may (i) extend the time for the performance of any obligation or other act of any other party hereto, (ii) waive any inaccuracy in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any agreement or condition contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby. -33- ARTICLE IX GENERAL PROVISIONS 9.1. SURVIVAL. The agreements in Articles II and IX and Section 6.5 and 6.10 of this Agreement shall survive the Effective Time indefinitely. The agreements made by the parties in Sections 6.3(e) and 8.3 of this Agreement shall survive termination indefinitely. The remainder of the representations, warranties and agreements in this Agreement shall terminate at the Effective Time or upon termination of this Agreement pursuant to Section 8.1. 9.2. SCOPE OF REPRESENTATIONS AND WARRANTIES. (a) Except as and to the extent expressly set forth in this Agreement, TPC makes no, and disclaims any, representations or warranties whatsoever, whether express or implied. TPC disclaims all liability or responsibility for any other statement or information made or communicated (orally or in writing) to ACo, PHI, their affiliates or any stockholder, officer, director, employee, representative, consultant, attorney, agent, lender or other advisor of ACo, PHI or their affiliates (including, but not limited to, any opinion, information or advice which may have been provided to any such person by any representative of TPC or any other person or contained in the files or records of TPC), wherever and however made. (b) Except as and to the extent expressly set forth in this Agreement, neither ACo nor PHI makes, and each disclaims, any representations or warranties whatsoever, whether express or implied. Each of ACo and PHI disclaims all liability and responsibility for any other statement or information made or communicated (orally or in writing) to TPC, its affiliates or any stockholder, officer, director, employee, representative, consultant, attorney, agent, lender or other advisor of TPC or its affiliates (including, but not limited to, any opinion, information or advice which may have been provided to any such person by any representative of ACo or Parent, PHI or any other person), wherever and however made. (c) Any representation "to the knowledge" or "to the best knowledge" of a party or phrases of similar wording shall be limited to matters within the actual conscious awareness of the executive officers of such party and any manager or managers of such party who have primary responsibility for the substantive area or operations in question and who report directly to such executive officers. 9.3. NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telecopy, facsimile, telegram or telex or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.3): -34- if to PHI or ACo: PacifiCorp Holdings, Inc. 700 NE Multnomah, Suite 1600 Portland, OR 97232 Attention: Dennis P. Steinberg Telephone: 503-731-2157 Telecopy: 503-731-2136 with a copy, which shall not constitute notice, to: Stoel Rives LLP 900 SW 5th, Suite 2300 Portland, OR 97204 Attention: Mark Norby Telephone: 503-224-3380 Telecopy: 503-220-2480 if to TPC: TPC Corporation 200 WestLake Park Boulevard Suite 1000 Houston, Texas 77079 Attention: J. Chris Jones, Senior Vice President and Chief Operating Officer Telephone: (281) 597-6200 Telecopy: (281) 597-6500 with a copy, which shall not constitute notice, to: Baker & Botts, L.L.P. One Shell Plaza 910 Louisiana Houston, Texas 77002-4995 Attention: Stephen A. Massad Telephone: (713) 229-1234 Telecopy: (713) 229-1522 -35- 9.4. CERTAIN DEFINITIONS. For purposes of this Agreement: (a) "AFFILIATE" of a specified person means a person who directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, such specified person; (b) "BEST EFFORTS" means a party's efforts in accordance with reasonable commercial practice and without incurrence of unreasonable expense; (c) a person shall be the "BENEFICIAL OWNER" of Shares (i) which such person or any of its affiliates or associates (as such term is defined in Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or indirectly, (ii) which such person or any of its affiliates or associates has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of consideration rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding or (iii) which are beneficially owned, directly or indirectly, by any other persons with whom such person or any of its affiliates or associates or person with whom such person or any of its affiliates or associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Shares; (d) "BUSINESS DAY" means any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings, or, in the case of determining a date when any payment is due, any weekday other than Saturday or Sunday on which banking institutions in Houston, Texas are required to be open; (e) "CONTAMINATION" shall mean the presence on, under, from or to any of the real property owned or operated by TPC or any Subsidiary of any Hazardous Substance, except the storage, transport, handling and use of Hazardous Substances, or the disposal of brine, in the ordinary course of business and in material compliance with Environmental Laws. (f) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise; (g) "HAZARDOUS SUBSTANCE(S)" shall mean any dangerous, toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous substance in quantity or concentration which is regulated by any Environmental Law, including, but not limited to, petroleum and its fractions. -36- (h) "PERMITTED ENCUMBRANCES" means: (i) preferential purchase rights, rights of first refusal and similar rights which are not triggered by the Transactions; (ii) mechanics' and materialmens' liens and liens for Taxes or assessments that are not yet delinquent or, if delinquent, that are being contested in good faith in the ordinary course of business; (iii) liens arising under operating agreements, sales, processing, gathering, storage and transportation contracts securing amounts not yet delinquent, or if delinquent, that are being contested in good faith in the ordinary course of business; (iv) easements, rights-of-way, servitudes, permits, surface leases and other rights in respect of surface operations which do not materially interfere with the use of the property in the manner in which TPC or the Subsidiaries have historically used, or intended to use, the property or assets; (v) such title defects as PHI may have expressly waived in writing; (vi) rights reserved to or vested in any governmental, statutory, municipal or public authority to control or regulate any of TPC's or any Subsidiary's properties or assets in any manner, and all applicable laws, rules and orders of any governmental authority; and (vii) liens, charges and encumbrances listed on Schedule 9.4(h); (viii) all other liens, charges, encumbrances, defects and irregularities that individually or in the aggregate are not such as to materially interfere with the operation, value or use of the property or asset affected; (i) "PERSON" means an individual, corporation, partnership, limited partnership, syndicate, person (including, without limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government; and (j) "SUBSIDIARY" or "SUBSIDIARIES" of TPC, the Surviving Corporation, PHI or any other person means an entity in which such person, directly or indirectly, has a direct or indirect equity or ownership interest which represents twenty percent (20%) or more of the aggregate equity or ownership interest in such entity. 9.5. SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to -37- any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the Transactions be consummated as originally contemplated to the fullest extent possible. 9.6. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof, except that the Confidentiality Agreement shall remain in full force and effect. This Agreement shall not be assigned by operation of law or otherwise, except that PHI and ACo may assign all or any of their rights and obligations hereunder to any wholly owned Subsidiary of Parent; PROVIDED, HOWEVER, that no such assignment shall relieve the assigning party of its obligations hereunder if such assignee does not perform such obligations. 9.7. PARTIES IN INTEREST. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, other than Sections 2.7, 6.5 and 6.10 (which are intended to be for the benefit of the persons covered thereby and may be enforced by such persons). 9.8. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity. 9.9. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware. 9.10. HEADINGS. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. 9.11. COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. -38- IN WITNESS WHEREOF, PHI, ACo and TPC have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. PACIFICORP HOLDINGS, INC. By: /s/ REYNOLD ROEDER ----------------------------------- Name: Reynold Roeder Title: Vice President, Finance POWER ACQUISITION COMPANY By: /s/ DENNIS P. STEINBERG ----------------------------------- Name: Dennis P. Steinberg Title: President TPC CORPORATION By: /s/ LARRY W. BICKLE ----------------------------------- Name: Larry W. Bickle Title: Chairman & CEO -39- 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 (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 EX-2 3 EXHIBIT 2 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, 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- interfere with the performance of its obligations hereunder or the transactions contemplated hereby; provided that each Stockholder shall be entitled to transfer all or any portion of such Shareholder's Shares to any person or entity which agrees in writing to be bound by the provisions of this Agreement. SECTION 4. CERTAIN EVENTS. Each Stockholder agrees that this Agreement and the obligations hereunder shall attach to such Stockholder's Shares and shall be binding upon any person or entity to which legal or beneficial ownership of such Shares shall pass, whether by operation of law or otherwise, including without limitation such Stockholder's heirs, guardians, administrators or successors. In the event of any stock split, stock dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Company Common Stock, or the acquisition of additional shares of Company Common Stock or other securities or rights of the Company by any Stockholder, the number of Owned Shares and Option Shares listed on Schedule A beside the name of such Stockholder shall be adjusted appropriately and this Agreement and the obligations hereunder shall attach to any additional shares of Company Common Stock or other securities or rights of the Company issued to or acquired by such Stockholder. SECTION 5. TRANSFER. Each Stockholder agrees with and covenants to PHI that such Stockholder shall not request that the Company register the transfer (booked as entry or otherwise) of any certificated or uncertificated interest representing any of the securities of the Company, unless such transfer is made in compliance with this Agreement. SECTION 6. VOIDABILITY. If prior to the execution hereof, the Board of Directors of the Company shall not have duly and validly authorized and approved by all necessary corporate action the acquisition of Company Common Stock by PHI and ACo and other transactions contemplated by this Agreement and the Merger Agreement, so that by the execution and delivery hereof PHI or ACo would become, or could reasonably be expected to become, an "interested stockholder" with whom the Company would be prevented for any period pursuant to Section 203 of the DGCL from engaging in any "business combination" (as such terms are defined in Section 203 of the DGCL), then this Agreement shall be void and unenforceable until such time as such authorization and approval shall have been duly and validly obtained. SECTION 7. STOCKHOLDER CAPACITY. No person executing this Agreement who is or becomes during the term hereof a director or officer of the Company makes any agreement or understanding herein in his or her capacity as such director or officer. Each Stockholder signs solely in his or her capacity as the record holder and beneficial owner of such Stockholder's Shares and nothing herein shall limit or affect any actions taken by a Stockholder in its capacity as an officer or director for the Company to the extent specifically permitted by the Merger Agreement. SECTION 8. FURTHER ASSURANCES. Each Stockholder shall, upon request of PHI -3- 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- 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- 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- SCHEDULE A 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 - ------------------------------- -------------- ---------------- ----------- 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
-7- EX-3 4 EXHIBIT 3 [LETTERHEAD] October 23, 1996 Pacificorp Power Marketing, Inc. 700 N.E. Multnomah Street Suite 500 Portland, Oregon 73232-4116 Attention: Don Furman President In connection with your consideration of a possible transaction with TPC Corporation and/or its subsidiaries or affiliates (collectively, with such subsidiaries or affiliates, the "Company") the Company is prepared to make available to you certain information concerning the business, financial condition, operations, assets and liabilities of the Company. As a condition to such information being furnished to you and your directors, officers, employees, agents or advisors (including, without limitation, attorneys, accountants, consultants, bankers and financial advisors) (collectively, "Representatives"), you agree to treat any information concerning the Company (whether prepared by the Company, its advisors or otherwise and irrespective of the form of communication) which has been or will be furnished to you or to your Representatives by or on behalf of the Company (herein collectively referred to as the "Evaluation Material") in accordance with the provisions of this letter agreement, and to take or abstain from taking certain other actions hereinafter set forth. The term "Evaluation Material" shall be deemed to include all notes, analyses, compilations, studies, interpretations or other documents prepared by you or your Representatives which contain, reflect or are based upon, in whole or in part, the information furnished to you or your Representatives pursuant hereto. The term "Evaluation Material" does not include information which (i) is or becomes generally available to the public other than as a result of a disclosure by you or your Representatives, (ii) was within your possession prior to its being furnished to you by or on behalf of the Company pursuant hereto, provided that the source of such information was not known by you to be bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to the Company or any other party with respect to such information or (iii) becomes available to you on a non-confidential basis from a source other than the Company or any of its Representatives, provided that such source is not bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to the Company or any other party with respect to such information. You hereby agree that you and your Representatives shall use the Evaluation Material solely for the purpose of evaluating a possible transaction between the Company and you, that the Evaluation Material will be kept confidential and that you and your Representatives will not disclose any of the Evaluation Material in any manner whatsoever; provided, however, that (i) you may make any disclosure of such information to which the Company gives its prior written consent and (ii) any of such information may be disclosed to your Representatives who need to know such information for the sole purpose of evaluating a possible transaction with the Company, who agree to keep such information confidential and who are provided with a copy of this letter agreement and agree to be bound by the terms hereof to the same extent as if they were parties hereto. In any event, you shall be responsible for any breach of this letter agreement by any of your Representatives and you agree, at your sole expense, to take all reasonable measures (including but not limited to court proceedings) to restrain your Representatives from prohibited or unauthorized disclosure or use of the Evaluation Material. In addition, you agree that, without the prior written consent of the Company, you and your Representatives will not disclose to any other person the fact that the Evaluation Material has been made available to you, that discussions or negotiations are taking place concerning a possible transaction involving the Company or any of the terms, conditions or other facts with respect thereto (including the status thereof), unless in the written opinion of your counsel such disclosure is required by law and then only with as much prior written notice to the Company as is practical under the circumstances. Without limiting the generality of the foregoing, you further agree that, without the prior written consent of the Company, you will not, directly or indirectly, enter into any agreement, arrangement or understanding, or any discussions which might lead to such agreement, arrangement or understanding, with any other person regarding a possible transaction involving the Company. The term "person" as used in this letter agreement shall be broadly interpreted to include the media and any corporation, partnership, group, individual or other entity. You further agree that, without the prior consent of Lehman Brothers, all communications regarding the proposed transaction, requests for additional information, and discussions or questions regarding procedures, will be submitted or directed only to Lehman Brothers and not to the Company or any of its affiliates or any of their respective directors, officers or employees. In the event that you or any of your Representatives are requested or required (by deposition, interrogatories, requests for information or documents in legal proceedings, subpoena, civil investigative demand or other similar process) to disclose any of the Evaluation Material, you shall provide the Company with prompt written notice of any such request or requirement so that the Company may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this letter agreement. If, in the absence of a protective order or other remedy or the receipt of a waiver by the Company, you or any of your Representatives are nonetheless, in the written opinion of your counsel, legally compelled to disclose Evaluation Material to any tribunal or else stand liable for contempt or suffer other censure or penalty, you or your Representative may, without liability hereunder, disclose to such tribunal only that portion of the Evaluation Material which such counsel advises you is legally required to be disclosed, provided that you exercise your best efforts to preserve the confidentiality of the Evaluation Material, including, without limitation, by cooperating with the Company to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Evaluation Material by such tribunal. If you decide that you do not wish to proceed with a transaction with the Company, you will promptly inform the Company of that decision. In that case, or at any time upon the request of the Company for any reason, you will promptly deliver to the Company all documents (and all copies thereof) furnished to you or your Representatives by or on behalf of the Company pursuant hereto. In the event of such a decision or request, all other Evaluation Material prepared by you or your Representatives shall be destroyed and no copy thereof shall be retained. Notwithstanding the return or destruction of the Evaluation Material, you and your Representatives will continue to be bound by your obligations of confidentiality and other obligations hereunder. You understand and acknowledge that neither the Company nor any of its Representatives (including without limitation Lehman Brothers Inc.) make any representation or warranty, express or implied, as to the accuracy or completeness of the Evaluation Material. You agree that neither the Company nor any of its Representatives (including without limitation Lehman Brothers Inc.) shall have any liability to you or to any of your Representatives relating to or resulting from the use of the Evaluation Material. Only those representations or warranties which are made in a final definitive agreement regarding the transactions contemplated hereby, when, as and if executed, and subject to such limitations and restrictions as may be specified therein, will have any legal effect. In consideration of the Evaluation Material being furnished to you, you hereby agree that, for a period of two (2) years from the date hereof, neither you nor any of your affiliates will solicit to employ any of the current officers or employees of the Company so long as they are employed by the Company without obtaining the prior written consent of the Company. Until the expiration of three (3) years from the date hereof, neither you nor any of your affiliates (as such term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended) shall, without prior written consent or invitation of the Board of Directors of the Company, directly or indirectly, (a) effect or seek, offer or propose (whether publicly or otherwise) to effect, or cause or participate in or in any way assist any other person to effect or seek, offer or propose (whether publicly or otherwise) to effect or participate in, (i) any acquisition of any securities or rights to acquire any securities (or any other beneficial ownership thereof) or assets of the Company or any of its subsidiaries; (ii) any merger or other business combination or tender or exchange offer involving the Company or any of its subsidiaries; (iii) any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to the Company or any of its subsidiaries; or (iv) any "solicitation" of "proxies" (as such terms are used in the proxy rules of the Securities and Exchange Commission) or consents to vote or otherwise with respect to any voting securities of the Company; (b) form, join or in any way participate in a "group" (as defined under the Securities Exchange Act of 1934) with respect to the Company; (c) otherwise act, alone or in concert with others, to seek to control or influence the management, Board of Directors or policies of the Company; (d) take any action which might cause or require the Company to make a public announcement regarding any of the types of matters set forth in (a) above; (e) disclose any intention, plan or arrangement inconsistent with the foregoing; or (f) enter into any discussions or arrangements with any third party with respect to any of the foregoing. You agree during such period not to request the Company (or its Representatives), directly or indirectly, to amend or waive any provision of this paragraph (including this sentence). You agree that unless and until a final definitive agreement regarding a transaction between the Company and you has been executed and delivered, neither the Company nor you will be under any legal obligation of any kind whatsoever with respect to such a transaction by virtue of this letter agreement except for the matters specifically agreed to herein. You further acknowledge and agree that the Company reserves the right, in its sole discretion, to reject any and all proposals made by you or any of your Representatives with regard to a transaction between the Company and you, and to terminate discussions and negotiations with you at any time. The Company reserves the right to assign all of its rights, powers and privileges under this letter agreement (including, without limitation, the right to enforce all of the terms of this letter agreement) to any person who enters into the transactions contemplated by this letter agreement. It is understood and agreed that no failure or delay by the Company in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. It is further understood and agreed that money damages would not be a sufficient remedy for any breach of this letter agreement by you or any of your Representatives and that the Company shall be entitled to equitable relief, including injunction and specific performance, as a remedy for any such breach. Such remedies shall not be deemed to be the exclusive remedies for a breach by you of this letter agreement but shall be in addition to all other remedies available at law or equity to the Company. In the event of litigation relating to this letter agreement, if a court of competent jurisdiction determines that you or any of your Representatives have breached this letter agreement, then you shall be liable and pay to the Company the reasonable legal fees and expenses incurred by the Company in connection with such litigation, including any appeal therefrom. The term of this letter agreement shall be for a period of three (3) years from the date hereof, after which time the provisions hereof will be of no further force and effect. This letter agreement shall be governed by and construed in accordance with the laws of the State of New York. Please confirm your agreement with the foregoing by signing and returning one copy of this letter to the undersigned, whereupon this letter agreement shall become a binding agreement between you and the Company. Very truly yours, TPC CORPORATION /s/ H.E. MCGEE III ------------------------------------------- By: Lehman Brothers Inc. as financial advisor to, and on behalf of, TPC Corporation Accepted and agreed as of the date first written above: By: /s/ DON FURMAN ------------------------------- Name: Don Furman Title: President EX-4 5 EXHIBIT 4 RESOLUTIONS RESOLVED, that Larry W. Bickle, John A. Strom, and J. Chris Jones (the "Senior Executive") be granted a bonus (the "Performance Bonus") to be earned upon and measured by the Senior Executives performance in obtaining a premium to the market price of the Corporation's Class A Common Stock on the date of adoption of this resolution through a sale of the entire Corporation consummated on or before June 30, 1997, such Performance Bonus to include the terms and conditions on SCHEDULE I hereto; and it is further RESOLVED, that the Senior Executives also be entitled to receive continuing medical and dental health benefits coverage for two years following any transaction resulting in a change of control (for all purposes of these resolutions, a "change of control" being as defined in EXHIBIT A attached hereto); and it is further SCHEDULE I - - A Performance Bonus is payable to each of the Senior Executives upon the consummation of a sale of the entire Corporation on or before June 30, 1997. - - If the per share price is less than or equal to $10.50, no amount is due. - - If the per share price is equal to $15.50, an amount equal to two times the respective base amount (as of the date of consummation of the sale as determined in accordance with Section 280G of the Internal Revenue Code of 1986, as amended) is due. - - Any per share price between these two end points will result in the interpolated value being due; I.E., four-tenths of the base amount is due for each dollar of per share value between $10.50 and $15.50. For example, a per share sales price of $12.00 results in a Performance Bonus equal to six-tenths of the respective base amount. - - If a per share price in excess of $15.50 is obtained, the multiple increase to one-half of the base amount for each dollar of share value in excess of $15.50. For example, a per share sales price of $16.00 results in a Performance Bonus equal to 2.25 times the respective base amount. - - The Performance Bonus to be paid shall be subject to reduction if it would constitute a "parachute payment" within the meaning of Code Section 280G to the Senior Executive in accordance with the method specified in the Change of Control Agreement being approved by the Board of Directors on the date of adoption of this Performance Bonus program. RESOLUTION #2 APPROVE AMENDMENT TO PERFORMANCE BONUS WHEREAS, the Compensation Committee has recommended an amendment to the Performance Bonus recently approved by the Board of Directors, it is therefore RESOLVED, that the Board of Directors deems it necessary and advisable and in the best interests of the Corporation that the Performance Bonus previously instituted at the Board's November 1, 1996, special meeting be amended to provide that the Performance Bonus shall be payable if a sale of the entire Corporation is consummated on or before December 31, 1997; and it is further RESOLVED, that the appropriate officers of the Corporation be, and each of them is hereby, authorized and empowered, in the name and on behalf of the Corporation, to take or cause to be taken any and all other action, to enter into, execute, and deliver any and all certificates, agreements, applications, affidavits, acknowledgments, instruments, contracts, statements, and other documents, and to do any and all things that, in the judgment of the officer taking such action, are necessary to advisable to effectuate and carry out the purposes and intent of the foregoing resolutions, the taking of any such action, the execution of any such documents, and the doing of any such other things by any such officers conclusively to evidence the due authorization and approval thereof by this Board of Directors; and it is further RESOLVED, that any and all acts, transactions, or agreements undertaken prior to the date of these resolutions by any officer or representative of the Corporation in the name and on behalf of the Corporation in connection with any of the foregoing matters, are hereby ratified, confirmed, adopted, and approved in all respects by the Corporation. EX-5 6 EXHIBIT 5 CHANGE IN CONTROL AGREEMENT This Agreement ("Agreement"), dated as of November 8, 1996, is made by and between TPC Corporation, a Delaware corporation (the "Company"), and Michael E. Calderone (the "Executive"). RECITALS The Board of Directors of the Company (the "Board") has determined that it is in the best interest of the Company and its shareholders to ensure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a Change in Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by any pending or threatened Change in Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation arrangements upon a Change in Control that ensure that the compensation expectations of the Executive will be satisfied and that are competitive with those of other corporations. AGREEMENT NOW, THEREFORE, in consideration of the premises and covenants herein contained, and for other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. DEFINITIONS 1.1 BASE AMOUNT means the Executive's base amount on the date of the Change in Control, as determined in accordance with Code Section 280G. 1.2 BOARD means the Board of Directors of the Company. 1.3 CHANGE IN CONTROL shall mean any of the following events that occur during the Term of this Agreement: (a) The acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) a percentage of the then outstanding shares of common stock (assuming, for purposes of this definition, that all shares of Class B Common Stock have been converted into the same number of shares of Class A Common Stock) of the Company (the "Outstanding Company Common Stock") that, when added to the beneficial ownership previously held by that Person, and to the largest holding of beneficial ownership in Outstanding Company Common Stock by any other Person, equals or exceeds 50%, or (ii) a percentage of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") that, when added to the beneficial ownership previously held by that Person, and to the largest holding of beneficial ownership in Outstanding Company Voting Securities by any other Person, equals or exceeds 50%; provided, however, that for purposes of this subparagraph (a), the following acquisitions shall not in and of themselves constitute a Change in Control hereunder: (x) any acquisition of securities of the Company made directly from the Company and approved by a majority of the directors then comprising the Incumbent Board (as defined below), (y) any acquisition of beneficial ownership of a higher percentage of the Outstanding Company Common Stock or the Outstanding Company Voting Securities that results solely from the acquisition, purchase, or redemption of securities of the Company by the Company so long as such action by the Company was approved by a majority of the directors then comprising the Incumbent Board, or (z) any acquisition by any Company pursuant to a transaction that complies with clauses (i), (ii), and (iii) of subparagraph (c) hereof; or (b) Individuals who, as of November 8, 1996, constituted the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to November 8, 1996 whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all the assets of the Company (a 2 "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially owned, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any company resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all the Company's assets either directly or through one or more subsidiaries) or the combined voting power of the then outstanding voting securities of such company except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 1.4 CODE means the Internal Revenue Code of 1986, as amended. 1.5 COMPANY means TPC Corporation and any successor thereto. 1.6 DIRECTOR means a member of the Board. 1.7 DISABILITY has the same meaning as the definition of disability under the Company's long-term disability plan. 1.8 GOOD REASON shall mean any of the following: (a) the assignment to the Executive of any duties inconsistent with the Executive's duties at the time of a Change in Control or a change in the 3 Executive's reporting responsibilities as in effect immediately prior to the Change in Control, without the Executive's express written consent; or any removal of the Executive from or any failure to reelect the Executive to positions held by the Executive immediately prior to the Change in Control, except in connection with promotions to higher office; (b) a reduction in the Executive's total compensation as in effect immediately prior to the Change in Control; (c) the failure of the Company substantially to maintain and continue the Executive's relative level of participation in the same or substantially comparable bonus, stock incentive programs, and retirement and welfare benefit plans as provided immediately prior to the Change in Control; (d) the failure of the Company substantially to provide and continue for the Executive the same or substantially comparable fringe benefits; or (e) the Company's requiring the Executive to be based anywhere other than in or within 20 miles of the Executive's principal place of employment at the time of the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's prior business travel obligations or, in the event the Executive consents to relocation, the failure of the Company to pay (or reimburse the Executive for) all reasonable moving expenses incurred by the Executive relating to a change in the Executive's principal residence in connection with such relocation. 1.9 HOLDOVER PERIOD means the period following a Change in Control that (a) begins on the date that the Company provides the Executive with written notice that the Company requires the services of the Executive and (b) ends on the date specified in the notice but no later than six months after the date of the Change in Control. 1.10 PROTECTED PERIOD shall be the period of time beginning upon the later of (a) the date of a Change in Control or (b) the last day of the Executive's Holdover Period, and ending two years after such date. 1.11 RETENTION BONUS means the Executive's benefit, as described in Subsection 2.1 of this Agreement. 4 1.12 SEVERANCE COMPENSATION means the Executive's severance benefit, as described in Subsection 2.2 of this Agreement. 1.13 TERM has the meaning set forth in Section 8 of this Agreement. 1.14 TERMINATION OF EMPLOYMENT shall be deemed to have occurred for purposes of this Agreement and the Executive shall be entitled to the Severance Compensation hereunder if following a Change in Control that occurs during the Term of this Agreement, the Executive (a) is terminated by the Company during the Holdover Period or the Protected Period for any reason other than willful dishonesty or the commission of a felony for which he is convicted and which, in either case, may cause material harm to the Company, (b) terminates employment during the Protected Period where such termination in any way follows or results from a Good Reason, or (c) terminates employment during the Holdover Period where such termination in any way follows or results from a Good Reason described in Subsection 1.8(b)-(e) of this Agreement. The Executive is not entitled to benefits under this Agreement if he terminates service during the Holdover Period for a Good Reason described in Subsection 1.8(a) of this Agreement; provided, however, that immediately following the end of the Holdover Period, the Executive may have a Termination of Employment for a Good Reason described in Subsection 1.8(a) based on events that occurred during the Holdover Period. 2. BENEFITS 2.1 RETENTION BONUS. Upon a Change in Control, the Executive shall be entitled to a cash payment equal to the Base Amount as a Retention Bonus. The Retention Bonus shall be paid within three business days after the Change in Control. 2.2 SEVERANCE COMPENSATION. Upon Termination of Employment, the Executive shall be entitled to receive a cash payment equal to two times the Base Amount. The Severance Compensation shall be paid within three business days after the Termination of Employment. 2.3 HEALTH COVERAGE. Upon Termination of Employment, the Executive shall be entitled to receive continuing group medical and dental insurance coverage for a period of 24 months after Termination of Employment, at no cost to the Executive. 2.4 EXCEPTION TO BENEFIT ELIGIBILITY. The Executive shall not be entitled to receive any of the benefits under this Agreement if the Executive is one of the "Persons" (or a member of a group within the meaning of Section 13(d)(3) of the Exchange Act that constitutes the "Person") whose beneficial ownership results in a "Change in Control" under Subsection 1.3(a) or clause (ii) of Subsection 1.3(c) or if the Executive is (i) a general partner, executive officer, or director of any such 5 Person, (ii) a person controlling any such Person, (iii) a general partner , executive officer, or director of any person controlling any such person, or (iv) a beneficial owner of (x) any equity interest in any such Person or controlling person, if such Person or controlling person was formed for the purpose of engaging in the transaction resulting in the Change in Control or (y) more than 5% of the outstanding equity interest therein, if not so formed. 3. DEATH BENEFITS If the Executive's employment with the Company is terminated after a Change in Control and during the Protected Period due to death, the Executive shall receive no Severance Compensation under Subsection 2.2 of this Agreement; provided however, that if the Executive dies either (a) during the Holdover Period or (b) after a Termination of Employment, but prior to payment of all benefits under Section 2 of this Agreement, then the Executive's surviving spouse (or if no spouse survives the Executive, the Executive's estate) shall be entitled to the Severance Compensation. For purposes of this Section 3, the Executive will be deemed to be in a Holdover Period for the six-month period immediately following a Change in Control unless the Executive has received written notice from the Company stating that a Holdover Period is not applicable to the Executive or unless the time period prescribed by the Company for the Holdover Period has expired. The benefits prescribed herein are in addition to those available under applicable law and under the terms of the Company's benefit plans and programs. 4. DISABILITY BENEFITS If the Executive's employment with the Company is terminated after a Change in Control and during the Protected Period due to Disability, the Executive shall receive no Severance Compensation under Subsection 2.2 of this Agreement; provided, however, that if the Executive terminates employment due to Disability during the Holdover Period, the Executive shall receive Severance Compensation as if the date of termination due to Disability were the date of a Termination of Employment. For purposes of this Section 4, the Executive will be deemed to be in a Holdover Period for the six-month period immediately following a Change in Control unless the Executive has received written notice from the Company stating that a Holdover Period is not applicable to the Executive or unless the time period prescribed by the Company for the Holdover Period has expired. The Executive shall also be eligible for disability benefits available under applicable law and under the terms of the Company's benefit plans and programs. 6 5. CERTAIN REDUCTION IN PAYMENTS Notwithstanding anything to the contrary in this Agreement, the provisions of this Section 5 shall apply in the event that any payment or distribution (whether paid or payable, or distributed or distributable, pursuant to the terms of this Agreement or otherwise, but determined without regard to any reductions in payments required under this Section 5 (a "Payment")) to the Executive would constitute a "parachute payment" within the meaning of Code Section 280G; this Section 5 shall not be applicable if no such Payment to the Executive constitutes a parachute payment under Code Section 280G. In the event that a nationally recognized accounting firm chosen by the Company (the "Accounting Firm") shall determine that receipt of all Payments would subject the Executive to the excise tax imposed by Code Section 4999, then the aggregate present value of all Payments shall be reduced (but not below zero) such that such aggregate present value of Payments equals the Reduced Amount. If the Accounting Firm determines that some amount of Payments would result in a Reduced Amount, the Company shall promptly notify the Executive of the Accounting Firm's decision and further provide a copy of the detailed computations, and the Executive shall be entitled solely to the Reduced Amount. The Executive may then elect which of the Payments shall be eliminated or reduced (as long as after such election the present value, as determined in accordance with Code Section 280G(d)(4) ("Present Value"), of the aggregate Payments equals the Reduced Amount). The Executive shall advise the Company in writing of such election within 20 days of his receipt of notice. If no such election is made by the Executive within the 20-day period, the Company may elect which of such Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Payments equals the Reduced Amount) and shall promptly notify the Executive of such election. All fees and expenses of the Accounting Firm shall be borne solely by the Company. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Payments without causing any Payment to be nondeductible by the Company because of Code Section 280G or subject to an excise tax on the Executive under Code Section 4999. For purposes of this Section 5, Present Value shall be determined in accordance with Code Section 280G(d)(4). 7 6. NO CONTRACT OF EMPLOYMENT This Agreement shall not be construed so as to create a contract, promise, or guarantee of employment for any particular term or duration, in any particular position or assignment, or at any particular level of compensation or benefits. 7. NON-ALIENATION OF BENEFITS No right or benefit at any time under the Agreement shall be subject to alienation, sale, transfer, assignment, pledge, or any encumbrance of any kind. If the Executive shall attempt to or shall alienate, sell, transfer, assign, pledge, or otherwise encumber his or her rights, benefits, or amounts payable under the Agreement, or any part thereof, or if by reason of his bankruptcy or other events happening at any time, such benefits would otherwise be received by anyone else, the Company in its sole discretion may terminate his interest in any such right or benefit and hold or pay it to, or for the benefit of, such person, his spouse, children, or other dependents, or any of them as the Company may determine. 8. TERM OF THIS AGREEMENT The Term of this Agreement shall commence on the date of this Agreement and end on the first anniversary of that date; PROVIDED, HOWEVER, that the Term shall automatically be extended without further action by the parties for additional one-year periods, unless written notice of the Company's intention not to extend has been given to the Executive at least six months prior to the expiration of the then effective Term. This Agreement shall be void and of no effect if (i) a Change in Control occurs after the expiration of the Term, or (ii) the Executive's employment with the Company and its subsidiaries is terminated for any reason prior to a Change in Control. 9. RESOLUTION OF DISPUTES (a) Any disputes arising under or in connection with this Agreement shall be resolved, in the Executive's discretion, either (i) by arbitration, to be held in Houston, Texas in accordance with the rules and procedures of the American Arbitration Association, or (ii) by litigation. (b) All costs, fees, and expenses of any arbitration or litigation in connection with this Agreement that results in any decision or settlement requiring the Company to make a payment to the Executive, including, without limitation, attorneys' fees of both the Executive and the Company, shall be borne by, and be 8 the obligation of, the Company. In no event shall the Executive be required to reimburse the Company for any of the costs and expenses incurred by the Company relating to arbitration or litigation. 10. MISCELLANEOUS 10.1 APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to principles of conflict of laws. 10.2 AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or modified otherwise than by a written agreement executed by the parties to this Agreement or their respective successors and legal representatives. No waiver by any party to this Agreement of any breach of any term, provision, or condition of this Agreement by the other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, or any prior or subsequent time. 10.3 NOTICES. All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other party, by facsimile transmission, by overnight courier, or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Michael E. Calderone 20631 Laurel Lock Dr. Katy, Texas 77450 If to the Company: TPC Corporation 200 West Lake Park Boulevard Suite 1000 Houston, Texas 77079. 10.4 PAYMENT OBLIGATION ABSOLUTE. Subject to Section 5 and to Subsection 2.4, the obligations of the Company to pay the benefits described in Section 2 shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense, or other right which the Company may have against the Executive. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned by the Executive as a result of employment by another employer. 9 10.5 TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all federal, state, city, or other taxes that are required by any law or governmental regulation or ruling. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and the Company has caused this Agreement to be executed in its name and on its behalf, all as of the day and year first above written. TPC CORPORATION By: /s/ John A. Strom ------------------------------ John A. Strom, President /s/ Michael E. Calderone ------------------------------ Michael E. Calderone 10 EX-6 7 EXHIBIT 6 CHANGE IN CONTROL AGREEMENT This Agreement ("Agreement"), dated as of November 8, 1996, is made by and between TPC Corporation, a Delaware corporation (the "Company"), and Ronald H. Benson (the "Executive"). RECITALS The Board of Directors of the Company (the "Board") has determined that it is in the best interest of the Company and its shareholders to ensure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a Change in Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by any pending or threatened Change in Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation arrangements upon a Change in Control that ensure that the compensation expectations of the Executive will be satisfied and that are competitive with those of other corporations. AGREEMENT NOW, THEREFORE, in consideration of the premises and covenants herein contained, and for other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. DEFINITIONS 1.1 BASE AMOUNT means the Executive's base amount on the date of the Change in Control, as determined in accordance with Code Section 280G. 1.2 BOARD means the Board of Directors of the Company. 1.3 CHANGE IN CONTROL shall mean any of the following events that occur during the Term of this Agreement: (a) The acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) a percentage of the then outstanding shares of common stock (assuming, for purposes of this definition, that all shares of Class B Common Stock have been converted into the same number of shares of Class A Common Stock) of the Company (the "Outstanding Company Common Stock") that, when added to the beneficial ownership previously held by that Person, and to the largest holding of beneficial ownership in Outstanding Company Common Stock by any other Person, equals or exceeds 50%, or (ii) a percentage of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") that, when added to the beneficial ownership previously held by that Person, and to the largest holding of beneficial ownership in Outstanding Company Voting Securities by any other Person, equals or exceeds 50%; provided, however, that for purposes of this subparagraph (a), the following acquisitions shall not in and of themselves constitute a Change in Control hereunder: (x) any acquisition of securities of the Company made directly from the Company and approved by a majority of the directors then comprising the Incumbent Board (as defined below), (y) any acquisition of beneficial ownership of a higher percentage of the Outstanding Company Common Stock or the Outstanding Company Voting Securities that results solely from the acquisition, purchase, or redemption of securities of the Company by the Company so long as such action by the Company was approved by a majority of the directors then comprising the Incumbent Board, or (z) any acquisition by any Company pursuant to a transaction that complies with clauses (i), (ii), and (iii) of subparagraph (c) hereof; or (b) Individuals who, as of November 8, 1996, constituted the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to November 8, 1996 whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all the assets of the Company (a 2 "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially owned, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any company resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all the Company's assets either directly or through one or more subsidiaries) or the combined voting power of the then outstanding voting securities of such company except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 1.4 CODE means the Internal Revenue Code of 1986, as amended. 1.5 COMPANY means TPC Corporation and any successor thereto. 1.6 DIRECTOR means a member of the Board. 1.7 DISABILITY has the same meaning as the definition of disability under the Company's long-term disability plan. 1.8 GOOD REASON shall mean any of the following: 3 (a) the assignment to the Executive of any duties inconsistent with the Executive's duties at the time of a Change in Control or a change in the Executive's reporting responsibilities as in effect immediately prior to the Change in Control, without the Executive's express written consent; or any removal of the Executive from or any failure to reelect the Executive to positions held by the Executive immediately prior to the Change in Control, except in connection with promotions to higher office; (b) a reduction in the Executive's total compensation as in effect immediately prior to the Change in Control; (c) the failure of the Company substantially to maintain and continue the Executive's relative level of participation in the same or substantially comparable bonus, stock incentive programs, and retirement and welfare benefit plans as provided immediately prior to the Change in Control; (d) the failure of the Company substantially to provide and continue for the Executive the same or substantially comparable fringe benefits; or (e) the Company's requiring the Executive to be based anywhere other than in or within 20 miles of the Executive's principal place of employment at the time of the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's prior business travel obligations or, in the event the Executive consents to relocation, the failure of the Company to pay (or reimburse the Executive for) all reasonable moving expenses incurred by the Executive relating to a change in the Executive's principal residence in connection with such relocation. 1.9 HOLDOVER PERIOD means the period following a Change in Control that (a) begins on the date that the Company provides the Executive with written notice that the Company requires the services of the Executive and (b) ends on the date specified in the notice but no later than six months after the date of the Change in Control. 1.10 PROTECTED PERIOD shall be the period of time beginning upon the later of (a) the date of a Change in Control or (b) the last day of the Executive's Holdover Period, and ending two years after such date. 1.11 RETENTION BONUS means the Executive's benefit, as described in Subsection 2.1 of this Agreement. 4 1.12 SEVERANCE COMPENSATION means the Executive's severance benefit, as described in Subsection 2.2 of this Agreement. 1.13 TERM has the meaning set forth in Section 8 of this Agreement. 1.14 TERMINATION OF EMPLOYMENT shall be deemed to have occurred for purposes of this Agreement and the Executive shall be entitled to the Severance Compensation hereunder if following a Change in Control that occurs during the Term of this Agreement, the Executive (a) is terminated by the Company during the Holdover Period or the Protected Period for any reason other than willful dishonesty or the commission of a felony for which he is convicted and which, in either case, may cause material harm to the Company, (b) terminates employment during the Protected Period where such termination in any way follows or results from a Good Reason, or (c) terminates employment during the Holdover Period where such termination in any way follows or results from a Good Reason described in Subsection 1.8(b)-(e) of this Agreement. The Executive is not entitled to benefits under this Agreement if he terminates service during the Holdover Period for a Good Reason described in Subsection 1.8(a) of this Agreement; provided, however, that immediately following the end of the Holdover Period, the Executive may have a Termination of Employment for a Good Reason described in Subsection 1.8(a) based on events that occurred during the Holdover Period. 2. BENEFITS 2.1 RETENTION BONUS. Upon a Change in Control, the Executive shall be entitled to a cash payment equal to two-thirds times the Base Amount as a Retention Bonus. The Retention Bonus shall be paid within three business days after the Change in Control. 2.2 SEVERANCE COMPENSATION. Upon Termination of Employment, the Executive shall be entitled to receive a cash payment equal to four-thirds times the Base Amount. The Severance Compensation shall be paid within three business days after the Termination of Employment. 2.3 HEALTH COVERAGE. Upon Termination of Employment, the Executive shall be entitled to receive continuing group medical and dental insurance coverage for a period of 24 months after Termination of Employment, at no cost to the Executive. 2.4 EXCEPTION TO BENEFIT ELIGIBILITY. The Executive shall not be entitled to receive any of the benefits under this Agreement if the Executive is one of the "Persons" (or a member of a group within the meaning of Section 13(d)(3) of the Exchange Act that constitutes the "Person") whose beneficial ownership results in a "Change in Control" under Subsection 1.3(a) or clause (ii) of Subsection 1.3(c) or if the Executive is (i) a general partner, executive officer, or director of any such 5 Person, (ii) a person controlling any such Person, (iii) a general partner, executive officer, or director of any person controlling any such person, or (iv) a beneficial owner of (x) any equity interest in any such Person or controlling person, if such Person or controlling person was formed for the purpose of engaging in the transaction resulting in the Change in Control or (y) more than 5% of the outstanding equity interest therein, if not so formed. 3. DEATH BENEFITS If the Executive's employment with the Company is terminated after a Change in Control and during the Protected Period due to death, the Executive shall receive no Severance Compensation under Subsection 2.2 of this Agreement; provided however, that if the Executive dies either (a) during the Holdover Period or (b) after a Termination of Employment, but prior to payment of all benefits under Section 2 of this Agreement, then the Executive's surviving spouse (or if no spouse survives the Executive, the Executive's estate) shall be entitled to the Severance Compensation. For purposes of this Section 3, the Executive will be deemed to be in a Holdover Period for the six-month period immediately following a Change in Control unless the Executive has received written notice from the Company stating that a Holdover Period is not applicable to the Executive or unless the time period prescribed by the Company for the Holdover Period has expired. The benefits prescribed herein are in addition to those available under applicable law and under the terms of the Company's benefit plans and programs. 4. DISABILITY BENEFITS If the Executive's employment with the Company is terminated after a Change in Control and during the Protected Period due to Disability, the Executive shall receive no Severance Compensation under Subsection 2.2 of this Agreement; provided, however, that if the Executive terminates employment due to Disability during the Holdover Period, the Executive shall receive Severance Compensation as if the date of termination due to Disability were the date of a Termination of Employment. For purposes of this Section 4, the Executive will be deemed to be in a Holdover Period for the six-month period immediately following a Change in Control unless the Executive has received written notice from the Company stating that a Holdover Period is not applicable to the Executive or unless the time period prescribed by the Company for the Holdover Period has expired. The Executive shall also be eligible for disability benefits available under applicable law and under the terms of the Company's benefit plans and programs. 6 5. CERTAIN REDUCTION IN PAYMENTS Notwithstanding anything to the contrary in this Agreement, the provisions of this Section 5 shall apply in the event that any payment or distribution (whether paid or payable, or distributed or distributable, pursuant to the terms of this Agreement or otherwise, but determined without regard to any reductions in payments required under this Section 5 (a "Payment")) to the Executive would constitute a "parachute payment" within the meaning of Code Section 280G; this Section 5 shall not be applicable if no such Payment to the Executive constitutes a parachute payment under Code Section 280G. In the event that a nationally recognized accounting firm chosen by the Company (the "Accounting Firm") shall determine that receipt of all Payments would subject the Executive to the excise tax imposed by Code Section 4999, then the aggregate present value of all Payments shall be reduced (but not below zero) such that such aggregate present value of Payments equals the Reduced Amount. If the Accounting Firm determines that some amount of Payments would result in a Reduced Amount, the Company shall promptly notify the Executive of the Accounting Firm's decision and further provide a copy of the detailed computations, and the Executive shall be entitled solely to the Reduced Amount. The Executive may then elect which of the Payments shall be eliminated or reduced (as long as after such election the present value, as determined in accordance with Code Section 280G(d)(4) ("Present Value"), of the aggregate Payments equals the Reduced Amount). The Executive shall advise the Company in writing of such election within 20 days of his receipt of notice. If no such election is made by the Executive within the 20-day period, the Company may elect which of such Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Payments equals the Reduced Amount) and shall promptly notify the Executive of such election. All fees and expenses of the Accounting Firm shall be borne solely by the Company. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Payments without causing any Payment to be nondeductible by the Company because of Code Section 280G or subject to an excise tax on the Executive under Code Section 4999. For purposes of this Section 5, Present Value shall be determined in accordance with Code Section 280G(d)(4). 7 6. NO CONTRACT OF EMPLOYMENT This Agreement shall not be construed so as to create a contract, promise, or guarantee of employment for any particular term or duration, in any particular position or assignment, or at any particular level of compensation or benefits. 7. NON-ALIENATION OF BENEFITS No right or benefit at any time under the Agreement shall be subject to alienation, sale, transfer, assignment, pledge, or any encumbrance of any kind. If the Executive shall attempt to or shall alienate, sell, transfer, assign, pledge, or otherwise encumber his or her rights, benefits, or amounts payable under the Agreement, or any part thereof, or if by reason of his bankruptcy or other events happening at any time, such benefits would otherwise be received by anyone else, the Company in its sole discretion may terminate his interest in any such right or benefit and hold or pay it to, or for the benefit of, such person, his spouse, children, or other dependents, or any of them as the Company may determine. 8. TERM OF THIS AGREEMENT The Term of this Agreement shall commence on the date of this Agreement and end on the first anniversary of that date; PROVIDED, HOWEVER, that the Term shall automatically be extended without further action by the parties for additional one-year periods, unless written notice of the Company's intention not to extend has been given to the Executive at least six months prior to the expiration of the then effective Term. This Agreement shall be void and of no effect if (i) a Change in Control occurs after the expiration of the Term, or (ii) the Executive's employment with the Company and its subsidiaries is terminated for any reason prior to a Change in Control. 9. RESOLUTION OF DISPUTES (a) Any disputes arising under or in connection with this Agreement shall be resolved, in the Executive's discretion, either (i) by arbitration, to be held in Houston, Texas in accordance with the rules and procedures of the American Arbitration Association, or (ii) by litigation. (b) All costs, fees, and expenses of any arbitration or litigation in connection with this Agreement that results in any decision or settlement requiring the Company to make a payment to the Executive, including, without limitation, attorneys' fees of both the Executive and the Company, shall be borne by, and be 8 the obligation of, the Company. In no event shall the Executive be required to reimburse the Company for any of the costs and expenses incurred by the Company relating to arbitration or litigation. 10. MISCELLANEOUS 10.1 APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to principles of conflict of laws. 10.2 AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or modified otherwise than by a written agreement executed by the parties to this Agreement or their respective successors and legal representatives. No waiver by any party to this Agreement of any breach of any term, provision, or condition of this Agreement by the other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, or any prior or subsequent time. 10.3 NOTICES. All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other party, by facsimile transmission, by overnight courier, or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Ronald H. Benson 13618 Winter Creek Court Houston, Texas 77077 If to the Company: TPC Corporation 200 West Lake Park Boulevard Suite 1000 Houston, Texas 77079. 10.4 PAYMENT OBLIGATION ABSOLUTE. Subject to Section 5 and to Subsection 2.4, the obligations of the Company to pay the benefits described in Section 2 shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense, or other right which the Company may have against the Executive. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned by the Executive as a result of employment by another employer. 9 10.5 TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all federal, state, city, or other taxes that are required by any law or governmental regulation or ruling. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and the Company has caused this Agreement to be executed in its name and on its behalf, all as of the day and year first above written. TPC CORPORATION By: /s/ JOHN S. STROM -------------------------------------- John A. Strom, President /s/ RONALD H. BENSON -------------------------------------- Ronald H. Benson 10 EX-7 8 EXHIBIT 7 CHANGE IN CONTROL AGREEMENT This Agreement ("Agreement"), dated as of November 8, 1996, is made by and between TPC Corporation, a Delaware corporation (the "Company"), and M. Scott Jones (the "Executive"). RECITALS The Board of Directors of the Company (the "Board") has determined that it is in the best interest of the Company and its shareholders to ensure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a Change in Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by any pending or threatened Change in Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation arrangements upon a Change in Control that ensure that the compensation expectations of the Executive will be satisfied and that are competitive with those of other corporations. AGREEMENT NOW, THEREFORE, in consideration of the premises and covenants herein contained, and for other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. DEFINITIONS 1.1 BASE AMOUNT means the Executive's base amount on the date of the Change in Control, as determined in accordance with Code Section 280G. 1.2 BOARD means the Board of Directors of the Company. 1.3 CHANGE IN CONTROL shall mean any of the following events that occur during the Term of this Agreement: (a) The acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) a percentage of the then outstanding shares of common stock (assuming, for purposes of this definition, that all shares of Class B Common Stock have been converted into the same number of shares of Class A Common Stock) of the Company (the "Outstanding Company Common Stock") that, when added to the beneficial ownership previously held by that Person, and to the largest holding of beneficial ownership in Outstanding Company Common Stock by any other Person, equals or exceeds 50%, or (ii) a percentage of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") that, when added to the beneficial ownership previously held by that Person, and to the largest holding of beneficial ownership in Outstanding Company Voting Securities by any other Person, equals or exceeds 50%; provided, however, that for purposes of this subparagraph (a), the following acquisitions shall not in and of themselves constitute a Change in Control hereunder: (x) any acquisition of securities of the Company made directly from the Company and approved by a majority of the directors then comprising the Incumbent Board (as defined below), (y) any acquisition of beneficial ownership of a higher percentage of the Outstanding Company Common Stock or the Outstanding Company Voting Securities that results solely from the acquisition, purchase, or redemption of securities of the Company by the Company so long as such action by the Company was approved by a majority of the directors then comprising the Incumbent Board, or (z) any acquisition by any Company pursuant to a transaction that complies with clauses (i), (ii), and (iii) of subparagraph (c) hereof; or (b) Individuals who, as of November 8, 1996, constituted the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to November 8, 1996 whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all the assets of the Company (a 2 "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially owned, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any company resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all the Company's assets either directly or through one or more subsidiaries) or the combined voting power of the then outstanding voting securities of such company except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 1.4 CODE means the Internal Revenue Code of 1986, as amended. 1.5 COMPANY means TPC Corporation and any successor thereto. 1.6 DIRECTOR means a member of the Board. 1.7 DISABILITY has the same meaning as the definition of disability under the Company's long-term disability plan. 1.8 GOOD REASON shall mean any of the following: 3 (a) the assignment to the Executive of any duties inconsistent with the Executive's duties at the time of a Change in Control or a change in the Executive's reporting responsibilities as in effect immediately prior to the Change in Control, without the Executive's express written consent; or any removal of the Executive from or any failure to reelect the Executive to positions held by the Executive immediately prior to the Change in Control, except in connection with promotions to higher office; (b) a reduction in the Executive's total compensation as in effect immediately prior to the Change in Control; (c) the failure of the Company substantially to maintain and continue the Executive's relative level of participation in the same or substantially comparable bonus, stock incentive programs, and retirement and welfare benefit plans as provided immediately prior to the Change in Control; (d) the failure of the Company substantially to provide and continue for the Executive the same or substantially comparable fringe benefits; or (e) the Company's requiring the Executive to be based anywhere other than in or within 20 miles of the Executive's principal place of employment at the time of the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's prior business travel obligations or, in the event the Executive consents to relocation, the failure of the Company to pay (or reimburse the Executive for) all reasonable moving expenses incurred by the Executive relating to a change in the Executive's principal residence in connection with such relocation. 1.9 HOLDOVER PERIOD means the period following a Change in Control that (a) begins on the date that the Company provides the Executive with written notice that the Company requires the services of the Executive and (b) ends on the date specified in the notice but no later than six months after the date of the Change in Control. 1.10 PROTECTED PERIOD shall be the period of time beginning upon the later of (a) the date of a Change in Control or (b) the last day of the Executive's Holdover Period, and ending two years after such date. 1.11 RETENTION BONUS means the Executive's benefit, as described in Subsection 2.1 of this Agreement. 4 1.12 SEVERANCE COMPENSATION means the Executive's severance benefit, as described in Subsection 2.2 of this Agreement. 1.13 TERM has the meaning set forth in Section 8 of this Agreement. 1.14 TERMINATION OF EMPLOYMENT shall be deemed to have occurred for purposes of this Agreement and the Executive shall be entitled to the Severance Compensation hereunder if following a Change in Control that occurs during the Term of this Agreement, the Executive (a) is terminated by the Company during the Holdover Period or the Protected Period for any reason other than willful dishonesty or the commission of a felony for which he is convicted and which, in either case, may cause material harm to the Company, (b) terminates employment during the Protected Period where such termination in any way follows or results from a Good Reason, or (c) terminates employment during the Holdover Period where such termination in any way follows or results from a Good Reason described in Subsection 1.8(b)-(e) of this Agreement. The Executive is not entitled to benefits under this Agreement if he terminates service during the Holdover Period for a Good Reason described in Subsection 1.8(a) of this Agreement; provided, however, that immediately following the end of the Holdover Period, the Executive may have a Termination of Employment for a Good Reason described in Subsection 1.8(a) based on events that occurred during the Holdover Period. 2. BENEFITS 2.1 RETENTION BONUS. Upon a Change in Control, the Executive shall be entitled to a cash payment equal to the Base Amount as a Retention Bonus. The Retention Bonus shall be paid within three business days after the Change in Control. 2.2 SEVERANCE COMPENSATION. Upon Termination of Employment, the Executive shall be entitled to receive a cash payment equal to two times the Base Amount. The Severance Compensation shall be paid within three business days after the Termination of Employment. 2.3 HEALTH COVERAGE. Upon Termination of Employment, the Executive shall be entitled to receive continuing group medical and dental insurance coverage for a period of 24 months after Termination of Employment, at no cost to the Executive. 2.4 EXCEPTION TO BENEFIT ELIGIBILITY. The Executive shall not be entitled to receive any of the benefits under this Agreement if the Executive is one of the "Persons" (or a member of a group within the meaning of Section 13(d)(3) of the Exchange Act that constitutes the "Person") whose beneficial ownership results in a "Change in Control" under Subsection 1.3(a) or clause (ii) of Subsection 1.3(c) or if the Executive is (i) a general partner, executive officer, or director of any such Person, (ii) a person controlling any such 5 Person, (iii) a general partner, executive officer, or director of any person controlling any such person, or (iv) a beneficial owner of (x) any equity interest in any such Person or controlling person, if such Person or controlling person was formed for the purpose of engaging in the transaction resulting in the Change in Control or (y) more than 5% of the outstanding equity interest therein, if not so formed. 3. DEATH BENEFITS If the Executive's employment with the Company is terminated after a Change in Control and during the Protected Period due to death, the Executive shall receive no Severance Compensation under Subsection 2.2 of this Agreement; provided however, that if the Executive dies either (a) during the Holdover Period or (b) after a Termination of Employment, but prior to payment of all benefits under Section 2 of this Agreement, then the Executive's surviving spouse (or if no spouse survives the Executive, the Executive's estate) shall be entitled to the Severance Compensation. For purposes of this Section 3, the Executive will be deemed to be in a Holdover Period for the six-month period immediately following a Change in Control unless the Executive has received written notice from the Company stating that a Holdover Period is not applicable to the Executive or unless the time period prescribed by the Company for the Holdover Period has expired. The benefits prescribed herein are in addition to those available under applicable law and under the terms of the Company's benefit plans and programs. 4. DISABILITY BENEFITS If the Executive's employment with the Company is terminated after a Change in Control and during the Protected Period due to Disability, the Executive shall receive no Severance Compensation under Subsection 2.2 of this Agreement; provided, however, that if the Executive terminates employment due to Disability during the Holdover Period, the Executive shall receive Severance Compensation as if the date of termination due to Disability were the date of a Termination of Employment. For purposes of this Section 4, the Executive will be deemed to be in a Holdover Period for the six-month period immediately following a Change in Control unless the Executive has received written notice from the Company stating that a Holdover Period is not applicable to the Executive or unless the time period prescribed by the Company for the Holdover Period has expired. The Executive shall also be eligible for disability benefits available under applicable law and under the terms of the Company's benefit plans and programs. 6 5. CERTAIN REDUCTION IN PAYMENTS Notwithstanding anything to the contrary in this Agreement, the provisions of this Section 5 shall apply in the event that any payment or distribution (whether paid or payable, or distributed or distributable, pursuant to the terms of this Agreement or otherwise, but determined without regard to any reductions in payments required under this Section 5 (a "Payment")) to the Executive would constitute a "parachute payment" within the meaning of Code Section 280G; this Section 5 shall not be applicable if no such Payment to the Executive constitutes a parachute payment under Code Section 280G. In the event that a nationally recognized accounting firm chosen by the Company (the "Accounting Firm") shall determine that receipt of all Payments would subject the Executive to the excise tax imposed by Code Section 4999, then the aggregate present value of all Payments shall be reduced (but not below zero) such that such aggregate present value of Payments equals the Reduced Amount. If the Accounting Firm determines that some amount of Payments would result in a Reduced Amount, the Company shall promptly notify the Executive of the Accounting Firm's decision and further provide a copy of the detailed computations, and the Executive shall be entitled solely to the Reduced Amount. The Executive may then elect which of the Payments shall be eliminated or reduced (as long as after such election the present value, as determined in accordance with Code Section 280G(d)(4) ("Present Value"), of the aggregate Payments equals the Reduced Amount). The Executive shall advise the Company in writing of such election within 20 days of his receipt of notice. If no such election is made by the Executive within the 20-day period, the Company may elect which of such Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Payments equals the Reduced Amount) and shall promptly notify the Executive of such election. All fees and expenses of the Accounting Firm shall be borne solely by the Company. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Payments without causing any Payment to be nondeductible by the Company because of Code Section 280G or subject to an excise tax on the Executive under Code Section 4999. For purposes of this Section 5, Present Value shall be determined in accordance with Code Section 280G(d)(4). 7 6. NO CONTRACT OF EMPLOYMENT This Agreement shall not be construed so as to create a contract, promise, or guarantee of employment for any particular term or duration, in any particular position or assignment, or at any particular level of compensation or benefits. 7. NON-ALIENATION OF BENEFITS No right or benefit at any time under the Agreement shall be subject to alienation, sale, transfer, assignment, pledge, or any encumbrance of any kind. If the Executive shall attempt to or shall alienate, sell, transfer, assign, pledge, or otherwise encumber his or her rights, benefits, or amounts payable under the Agreement, or any part thereof, or if by reason of his bankruptcy or other events happening at any time, such benefits would otherwise be received by anyone else, the Company in its sole discretion may terminate his interest in any such right or benefit and hold or pay it to, or for the benefit of, such person, his spouse, children, or other dependents, or any of them as the Company may determine. 8. TERM OF THIS AGREEMENT The Term of this Agreement shall commence on the date of this Agreement and end on the first anniversary of that date; PROVIDED, HOWEVER, that the Term shall automatically be extended without further action by the parties for additional one-year periods, unless written notice of the Company's intention not to extend has been given to the Executive at least six months prior to the expiration of the then effective Term. This Agreement shall be void and of no effect if (i) a Change in Control occurs after the expiration of the Term, or (ii) the Executive's employment with the Company and its subsidiaries is terminated for any reason prior to a Change in Control. 9. RESOLUTION OF DISPUTES (a) Any disputes arising under or in connection with this Agreement shall be resolved, in the Executive's discretion, either (i) by arbitration, to be held in Houston, Texas in accordance with the rules and procedures of the American Arbitration Association, or (ii) by litigation. (b) All costs, fees, and expenses of any arbitration or litigation in connection with this Agreement that results in any decision or settlement requiring the Company to make a payment to the Executive, including, without limitation, attorneys' fees of both the Executive and the Company, shall be borne by, and be 8 the obligation of, the Company. In no event shall the Executive be required to reimburse the Company for any of the costs and expenses incurred by the Company relating to arbitration or litigation. 10. MISCELLANEOUS 10.1 APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to principles of conflict of laws. 10.2 AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or modified otherwise than by a written agreement executed by the parties to this Agreement or their respective successors and legal representatives. No waiver by any party to this Agreement of any breach of any term, provision, or condition of this Agreement by the other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, or any prior or subsequent time. 10.3 NOTICES. All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other party, by facsimile transmission, by overnight courier, or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: M. Scott Jones 3026 Tangley Houston, Texas 77005 If to the Company: TPC Corporation 200 West Lake Park Boulevard Suite 1000 Houston, Texas 77079. 10.4 PAYMENT OBLIGATION ABSOLUTE. Subject to Section 5 and to Subsection 2.4, the obligations of the Company to pay the benefits described in Section 2 shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense, or other right which the Company may have against the Executive. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned by the Executive as a result of employment by another employer. 9 10.5 TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all federal, state, city, or other taxes that are required by any law or governmental regulation or ruling. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and the Company has caused this Agreement to be executed in its name and on its behalf, all as of the day and year first above written. TPC CORPORATION By: /s/ JOHN A. STROM --------------------------------- John A. Strom, President /s/ M. SCOTT JONES ------------------------------------ M. Scott Jones 10 EX-8 9 EXHIBIT 8 CHANGE IN CONTROL AGREEMENT This Agreement ("Agreement"), dated as of November 8, 1996, is made by and between TPC Corporation, a Delaware corporation (the "Company"), and Robert D. Kincaid (the "Executive"). RECITALS The Board of Directors of the Company (the "Board") has determined that it is in the best interest of the Company and its shareholders to ensure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a Change in Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by any pending or threatened Change in Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation arrangements upon a Change in Control that ensure that the compensation expectations of the Executive will be satisfied and that are competitive with those of other corporations. AGREEMENT NOW, THEREFORE, in consideration of the premises and covenants herein contained, and for other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. DEFINITIONS 1.1 BASE AMOUNT means the Executive's base amount on the date of the Change in Control, as determined in accordance with Code Section 280G. 1.2 BOARD means the Board of Directors of the Company. 1.3 CHANGE IN CONTROL shall mean any of the following events that occur during the Term of this Agreement: (a) The acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) a percentage of the then outstanding shares of common stock (assuming, for purposes of this definition, that all shares of Class B Common Stock have been converted into the same number of shares of Class A Common Stock) of the Company (the "Outstanding Company Common Stock") that, when added to the beneficial ownership previously held by that Person, and to the largest holding of beneficial ownership in Outstanding Company Common Stock by any other Person, equals or exceeds 50%, or (ii) a percentage of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") that, when added to the beneficial ownership previously held by that Person, and to the largest holding of beneficial ownership in Outstanding Company Voting Securities by any other Person, equals or exceeds 50%; provided, however, that for purposes of this subparagraph (a), the following acquisitions shall not in and of themselves constitute a Change in Control hereunder: (x) any acquisition of securities of the Company made directly from the Company and approved by a majority of the directors then comprising the Incumbent Board (as defined below), (y) any acquisition of beneficial ownership of a higher percentage of the Outstanding Company Common Stock or the Outstanding Company Voting Securities that results solely from the acquisition, purchase, or redemption of securities of the Company by the Company so long as such action by the Company was approved by a majority of the directors then comprising the Incumbent Board, or (z) any acquisition by any Company pursuant to a transaction that complies with clauses (i), (ii), and (iii) of subparagraph (c) hereof; or (b) Individuals who, as of November 8, 1996, constituted the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to November 8, 1996 whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all the assets of the Company (a 2 "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially owned, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any company resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all the Company's assets either directly or through one or more subsidiaries) or the combined voting power of the then outstanding voting securities of such company except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 1.4 CODE means the Internal Revenue Code of 1986, as amended. 1.5 COMPANY means TPC Corporation and any successor thereto. 1.6 DIRECTOR means a member of the Board. 1.7 DISABILITY has the same meaning as the definition of disability under the Company's long-term disability plan. 1.8 GOOD REASON shall mean any of the following: (a) the assignment to the Executive of any duties inconsistent with the Executive's duties at the time of a Change in Control or a change in the 3 Executive's reporting responsibilities as in effect immediately prior to the Change in Control, without the Executive's express written consent; or any removal of the Executive from or any failure to reelect the Executive to positions held by the Executive immediately prior to the Change in Control, except in connection with promotions to higher office; (b) a reduction in the Executive's total compensation as in effect immediately prior to the Change in Control; (c) the failure of the Company substantially to maintain and continue the Executive's relative level of participation in the same or substantially comparable bonus, stock incentive programs, and retirement and welfare benefit plans as provided immediately prior to the Change in Control; (d) the failure of the Company substantially to provide and continue for the Executive the same or substantially comparable fringe benefits; or (e) the Company's requiring the Executive to be based anywhere other than in or within 20 miles of the Executive's principal place of employment at the time of the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's prior business travel obligations or, in the event the Executive consents to relocation, the failure of the Company to pay (or reimburse the Executive for) all reasonable moving expenses incurred by the Executive relating to a change in the Executive's principal residence in connection with such relocation. 1.9 HOLDOVER PERIOD means the period following a Change in Control that (a) begins on the date that the Company provides the Executive with written notice that the Company requires the services of the Executive and (b) ends on the date specified in the notice but no later than six months after the date of the Change in Control. 1.10 PROTECTED PERIOD shall be the period of time beginning upon the later of (a) the date of a Change in Control or (b) the last day of the Executive's Holdover Period, and ending two years after such date. 1.11 RETENTION BONUS means the Executive's benefit, as described in Subsection 2.1 of this Agreement. 4 1.12 SEVERANCE COMPENSATION means the Executive's severance benefit, as described in Subsection 2.2 of this Agreement. 1.13 TERM has the meaning set forth in Section 8 of this Agreement. 1.14 TERMINATION OF EMPLOYMENT shall be deemed to have occurred for purposes of this Agreement and the Executive shall be entitled to the Severance Compensation hereunder if following a Change in Control that occurs during the Term of this Agreement, the Executive (a) is terminated by the Company during the Holdover Period or the Protected Period for any reason other than willful dishonesty or the commission of a felony for which he is convicted and which, in either case, may cause material harm to the Company, (b) terminates employment during the Protected Period where such termination in any way follows or results from a Good Reason, or (c) terminates employment during the Holdover Period where such termination in any way follows or results from a Good Reason described in Subsection 1.8(b)-(e) of this Agreement. The Executive is not entitled to benefits under this Agreement if he terminates service during the Holdover Period for a Good Reason described in Subsection 1.8(a) of this Agreement; provided, however, that immediately following the end of the Holdover Period, the Executive may have a Termination of Employment for a Good Reason described in Subsection 1.8(a) based on events that occurred during the Holdover Period. 2. BENEFITS 2.1 RETENTION BONUS. Upon a Change in Control, the Executive shall be entitled to a cash payment equal to two-thirds times the Base Amount as a Retention Bonus. The Retention Bonus shall be paid within three business days after the Change in Control. 2.2 SEVERANCE COMPENSATION. Upon Termination of Employment, the Executive shall be entitled to receive a cash payment equal to four-thirds times the Base Amount. The Severance Compensation shall be paid within three business days after the Termination of Employment. 2.3 HEALTH COVERAGE. Upon Termination of Employment, the Executive shall be entitled to receive continuing group medical and dental insurance coverage for a period of 24 months after Termination of Employment, at no cost to the Executive. 2.4 EXCEPTION TO BENEFIT ELIGIBILITY. The Executive shall not be entitled to receive any of the benefits under this Agreement if the Executive is one of the "Persons" (or a member of a group within the meaning of Section 13(d)(3) of the Exchange Act that constitutes the "Person") whose beneficial ownership results in a "Change in Control" under Subsection 1.3(a) or clause (ii) of Subsection 1.3(c) or if the Executive is (i) a general partner, executive officer, or director of any such 5 Person, (ii) a person controlling any such Person, (iii) a general partner , executive officer, or director of any person controlling any such person, or (iv) a beneficial owner of (x) any equity interest in any such Person or controlling person, if such Person or controlling person was formed for the purpose of engaging in the transaction resulting in the Change in Control or (y) more than 5% of the outstanding equity interest therein, if not so formed. 3. DEATH BENEFITS If the Executive's employment with the Company is terminated after a Change in Control and during the Protected Period due to death, the Executive shall receive no Severance Compensation under Subsection 2.2 of this Agreement; provided however, that if the Executive dies either (a) during the Holdover Period or (b) after a Termination of Employment, but prior to payment of all benefits under Section 2 of this Agreement, then the Executive's surviving spouse (or if no spouse survives the Executive, the Executive's estate) shall be entitled to the Severance Compensation. For purposes of this Section 3, the Executive will be deemed to be in a Holdover Period for the six-month period immediately following a Change in Control unless the Executive has received written notice from the Company stating that a Holdover Period is not applicable to the Executive or unless the time period prescribed by the Company for the Holdover Period has expired. The benefits prescribed herein are in addition to those available under applicable law and under the terms of the Company's benefit plans and programs. 4. DISABILITY BENEFITS If the Executive's employment with the Company is terminated after a Change in Control and during the Protected Period due to Disability, the Executive shall receive no Severance Compensation under Subsection 2.2 of this Agreement; provided, however, that if the Executive terminates employment due to Disability during the Holdover Period, the Executive shall receive Severance Compensation as if the date of termination due to Disability were the date of a Termination of Employment. For purposes of this Section 4, the Executive will be deemed to be in a Holdover Period for the six-month period immediately following a Change in Control unless the Executive has received written notice from the Company stating that a Holdover Period is not applicable to the Executive or unless the time period prescribed by the Company for the Holdover Period has expired. The Executive shall also be eligible for disability benefits available under applicable law and under the terms of the Company's benefit plans and programs. 6 5. CERTAIN REDUCTION IN PAYMENTS Notwithstanding anything to the contrary in this Agreement, the provisions of this Section 5 shall apply in the event that any payment or distribution (whether paid or payable, or distributed or distributable, pursuant to the terms of this Agreement or otherwise, but determined without regard to any reductions in payments required under this Section 5 (a "Payment")) to the Executive would constitute a "parachute payment" within the meaning of Code Section 280G; this Section 5 shall not be applicable if no such Payment to the Executive constitutes a parachute payment under Code Section 280G. In the event that a nationally recognized accounting firm chosen by the Company (the "Accounting Firm") shall determine that receipt of all Payments would subject the Executive to the excise tax imposed by Code Section 4999, then the aggregate present value of all Payments shall be reduced (but not below zero) such that such aggregate present value of Payments equals the Reduced Amount. If the Accounting Firm determines that some amount of Payments would result in a Reduced Amount, the Company shall promptly notify the Executive of the Accounting Firm's decision and further provide a copy of the detailed computations, and the Executive shall be entitled solely to the Reduced Amount. The Executive may then elect which of the Payments shall be eliminated or reduced (as long as after such election the present value, as determined in accordance with Code Section 280G(d)(4) ("Present Value"), of the aggregate Payments equals the Reduced Amount). The Executive shall advise the Company in writing of such election within 20 days of his receipt of notice. If no such election is made by the Executive within the 20-day period, the Company may elect which of such Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Payments equals the Reduced Amount) and shall promptly notify the Executive of such election. All fees and expenses of the Accounting Firm shall be borne solely by the Company. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Payments without causing any Payment to be nondeductible by the Company because of Code Section 280G or subject to an excise tax on the Executive under Code Section 4999. For purposes of this Section 5, Present Value shall be determined in accordance with Code Section 280G(d)(4). 7 6. NO CONTRACT OF EMPLOYMENT This Agreement shall not be construed so as to create a contract, promise, or guarantee of employment for any particular term or duration, in any particular position or assignment, or at any particular level of compensation or benefits. 7. NON-ALIENATION OF BENEFITS No right or benefit at any time under the Agreement shall be subject to alienation, sale, transfer, assignment, pledge, or any encumbrance of any kind. If the Executive shall attempt to or shall alienate, sell, transfer, assign, pledge, or otherwise encumber his or her rights, benefits, or amounts payable under the Agreement, or any part thereof, or if by reason of his bankruptcy or other events happening at any time, such benefits would otherwise be received by anyone else, the Company in its sole discretion may terminate his interest in any such right or benefit and hold or pay it to, or for the benefit of, such person, his spouse, children, or other dependents, or any of them as the Company may determine. 8. TERM OF THIS AGREEMENT The Term of this Agreement shall commence on the date of this Agreement and end on the first anniversary of that date; PROVIDED, HOWEVER, that the Term shall automatically be extended without further action by the parties for additional one-year periods, unless written notice of the Company's intention not to extend has been given to the Executive at least six months prior to the expiration of the then effective Term. This Agreement shall be void and of no effect if (i) a Change in Control occurs after the expiration of the Term, or (ii) the Executive's employment with the Company and its subsidiaries is terminated for any reason prior to a Change in Control. 9. RESOLUTION OF DISPUTES (a) Any disputes arising under or in connection with this Agreement shall be resolved, in the Executive's discretion, either (i) by arbitration, to be held in Houston, Texas in accordance with the rules and procedures of the American Arbitration Association, or (ii) by litigation. (b) All costs, fees, and expenses of any arbitration or litigation in connection with this Agreement that results in any decision or settlement requiring the Company to make a payment to the Executive, including, without limitation, attorneys' fees of both the Executive and the Company, shall be borne by, and be 8 the obligation of, the Company. In no event shall the Executive be required to reimburse the Company for any of the costs and expenses incurred by the Company relating to arbitration or litigation. 10. MISCELLANEOUS 10.1 APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to principles of conflict of laws. 10.2 AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or modified otherwise than by a written agreement executed by the parties to this Agreement or their respective successors and legal representatives. No waiver by any party to this Agreement of any breach of any term, provision, or condition of this Agreement by the other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, or any prior or subsequent time. 10.3 NOTICES. All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other party, by facsimile transmission, by overnight courier, or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Robert D. Kincaid 36 Rippling Creek Dr. Sugar Land, Texas 77479 If to the Company: TPC Corporation 200 West Lake Park Boulevard Suite 1000 Houston, Texas 77079. 10.4 PAYMENT OBLIGATION ABSOLUTE. Subject to Section 5 and to Subsection 2.4, the obligations of the Company to pay the benefits described in Section 2 shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense, or other right which the Company may have against the Executive. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned by the Executive as a result of employment by another employer. 9 10.5 TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all federal, state, city, or other taxes that are required by any law or governmental regulation or ruling. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and the Company has caused this Agreement to be executed in its name and on its behalf, all as of the day and year first above written. TPC CORPORATION By: /s/ JOHN A. STROM ------------------------------ John A. Strom, President /s/ ROBERT D. KINCAID ---------------------------------- Robert D. Kincaid 10 EX-9 10 EXHIBIT 9 CHANGE IN CONTROL AGREEMENT This Agreement ("Agreement"), dated as of November 8, 1996, is made by and between TPC Corporation, a Delaware corporation (the "Company"), and Joseph J. DiNorscia (the "Executive"). RECITALS The Board of Directors of the Company (the "Board") has determined that it is in the best interest of the Company and its shareholders to ensure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a Change in Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by any pending or threatened Change in Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation arrangements upon a Change in Control that ensure that the compensation expectations of the Executive will be satisfied and that are competitive with those of other corporations. AGREEMENT NOW, THEREFORE, in consideration of the premises and covenants herein contained, and for other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. DEFINITIONS 1.1 BASE AMOUNT means the Executive's base amount on the date of the Change in Control, as determined in accordance with Code Section 280G. 1.2 BOARD means the Board of Directors of the Company. 1.3 CHANGE IN CONTROL shall mean any of the following events that occur during the Term of this Agreement: (a) The acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) a percentage of the then outstanding shares of common stock (assuming, for purposes of this definition, that all shares of Class B Common Stock have been converted into the same number of shares of Class A Common Stock) of the Company (the "Outstanding Company Common Stock") that, when added to the beneficial ownership previously held by that Person, and to the largest holding of beneficial ownership in Outstanding Company Common Stock by any other Person, equals or exceeds 50%, or (ii) a percentage of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") that, when added to the beneficial ownership previously held by that Person, and to the largest holding of beneficial ownership in Outstanding Company Voting Securities by any other Person, equals or exceeds 50%; provided, however, that for purposes of this subparagraph (a), the following acquisitions shall not in and of themselves constitute a Change in Control hereunder: (x) any acquisition of securities of the Company made directly from the Company and approved by a majority of the directors then comprising the Incumbent Board (as defined below), (y) any acquisition of beneficial ownership of a higher percentage of the Outstanding Company Common Stock or the Outstanding Company Voting Securities that results solely from the acquisition, purchase, or redemption of securities of the Company by the Company so long as such action by the Company was approved by a majority of the directors then comprising the Incumbent Board, or (z) any acquisition by any Company pursuant to a transaction that complies with clauses (i), (ii), and (iii) of subparagraph (c) hereof; or (b) Individuals who, as of November 8, 1996, constituted the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to November 8, 1996 whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all the assets of the Company (a 2 "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially owned, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any company resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all the Company's assets either directly or through one or more subsidiaries) or the combined voting power of the then outstanding voting securities of such company except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 1.4 CODE means the Internal Revenue Code of 1986, as amended. 1.5 COMPANY means TPC Corporation and any successor thereto. 1.6 DIRECTOR means a member of the Board. 1.7 DISABILITY has the same meaning as the definition of disability under the Company's long-term disability plan. 1.8 GOOD REASON shall mean any of the following: 3 (a) the assignment to the Executive of any duties inconsistent with the Executive's duties at the time of a Change in Control or a change in the Executive's reporting responsibilities as in effect immediately prior to the Change in Control, without the Executive's express written consent; or any removal of the Executive from or any failure to reelect the Executive to positions held by the Executive immediately prior to the Change in Control, except in connection with promotions to higher office; (b) a reduction in the Executive's total compensation as in effect immediately prior to the Change in Control; (c) the failure of the Company substantially to maintain and continue the Executive's relative level of participation in the same or substantially comparable bonus, stock incentive programs, and retirement and welfare benefit plans as provided immediately prior to the Change in Control; (d) the failure of the Company substantially to provide and continue for the Executive the same or substantially comparable fringe benefits; or (e) the Company's requiring the Executive to be based anywhere other than in or within 20 miles of the Executive's principal place of employment at the time of the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's prior business travel obligations or, in the event the Executive consents to relocation, the failure of the Company to pay (or reimburse the Executive for) all reasonable moving expenses incurred by the Executive relating to a change in the Executive's principal residence in connection with such relocation. 1.9 HOLDOVER PERIOD means the period following a Change in Control that (a) begins on the date that the Company provides the Executive with written notice that the Company requires the services of the Executive and (b) ends on the date specified in the notice but no later than six months after the date of the Change in Control. 1.10 PROTECTED PERIOD shall be the period of time beginning upon the later of (a) the date of a Change in Control or (b) the last day of the Executive's Holdover Period, and ending two years after such date. 1.11 RETENTION BONUS means the Executive's benefit, as described in Subsection 2.1 of this Agreement. 4 1.12 SEVERANCE COMPENSATION means the Executive's severance benefit, as described in Subsection 2.2 of this Agreement. 1.13 TERM has the meaning set forth in Section 8 of this Agreement. 1.14 TERMINATION OF EMPLOYMENT shall be deemed to have occurred for purposes of this Agreement and the Executive shall be entitled to the Severance Compensation hereunder if following a Change in Control that occurs during the Term of this Agreement, the Executive (a) is terminated by the Company during the Holdover Period or the Protected Period for any reason other than willful dishonesty or the commission of a felony for which he is convicted and which, in either case, may cause material harm to the Company, (b) terminates employment during the Protected Period where such termination in any way follows or results from a Good Reason, or (c) terminates employment during the Holdover Period where such termination in any way follows or results from a Good Reason described in Subsection 1.8(b)-(e) of this Agreement. The Executive is not entitled to benefits under this Agreement if he terminates service during the Holdover Period for a Good Reason described in Subsection 1.8(a) of this Agreement; provided, however, that immediately following the end of the Holdover Period, the Executive may have a Termination of Employment for a Good Reason described in Subsection 1.8(a) based on events that occurred during the Holdover Period. 2. BENEFITS 2.1 RETENTION BONUS. Upon a Change in Control, the Executive shall be entitled to a cash payment equal to the Base Amount as a Retention Bonus. The Retention Bonus shall be paid within three business days after the Change in Control. 2.2 SEVERANCE COMPENSATION. Upon Termination of Employment, the Executive shall be entitled to receive a cash payment equal to two times the Base Amount. The Severance Compensation shall be paid within three business days after the Termination of Employment. 2.3 HEALTH COVERAGE. Upon Termination of Employment, the Executive shall be entitled to receive continuing group medical and dental insurance coverage for a period of 24 months after Termination of Employment, at no cost to the Executive. 2.4 EXCEPTION TO BENEFIT ELIGIBILITY. The Executive shall not be entitled to receive any of the benefits under this Agreement if the Executive is one of the "Persons" (or a member of a group within the meaning of Section 13(d)(3) of the Exchange Act that constitutes the "Person") whose beneficial ownership results in a "Change in Control" under Subsection 1.3(a) or clause (ii) of Subsection 1.3(c) or if the Executive is (i) a general partner, executive officer, or director of any such 5 Person, (ii) a person controlling any such Person, (iii) a general partner, executive officer, or director of any person controlling any such person, or (iv) a beneficial owner of (x) any equity interest in any such Person or controlling person, if such Person or controlling person was formed for the purpose of engaging in the transaction resulting in the Change in Control or (y) more than 5% of the outstanding equity interest therein, if not so formed. 3. DEATH BENEFITS If the Executive's employment with the Company is terminated after a Change in Control and during the Protected Period due to death, the Executive shall receive no Severance Compensation under Subsection 2.2 of this Agreement; provided however, that if the Executive dies either (a) during the Holdover Period or (b) after a Termination of Employment, but prior to payment of all benefits under Section 2 of this Agreement, then the Executive's surviving spouse (or if no spouse survives the Executive, the Executive's estate) shall be entitled to the Severance Compensation. For purposes of this Section 3, the Executive will be deemed to be in a Holdover Period for the six-month period immediately following a Change in Control unless the Executive has received written notice from the Company stating that a Holdover Period is not applicable to the Executive or unless the time period prescribed by the Company for the Holdover Period has expired. The benefits prescribed herein are in addition to those available under applicable law and under the terms of the Company's benefit plans and programs. 4. DISABILITY BENEFITS If the Executive's employment with the Company is terminated after a Change in Control and during the Protected Period due to Disability, the Executive shall receive no Severance Compensation under Subsection 2.2 of this Agreement; provided, however, that if the Executive terminates employment due to Disability during the Holdover Period, the Executive shall receive Severance Compensation as if the date of termination due to Disability were the date of a Termination of Employment. For purposes of this Section 4, the Executive will be deemed to be in a Holdover Period for the six-month period immediately following a Change in Control unless the Executive has received written notice from the Company stating that a Holdover Period is not applicable to the Executive or unless the time period prescribed by the Company for the Holdover Period has expired. The Executive shall also be eligible for disability benefits available under applicable law and under the terms of the Company's benefit plans and programs. 6 5. CERTAIN REDUCTION IN PAYMENTS Notwithstanding anything to the contrary in this Agreement, the provisions of this Section 5 shall apply in the event that any payment or distribution (whether paid or payable, or distributed or distributable, pursuant to the terms of this Agreement or otherwise, but determined without regard to any reductions in payments required under this Section 5 (a "Payment")) to the Executive would constitute a "parachute payment" within the meaning of Code Section 280G; this Section 5 shall not be applicable if no such Payment to the Executive constitutes a parachute payment under Code Section 280G. In the event that a nationally recognized accounting firm chosen by the Company (the "Accounting Firm") shall determine that receipt of all Payments would subject the Executive to the excise tax imposed by Code Section 4999, then the aggregate present value of all Payments shall be reduced (but not below zero) such that such aggregate present value of Payments equals the Reduced Amount. If the Accounting Firm determines that some amount of Payments would result in a Reduced Amount, the Company shall promptly notify the Executive of the Accounting Firm's decision and further provide a copy of the detailed computations, and the Executive shall be entitled solely to the Reduced Amount. The Executive may then elect which of the Payments shall be eliminated or reduced (as long as after such election the present value, as determined in accordance with Code Section 280G(d)(4) ("Present Value"), of the aggregate Payments equals the Reduced Amount). The Executive shall advise the Company in writing of such election within 20 days of his receipt of notice. If no such election is made by the Executive within the 20-day period, the Company may elect which of such Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Payments equals the Reduced Amount) and shall promptly notify the Executive of such election. All fees and expenses of the Accounting Firm shall be borne solely by the Company. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Payments without causing any Payment to be nondeductible by the Company because of Code Section 280G or subject to an excise tax on the Executive under Code Section 4999. For purposes of this Section 5, Present Value shall be determined in accordance with Code Section 280G(d)(4). 7 6. NO CONTRACT OF EMPLOYMENT This Agreement shall not be construed so as to create a contract, promise, or guarantee of employment for any particular term or duration, in any particular position or assignment, or at any particular level of compensation or benefits. 7. NON-ALIENATION OF BENEFITS No right or benefit at any time under the Agreement shall be subject to alienation, sale, transfer, assignment, pledge, or any encumbrance of any kind. If the Executive shall attempt to or shall alienate, sell, transfer, assign, pledge, or otherwise encumber his or her rights, benefits, or amounts payable under the Agreement, or any part thereof, or if by reason of his bankruptcy or other events happening at any time, such benefits would otherwise be received by anyone else, the Company in its sole discretion may terminate his interest in any such right or benefit and hold or pay it to, or for the benefit of, such person, his spouse, children, or other dependents, or any of them as the Company may determine. 8. TERM OF THIS AGREEMENT The Term of this Agreement shall commence on the date of this Agreement and end on the first anniversary of that date; PROVIDED, HOWEVER, that the Term shall automatically be extended without further action by the parties for additional one-year periods, unless written notice of the Company's intention not to extend has been given to the Executive at least six months prior to the expiration of the then effective Term. This Agreement shall be void and of no effect if (i) a Change in Control occurs after the expiration of the Term, or (ii) the Executive's employment with the Company and its subsidiaries is terminated for any reason prior to a Change in Control. 9. RESOLUTION OF DISPUTES (a) Any disputes arising under or in connection with this Agreement shall be resolved, in the Executive's discretion, either (i) by arbitration, to be held in Houston, Texas in accordance with the rules and procedures of the American Arbitration Association, or (ii) by litigation. (b) All costs, fees, and expenses of any arbitration or litigation in connection with this Agreement that results in any decision or settlement requiring the Company to make a payment to the Executive, including, without limitation, attorneys' fees of both the Executive and the Company, shall be borne by, and be 8 the obligation of, the Company. In no event shall the Executive be required to reimburse the Company for any of the costs and expenses incurred by the Company relating to arbitration or litigation. 10. MISCELLANEOUS 10.1 APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to principles of conflict of laws. 10.2 AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or modified otherwise than by a written agreement executed by the parties to this Agreement or their respective successors and legal representatives. No waiver by any party to this Agreement of any breach of any term, provision, or condition of this Agreement by the other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, or any prior or subsequent time. 10.3 NOTICES. All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other party, by facsimile transmission, by overnight courier, or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Joseph J. DiNorscia 811 Thornvine Lane Houston, Texas 77079 If to the Company: TPC Corporation 200 West Lake Park Boulevard Suite 1000 Houston, Texas 77079. 10.4 PAYMENT OBLIGATION ABSOLUTE. Subject to Section 5 and to Subsection 2.4, the obligations of the Company to pay the benefits described in Section 2 shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense, or other right which the Company may have against the Executive. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned by the Executive as a result of employment by another employer. 9 10.5 TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all federal, state, city, or other taxes that are required by any law or governmental regulation or ruling. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and the Company has caused this Agreement to be executed in its name and on its behalf, all as of the day and year first above written. TPC CORPORATION By: /s/ JOHN A. STROM ------------------------------------ John A. Strom, President /s/ JOSEPH J. DINORSCIA --------------------------------------- Joseph J. DiNorscia 10 EX-10 11 EXHIBIT 10 CHANGE IN CONTROL AGREEMENT This Agreement ("Agreement"), dated as of November 8, 1996, is made by and between TPC Corporation, a Delaware corporation (the "Company"), and Marilyn I. Eckersley (the "Executive"). RECITALS The Board of Directors of the Company (the "Board") has determined that it is in the best interest of the Company and its shareholders to ensure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a Change in Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by any pending or threatened Change in Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation arrangements upon a Change in Control that ensure that the compensation expectations of the Executive will be satisfied and that are competitive with those of other corporations. AGREEMENT NOW, THEREFORE, in consideration of the premises and covenants herein contained, and for other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. DEFINITIONS 1.1 BASE AMOUNT means the Executive's base amount on the date of the Change in Control, as determined in accordance with Code Section 280G. 1.2 BOARD means the Board of Directors of the Company. 1.3 CHANGE IN CONTROL shall mean any of the following events that occur during the Term of this Agreement: (a) The acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) a percentage of the then outstanding shares of common stock (assuming, for purposes of this definition, that all shares of Class B Common Stock have been converted into the same number of shares of Class A Common Stock) of the Company (the "Outstanding Company Common Stock") that, when added to the beneficial ownership previously held by that Person, and to the largest holding of beneficial ownership in Outstanding Company Common Stock by any other Person, equals or exceeds 50%, or (ii) a percentage of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") that, when added to the beneficial ownership previously held by that Person, and to the largest holding of beneficial ownership in Outstanding Company Voting Securities by any other Person, equals or exceeds 50%; provided, however, that for purposes of this subparagraph (a), the following acquisitions shall not in and of themselves constitute a Change in Control hereunder: (x) any acquisition of securities of the Company made directly from the Company and approved by a majority of the directors then comprising the Incumbent Board (as defined below), (y) any acquisition of beneficial ownership of a higher percentage of the Outstanding Company Common Stock or the Outstanding Company Voting Securities that results solely from the acquisition, purchase, or redemption of securities of the Company by the Company so long as such action by the Company was approved by a majority of the directors then comprising the Incumbent Board, or (z) any acquisition by any Company pursuant to a transaction that complies with clauses (i), (ii), and (iii) of subparagraph (c) hereof; or (b) Individuals who, as of November 8, 1996, constituted the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to November 8, 1996 whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all the assets of the Company (a 2 "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially owned, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any company resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all the Company's assets either directly or through one or more subsidiaries) or the combined voting power of the then outstanding voting securities of such company except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 1.4 CODE means the Internal Revenue Code of 1986, as amended. 1.5 COMPANY means TPC Corporation and any successor thereto. 1.6 DIRECTOR means a member of the Board. 1.7 DISABILITY has the same meaning as the definition of disability under the Company's long-term disability plan. 1.8 GOOD REASON shall mean any of the following: (a) the assignment to the Executive of any duties inconsistent with the Executive's duties at the time of a Change in Control or a change in the 3 Executive's reporting responsibilities as in effect immediately prior to the Change in Control, without the Executive's express written consent; or any removal of the Executive from or any failure to reelect the Executive to positions held by the Executive immediately prior to the Change in Control, except in connection with promotions to higher office; (b) a reduction in the Executive's total compensation as in effect immediately prior to the Change in Control; (c) the failure of the Company substantially to maintain and continue the Executive's relative level of participation in the same or substantially comparable bonus, stock incentive programs, and retirement and welfare benefit plans as provided immediately prior to the Change in Control; (d) the failure of the Company substantially to provide and continue for the Executive the same or substantially comparable fringe benefits; or (e) the Company's requiring the Executive to be based anywhere other than in or within 20 miles of the Executive's principal place of employment at the time of the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's prior business travel obligations or, in the event the Executive consents to relocation, the failure of the Company to pay (or reimburse the Executive for) all reasonable moving expenses incurred by the Executive relating to a change in the Executive's principal residence in connection with such relocation. 1.9 HOLDOVER PERIOD means the period following a Change in Control that (a) begins on the date that the Company provides the Executive with written notice that the Company requires the services of the Executive and (b) ends on the date specified in the notice but no later than six months after the date of the Change in Control. 1.10 PROTECTED PERIOD shall be the period of time beginning upon the later of (a) the date of a Change in Control or (b) the last day of the Executive's Holdover Period, and ending two years after such date. 1.11 RETENTION BONUS means the Executive's benefit, as described in Subsection 2.1 of this Agreement. 1.12 SEVERANCE COMPENSATION means the Executive's severance benefit, as described in Subsection 2.2 of this Agreement. 4 1.13 TERM has the meaning set forth in Section 8 of this Agreement. 1.14 TERMINATION OF EMPLOYMENT shall be deemed to have occurred for purposes of this Agreement and the Executive shall be entitled to the Severance Compensation hereunder if following a Change in Control that occurs during the Term of this Agreement, the Executive (a) is terminated by the Company during the Holdover Period or the Protected Period for any reason other than willful dishonesty or the commission of a felony for which he is convicted and which, in either case, may cause material harm to the Company, (b) terminates employment during the Protected Period where such termination in any way follows or results from a Good Reason, or (c) terminates employment during the Holdover Period where such termination in any way follows or results from a Good Reason described in Subsection 1.8(b)-(e) of this Agreement. The Executive is not entitled to benefits under this Agreement if he terminates service during the Holdover Period for a Good Reason described in Subsection 1.8(a) of this Agreement; provided, however, that immediately following the end of the Holdover Period, the Executive may have a Termination of Employment for a Good Reason described in Subsection 1.8(a) based on events that occurred during the Holdover Period. 2. BENEFITS 2.1 RETENTION BONUS. Upon a Change in Control, the Executive shall be entitled to a cash payment equal to two-thirds times the Base Amount as a Retention Bonus. The Retention Bonus shall be paid within three business days after the Change in Control. 2.2 SEVERANCE COMPENSATION. Upon Termination of Employment, the Executive shall be entitled to receive a cash payment equal to four-thirds times the Base Amount. The Severance Compensation shall be paid within three business days after the Termination of Employment. 2.3 HEALTH COVERAGE. Upon Termination of Employment, the Executive shall be entitled to receive continuing group medical and dental insurance coverage for a period of 24 months after Termination of Employment, at no cost to the Executive. 2.4 EXCEPTION TO BENEFIT ELIGIBILITY. The Executive shall not be entitled to receive any of the benefits under this Agreement if the Executive is one of the "Persons" (or a member of a group within the meaning of Section 13(d)(3) of the Exchange Act that constitutes the "Person") whose beneficial ownership results in a "Change in Control" under Subsection 1.3(a) or clause (ii) of Subsection 1.3(c) or if the Executive is (i) a general partner, executive officer, or director of any such 5 Person, (ii) a person controlling any such Person, (iii) a general partner, executive officer, or director of any person controlling any such person, or (iv) a beneficial owner of (x) any equity interest in any such Person or controlling person, if such Person or controlling person was formed for the purpose of engaging in the transaction resulting in the Change in Control or (y) more than 5% of the outstanding equity interest therein, if not so formed. 3. DEATH BENEFITS If the Executive's employment with the Company is terminated after a Change in Control and during the Protected Period due to death, the Executive shall receive no Severance Compensation under Subsection 2.2 of this Agreement; provided however, that if the Executive dies either (a) during the Holdover Period or (b) after a Termination of Employment, but prior to payment of all benefits under Section 2 of this Agreement, then the Executive's surviving spouse (or if no spouse survives the Executive, the Executive's estate) shall be entitled to the Severance Compensation. For purposes of this Section 3, the Executive will be deemed to be in a Holdover Period for the six-month period immediately following a Change in Control unless the Executive has received written notice from the Company stating that a Holdover Period is not applicable to the Executive or unless the time period prescribed by the Company for the Holdover Period has expired. The benefits prescribed herein are in addition to those available under applicable law and under the terms of the Company's benefit plans and programs. 4. DISABILITY BENEFITS If the Executive's employment with the Company is terminated after a Change in Control and during the Protected Period due to Disability, the Executive shall receive no Severance Compensation under Subsection 2.2 of this Agreement; provided, however, that if the Executive terminates employment due to Disability during the Holdover Period, the Executive shall receive Severance Compensation as if the date of termination due to Disability were the date of a Termination of Employment. For purposes of this Section 4, the Executive will be deemed to be in a Holdover Period for the six-month period immediately following a Change in Control unless the Executive has received written notice from the Company stating that a Holdover Period is not applicable to the Executive or unless the time period prescribed by the Company for the Holdover Period has expired. The Executive shall also be eligible for disability benefits available under applicable law and under the terms of the Company's benefit plans and programs. 6 5. CERTAIN REDUCTION IN PAYMENTS Notwithstanding anything to the contrary in this Agreement, the provisions of this Section 5 shall apply in the event that any payment or distribution (whether paid or payable, or distributed or distributable, pursuant to the terms of this Agreement or otherwise, but determined without regard to any reductions in payments required under this Section 5 (a "Payment")) to the Executive would constitute a "parachute payment" within the meaning of Code Section 280G; this Section 5 shall not be applicable if no such Payment to the Executive constitutes a parachute payment under Code Section 280G. In the event that a nationally recognized accounting firm chosen by the Company (the "Accounting Firm") shall determine that receipt of all Payments would subject the Executive to the excise tax imposed by Code Section 4999, then the aggregate present value of all Payments shall be reduced (but not below zero) such that such aggregate present value of Payments equals the Reduced Amount. If the Accounting Firm determines that some amount of Payments would result in a Reduced Amount, the Company shall promptly notify the Executive of the Accounting Firm's decision and further provide a copy of the detailed computations, and the Executive shall be entitled solely to the Reduced Amount. The Executive may then elect which of the Payments shall be eliminated or reduced (as long as after such election the present value, as determined in accordance with Code Section 280G(d)(4) ("Present Value"), of the aggregate Payments equals the Reduced Amount). The Executive shall advise the Company in writing of such election within 20 days of his receipt of notice. If no such election is made by the Executive within the 20-day period, the Company may elect which of such Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Payments equals the Reduced Amount) and shall promptly notify the Executive of such election. All fees and expenses of the Accounting Firm shall be borne solely by the Company. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Payments without causing any Payment to be nondeductible by the Company because of Code Section 280G or subject to an excise tax on the Executive under Code Section 4999. For purposes of this Section 5, Present Value shall be determined in accordance with Code Section 280G(d)(4). 7 6. NO CONTRACT OF EMPLOYMENT This Agreement shall not be construed so as to create a contract, promise, or guarantee of employment for any particular term or duration, in any particular position or assignment, or at any particular level of compensation or benefits. 7. NON-ALIENATION OF BENEFITS No right or benefit at any time under the Agreement shall be subject to alienation, sale, transfer, assignment, pledge, or any encumbrance of any kind. If the Executive shall attempt to or shall alienate, sell, transfer, assign, pledge, or otherwise encumber his or her rights, benefits, or amounts payable under the Agreement, or any part thereof, or if by reason of his bankruptcy or other events happening at any time, such benefits would otherwise be received by anyone else, the Company in its sole discretion may terminate his interest in any such right or benefit and hold or pay it to, or for the benefit of, such person, his spouse, children, or other dependents, or any of them as the Company may determine. 8. TERM OF THIS AGREEMENT The Term of this Agreement shall commence on the date of this Agreement and end on the first anniversary of that date; PROVIDED, HOWEVER, that the Term shall automatically be extended without further action by the parties for additional one-year periods, unless written notice of the Company's intention not to extend has been given to the Executive at least six months prior to the expiration of the then effective Term. This Agreement shall be void and of no effect if (i) a Change in Control occurs after the expiration of the Term, or (ii) the Executive's employment with the Company and its subsidiaries is terminated for any reason prior to a Change in Control. 9. RESOLUTION OF DISPUTES (a) Any disputes arising under or in connection with this Agreement shall be resolved, in the Executive's discretion, either (i) by arbitration, to be held in Houston, Texas in accordance with the rules and procedures of the American Arbitration Association, or (ii) by litigation. (b) All costs, fees, and expenses of any arbitration or litigation in connection with this Agreement that results in any decision or settlement requiring the Company to make a payment to the Executive, including, without limitation, attorneys' fees of both the Executive and the Company, shall be borne by, and be 8 the obligation of, the Company. In no event shall the Executive be required to reimburse the Company for any of the costs and expenses incurred by the Company relating to arbitration or litigation. 10. MISCELLANEOUS 10.1 APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to principles of conflict of laws. 10.2 AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or modified otherwise than by a written agreement executed by the parties to this Agreement or their respective successors and legal representatives. No waiver by any party to this Agreement of any breach of any term, provision, or condition of this Agreement by the other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, or any prior or subsequent time. 10.3 NOTICES. All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other party, by facsimile transmission, by overnight courier, or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Marilyn I. Eckersley Rt. 3, Box 37A. Hempstead, Texas 77445 If to the Company: TPC Corporation 200 West Lake Park Boulevard Suite 1000 Houston, Texas 77079. 10.4 PAYMENT OBLIGATION ABSOLUTE. Subject to Section 5 and to Subsection 2.4, the obligations of the Company to pay the benefits described in Section 2 shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense, or other right which the Company may have against the Executive. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned by the Executive as a result of employment by another employer. 9 10.5 TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all federal, state, city, or other taxes that are required by any law or governmental regulation or ruling. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and the Company has caused this Agreement to be executed in its name and on its behalf, all as of the day and year first above written. TPC CORPORATION By: /s/ JOHN A. STROM ---------------------------------- John A. Strom, President /s/ MARILYN I. ECKERSLEY ---------------------------------- Marilyn I. Eckersley 10 EX-11 12 EXHIBIT 11 CHANGE IN CONTROL AGREEMENT This Agreement ("Agreement"), dated as of November 8, 1996, is made by and between TPC Corporation, a Delaware corporation (the "Company"), and Patrick J. Peldner (the "Executive"). RECITALS The Board of Directors of the Company (the "Board") has determined that it is in the best interest of the Company and its shareholders to ensure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a Change in Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by any pending or threatened Change in Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation arrangements upon a Change in Control that ensure that the compensation expectations of the Executive will be satisfied and that are competitive with those of other corporations. AGREEMENT NOW, THEREFORE, in consideration of the premises and covenants herein contained, and for other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. DEFINITIONS 1.1 BASE AMOUNT means the Executive's base amount on the date of the Change in Control, as determined in accordance with Code Section 280G. 1.2 BOARD means the Board of Directors of the Company. 1.3 CHANGE IN CONTROL shall mean any of the following events that occur during the Term of this Agreement: (a) The acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) a percentage of the then outstanding shares of common stock (assuming, for purposes of this definition, that all shares of Class B Common Stock have been converted into the same number of shares of Class A Common Stock) of the Company (the "Outstanding Company Common Stock") that, when added to the beneficial ownership previously held by that Person, and to the largest holding of beneficial ownership in Outstanding Company Common Stock by any other Person, equals or exceeds 50%, or (ii) a percentage of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") that, when added to the beneficial ownership previously held by that Person, and to the largest holding of beneficial ownership in Outstanding Company Voting Securities by any other Person, equals or exceeds 50%; provided, however, that for purposes of this subparagraph (a), the following acquisitions shall not in and of themselves constitute a Change in Control hereunder: (x) any acquisition of securities of the Company made directly from the Company and approved by a majority of the directors then comprising the Incumbent Board (as defined below), (y) any acquisition of beneficial ownership of a higher percentage of the Outstanding Company Common Stock or the Outstanding Company Voting Securities that results solely from the acquisition, purchase, or redemption of securities of the Company by the Company so long as such action by the Company was approved by a majority of the directors then comprising the Incumbent Board, or (z) any acquisition by any Company pursuant to a transaction that complies with clauses (i), (ii), and (iii) of subparagraph (c) hereof; or (b) Individuals who, as of November 8, 1996, constituted the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to November 8, 1996 whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all the assets of the Company (a 2 "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially owned, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any company resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all the Company's assets either directly or through one or more subsidiaries) or the combined voting power of the then outstanding voting securities of such company except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 1.4 CODE means the Internal Revenue Code of 1986, as amended. 1.5 COMPANY means TPC Corporation and any successor thereto. 1.6 DIRECTOR means a member of the Board. 1.7 DISABILITY has the same meaning as the definition of disability under the Company's long-term disability plan. 1.8 GOOD REASON shall mean any of the following: 3 (a) the assignment to the Executive of any duties inconsistent with the Executive's duties at the time of a Change in Control or a change in the Executive's reporting responsibilities as in effect immediately prior to the Change in Control, without the Executive's express written consent; or any removal of the Executive from or any failure to reelect the Executive to positions held by the Executive immediately prior to the Change in Control, except in connection with promotions to higher office; (b) a reduction in the Executive's total compensation as in effect immediately prior to the Change in Control; (c) the failure of the Company substantially to maintain and continue the Executive's relative level of participation in the same or substantially comparable bonus, stock incentive programs, and retirement and welfare benefit plans as provided immediately prior to the Change in Control; (d) the failure of the Company substantially to provide and continue for the Executive the same or substantially comparable fringe benefits; or (e) the Company's requiring the Executive to be based anywhere other than in or within 20 miles of the Executive's principal place of employment at the time of the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's prior business travel obligations or, in the event the Executive consents to relocation, the failure of the Company to pay (or reimburse the Executive for) all reasonable moving expenses incurred by the Executive relating to a change in the Executive's principal residence in connection with such relocation. 1.9 HOLDOVER PERIOD means the period following a Change in Control that (a) begins on the date that the Company provides the Executive with written notice that the Company requires the services of the Executive and (b) ends on the date specified in the notice but no later than six months after the date of the Change in Control. 1.10 PROTECTED PERIOD shall be the period of time beginning upon the later of (a) the date of a Change in Control or (b) the last day of the Executive's Holdover Period, and ending two years after such date. 1.11 RETENTION BONUS means the Executive's benefit, as described in Subsection 2.1 of this Agreement. 4 1.12 SEVERANCE COMPENSATION means the Executive's severance benefit, as described in Subsection 2.2 of this Agreement. 1.13 TERM has the meaning set forth in Section 8 of this Agreement. 1.14 TERMINATION OF EMPLOYMENT shall be deemed to have occurred for purposes of this Agreement and the Executive shall be entitled to the Severance Compensation hereunder if following a Change in Control that occurs during the Term of this Agreement, the Executive (a) is terminated by the Company during the Holdover Period or the Protected Period for any reason other than willful dishonesty or the commission of a felony for which he is convicted and which, in either case, may cause material harm to the Company, (b) terminates employment during the Protected Period where such termination in any way follows or results from a Good Reason, or (c) terminates employment during the Holdover Period where such termination in any way follows or results from a Good Reason described in Subsection 1.8(b)-(e) of this Agreement. The Executive is not entitled to benefits under this Agreement if he terminates service during the Holdover Period for a Good Reason described in Subsection 1.8(a) of this Agreement; provided, however, that immediately following the end of the Holdover Period, the Executive may have a Termination of Employment for a Good Reason described in Subsection 1.8(a) based on events that occurred during the Holdover Period. 2. BENEFITS 2.1 RETENTION BONUS. Upon a Change in Control, the Executive shall be entitled to a cash payment equal to two-thirds times the Base Amount as a Retention Bonus. The Retention Bonus shall be paid within three business days after the Change in Control. 2.2 SEVERANCE COMPENSATION. Upon Termination of Employment, the Executive shall be entitled to receive a cash payment equal to four-thirds times the Base Amount. The Severance Compensation shall be paid within three business days after the Termination of Employment. 2.3 HEALTH COVERAGE. Upon Termination of Employment, the Executive shall be entitled to receive continuing group medical and dental insurance coverage for a period of 24 months after Termination of Employment, at no cost to the Executive. 2.4 EXCEPTION TO BENEFIT ELIGIBILITY. The Executive shall not be entitled to receive any of the benefits under this Agreement if the Executive is one of the "Persons" (or a member of a group within the meaning of Section 13(d)(3) of the Exchange Act that constitutes the "Person") whose beneficial ownership results in a "Change in Control" under Subsection 1.3(a) or clause (ii) of Subsection 1.3(c) or if the Executive is (i) a general partner, executive officer, or director of any such 5 Person, (ii) a person controlling any such Person, (iii) a general partner , executive officer, or director of any person controlling any such person, or (iv) a beneficial owner of (x) any equity interest in any such Person or controlling person, if such Person or controlling person was formed for the purpose of engaging in the transaction resulting in the Change in Control or (y) more than 5% of the outstanding equity interest therein, if not so formed. 3. DEATH BENEFITS If the Executive's employment with the Company is terminated after a Change in Control and during the Protected Period due to death, the Executive shall receive no Severance Compensation under Subsection 2.2 of this Agreement; provided however, that if the Executive dies either (a) during the Holdover Period or (b) after a Termination of Employment, but prior to payment of all benefits under Section 2 of this Agreement, then the Executive's surviving spouse (or if no spouse survives the Executive, the Executive's estate) shall be entitled to the Severance Compensation. For purposes of this Section 3, the Executive will be deemed to be in a Holdover Period for the six-month period immediately following a Change in Control unless the Executive has received written notice from the Company stating that a Holdover Period is not applicable to the Executive or unless the time period prescribed by the Company for the Holdover Period has expired. The benefits prescribed herein are in addition to those available under applicable law and under the terms of the Company's benefit plans and programs. 4. DISABILITY BENEFITS If the Executive's employment with the Company is terminated after a Change in Control and during the Protected Period due to Disability, the Executive shall receive no Severance Compensation under Subsection 2.2 of this Agreement; provided, however, that if the Executive terminates employment due to Disability during the Holdover Period, the Executive shall receive Severance Compensation as if the date of termination due to Disability were the date of a Termination of Employment. For purposes of this Section 4, the Executive will be deemed to be in a Holdover Period for the six-month period immediately following a Change in Control unless the Executive has received written notice from the Company stating that a Holdover Period is not applicable to the Executive or unless the time period prescribed by the Company for the Holdover Period has expired. The Executive shall also be eligible for disability benefits available under applicable law and under the terms of the Company's benefit plans and programs. 6 5. CERTAIN REDUCTION IN PAYMENTS Notwithstanding anything to the contrary in this Agreement, the provisions of this Section 5 shall apply in the event that any payment or distribution (whether paid or payable, or distributed or distributable, pursuant to the terms of this Agreement or otherwise, but determined without regard to any reductions in payments required under this Section 5 (a "Payment")) to the Executive would constitute a "parachute payment" within the meaning of Code Section 280G; this Section 5 shall not be applicable if no such Payment to the Executive constitutes a parachute payment under Code Section 280G. In the event that a nationally recognized accounting firm chosen by the Company (the "Accounting Firm") shall determine that receipt of all Payments would subject the Executive to the excise tax imposed by Code Section 4999, then the aggregate present value of all Payments shall be reduced (but not below zero) such that such aggregate present value of Payments equals the Reduced Amount. If the Accounting Firm determines that some amount of Payments would result in a Reduced Amount, the Company shall promptly notify the Executive of the Accounting Firm's decision and further provide a copy of the detailed computations, and the Executive shall be entitled solely to the Reduced Amount. The Executive may then elect which of the Payments shall be eliminated or reduced (as long as after such election the present value, as determined in accordance with Code Section 280G(d)(4) ("Present Value"), of the aggregate Payments equals the Reduced Amount). The Executive shall advise the Company in writing of such election within 20 days of his receipt of notice. If no such election is made by the Executive within the 20-day period, the Company may elect which of such Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Payments equals the Reduced Amount) and shall promptly notify the Executive of such election. All fees and expenses of the Accounting Firm shall be borne solely by the Company. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Payments without causing any Payment to be nondeductible by the Company because of Code Section 280G or subject to an excise tax on the Executive under Code Section 4999. For purposes of this Section 5, Present Value shall be determined in accordance with Code Section 280G(d)(4). 7 6. NO CONTRACT OF EMPLOYMENT This Agreement shall not be construed so as to create a contract, promise, or guarantee of employment for any particular term or duration, in any particular position or assignment, or at any particular level of compensation or benefits. 7. NON-ALIENATION OF BENEFITS No right or benefit at any time under the Agreement shall be subject to alienation, sale, transfer, assignment, pledge, or any encumbrance of any kind. If the Executive shall attempt to or shall alienate, sell, transfer, assign, pledge, or otherwise encumber his or her rights, benefits, or amounts payable under the Agreement, or any part thereof, or if by reason of his bankruptcy or other events happening at any time, such benefits would otherwise be received by anyone else, the Company in its sole discretion may terminate his interest in any such right or benefit and hold or pay it to, or for the benefit of, such person, his spouse, children, or other dependents, or any of them as the Company may determine. 8. TERM OF THIS AGREEMENT The Term of this Agreement shall commence on the date of this Agreement and end on the first anniversary of that date; PROVIDED, HOWEVER, that the Term shall automatically be extended without further action by the parties for additional one-year periods, unless written notice of the Company's intention not to extend has been given to the Executive at least six months prior to the expiration of the then effective Term. This Agreement shall be void and of no effect if (i) a Change in Control occurs after the expiration of the Term, or (ii) the Executive's employment with the Company and its subsidiaries is terminated for any reason prior to a Change in Control. 9. RESOLUTION OF DISPUTES (a) Any disputes arising under or in connection with this Agreement shall be resolved, in the Executive's discretion, either (i) by arbitration, to be held in Houston, Texas in accordance with the rules and procedures of the American Arbitration Association, or (ii) by litigation. (b) All costs, fees, and expenses of any arbitration or litigation in connection with this Agreement that results in any decision or settlement requiring the Company to make a payment to the Executive, including, without limitation, attorneys' fees of both the Executive and the Company, shall be borne by, and be 8 the obligation of, the Company. In no event shall the Executive be required to reimburse the Company for any of the costs and expenses incurred by the Company relating to arbitration or litigation. 10. MISCELLANEOUS 10.1 APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to principles of conflict of laws. 10.2 AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or modified otherwise than by a written agreement executed by the parties to this Agreement or their respective successors and legal representatives. No waiver by any party to this Agreement of any breach of any term, provision, or condition of this Agreement by the other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, or any prior or subsequent time. 10.3 NOTICES. All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other party, by facsimile transmission, by overnight courier, or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Patrick J. Peldner 22210 Bay Spring Dr. Katy, Texas 77450 If to the Company: TPC Corporation 200 West Lake Park Boulevard Suite 1000 Houston, Texas 77079. 10.4 PAYMENT OBLIGATION ABSOLUTE. Subject to Section 5 and to Subsection 2.4, the obligations of the Company to pay the benefits described in Section 2 shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense, or other right which the Company may have against the Executive. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned by the Executive as a result of employment by another employer. 9 10.5 TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all federal, state, city, or other taxes that are required by any law or governmental regulation or ruling. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and the Company has caused this Agreement to be executed in its name and on its behalf, all as of the day and year first above written. TPC CORPORATION By: /s/ JOHN A. STROM -------------------------- John A. Strom, President /s/ PATRICK J. PELDNER -------------------------- Patrick J. Peldner 10 EX-12 13 EXHIBIT 12 CHANGE IN CONTROL AGREEMENT This Agreement ("Agreement"), dated as of November 8, 1996, is made by and between TPC Corporation, a Delaware corporation (the "Company"), and D. Hughes Watler, Jr. (the "Executive"). RECITALS The Board of Directors of the Company (the "Board") has determined that it is in the best interest of the Company and its shareholders to ensure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a Change in Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by any pending or threatened Change in Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation arrangements upon a Change in Control that ensure that the compensation expectations of the Executive will be satisfied and that are competitive with those of other corporations. AGREEMENT NOW, THEREFORE, in consideration of the premises and covenants herein contained, and for other good and valuable consideration, the Company and the Executive hereby agree as follows: 1. DEFINITIONS 1.1 BASE AMOUNT means the Executive's base amount on the date of the Change in Control, as determined in accordance with Code Section 280G. 1.2 BOARD means the Board of Directors of the Company. 1.3 CHANGE IN CONTROL shall mean any of the following events that occur during the Term of this Agreement: (a) The acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) a percentage of the then outstanding shares of common stock (assuming, for purposes of this definition, that all shares of Class B Common Stock have been converted into the same number of shares of Class A Common Stock) of the Company (the "Outstanding Company Common Stock") that, when added to the beneficial ownership previously held by that Person, and to the largest holding of beneficial ownership in Outstanding Company Common Stock by any other Person, equals or exceeds 50%, or (ii) a percentage of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities") that, when added to the beneficial ownership previously held by that Person, and to the largest holding of beneficial ownership in Outstanding Company Voting Securities by any other Person, equals or exceeds 50%; provided, however, that for purposes of this subparagraph (a), the following acquisitions shall not in and of themselves constitute a Change in Control hereunder: (x) any acquisition of securities of the Company made directly from the Company and approved by a majority of the directors then comprising the Incumbent Board (as defined below), (y) any acquisition of beneficial ownership of a higher percentage of the Outstanding Company Common Stock or the Outstanding Company Voting Securities that results solely from the acquisition, purchase, or redemption of securities of the Company by the Company so long as such action by the Company was approved by a majority of the directors then comprising the Incumbent Board, or (z) any acquisition by any Company pursuant to a transaction that complies with clauses (i), (ii), and (iii) of subparagraph (c) hereof; or (b) Individuals who, as of November 8, 1996, constituted the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to November 8, 1996 whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all the assets of the Company (a 2 "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially owned, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any company resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of, respectively, the then outstanding shares of common stock of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all the Company's assets either directly or through one or more subsidiaries) or the combined voting power of the then outstanding voting securities of such company except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 1.4 CODE means the Internal Revenue Code of 1986, as amended. 1.5 COMPANY means TPC Corporation and any successor thereto. 1.6 DIRECTOR means a member of the Board. 1.7 DISABILITY has the same meaning as the definition of disability under the Company's long-term disability plan. 1.8 GOOD REASON shall mean any of the following: 3 (a) the assignment to the Executive of any duties inconsistent with the Executive's duties at the time of a Change in Control or a change in the Executive's reporting responsibilities as in effect immediately prior to the Change in Control, without the Executive's express written consent; or any removal of the Executive from or any failure to reelect the Executive to positions held by the Executive immediately prior to the Change in Control, except in connection with promotions to higher office; (b) a reduction in the Executive's total compensation as in effect immediately prior to the Change in Control; (c) the failure of the Company substantially to maintain and continue the Executive's relative level of participation in the same or substantially comparable bonus, stock incentive programs, and retirement and welfare benefit plans as provided immediately prior to the Change in Control; (d) the failure of the Company substantially to provide and continue for the Executive the same or substantially comparable fringe benefits; or (e) the Company's requiring the Executive to be based anywhere other than in or within 20 miles of the Executive's principal place of employment at the time of the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's prior business travel obligations or, in the event the Executive consents to relocation, the failure of the Company to pay (or reimburse the Executive for) all reasonable moving expenses incurred by the Executive relating to a change in the Executive's principal residence in connection with such relocation. 1.9 HOLDOVER PERIOD means the period following a Change in Control that (a) begins on the date that the Company provides the Executive with written notice that the Company requires the services of the Executive and (b) ends on the date specified in the notice but no later than six months after the date of the Change in Control. 1.10 PROTECTED PERIOD shall be the period of time beginning upon the later of (a) the date of a Change in Control or (b) the last day of the Executive's Holdover Period, and ending two years after such date. 1.11 RETENTION BONUS means the Executive's benefit, as described in Subsection 2.1 of this Agreement. 4 1.12 SEVERANCE COMPENSATION means the Executive's severance benefit, as described in Subsection 2.2 of this Agreement. 1.13 TERM has the meaning set forth in Section 8 of this Agreement. 1.14 TERMINATION OF EMPLOYMENT shall be deemed to have occurred for purposes of this Agreement and the Executive shall be entitled to the Severance Compensation hereunder if following a Change in Control that occurs during the Term of this Agreement, the Executive (a) is terminated by the Company during the Holdover Period or the Protected Period for any reason other than willful dishonesty or the commission of a felony for which he is convicted and which, in either case, may cause material harm to the Company, (b) terminates employment during the Protected Period where such termination in any way follows or results from a Good Reason, or (c) terminates employment during the Holdover Period where such termination in any way follows or results from a Good Reason described in Subsection 1.8(b)-(e) of this Agreement. The Executive is not entitled to benefits under this Agreement if he terminates service during the Holdover Period for a Good Reason described in Subsection 1.8(a) of this Agreement; provided, however, that immediately following the end of the Holdover Period, the Executive may have a Termination of Employment for a Good Reason described in Subsection 1.8(a) based on events that occurred during the Holdover Period. 2. BENEFITS 2.1 RETENTION BONUS. Upon a Change in Control, the Executive shall be entitled to a cash payment equal to two-thirds times the Base Amount as a Retention Bonus. The Retention Bonus shall be paid within three business days after the Change in Control. 2.2 SEVERANCE COMPENSATION. Upon Termination of Employment, the Executive shall be entitled to receive a cash payment equal to four-thirds times the Base Amount. The Severance Compensation shall be paid within three business days after the Termination of Employment. 2.3 HEALTH COVERAGE. Upon Termination of Employment, the Executive shall be entitled to receive continuing group medical and dental insurance coverage for a period of 24 months after Termination of Employment, at no cost to the Executive. 2.4 EXCEPTION TO BENEFIT ELIGIBILITY. The Executive shall not be entitled to receive any of the benefits under this Agreement if the Executive is one of the "Persons" (or a member of a group within the meaning of Section 13(d)(3) of the Exchange Act that constitutes the "Person") whose beneficial ownership results in a "Change in Control" under Subsection 1.3(a) or clause (ii) of Subsection 1.3(c) or if the Executive is (i) a general partner, executive officer, or director of any such 5 Person, (ii) a person controlling any such Person, (iii) a general partner , executive officer, or director of any person controlling any such person, or (iv) a beneficial owner of (x) any equity interest in any such Person or controlling person, if such Person or controlling person was formed for the purpose of engaging in the transaction resulting in the Change in Control or (y) more than 5% of the outstanding equity interest therein, if not so formed. 3. DEATH BENEFITS If the Executive's employment with the Company is terminated after a Change in Control and during the Protected Period due to death, the Executive shall receive no Severance Compensation under Subsection 2.2 of this Agreement; provided however, that if the Executive dies either (a) during the Holdover Period or (b) after a Termination of Employment, but prior to payment of all benefits under Section 2 of this Agreement, then the Executive's surviving spouse (or if no spouse survives the Executive, the Executive's estate) shall be entitled to the Severance Compensation. For purposes of this Section 3, the Executive will be deemed to be in a Holdover Period for the six-month period immediately following a Change in Control unless the Executive has received written notice from the Company stating that a Holdover Period is not applicable to the Executive or unless the time period prescribed by the Company for the Holdover Period has expired. The benefits prescribed herein are in addition to those available under applicable law and under the terms of the Company's benefit plans and programs. 4. DISABILITY BENEFITS If the Executive's employment with the Company is terminated after a Change in Control and during the Protected Period due to Disability, the Executive shall receive no Severance Compensation under Subsection 2.2 of this Agreement; provided, however, that if the Executive terminates employment due to Disability during the Holdover Period, the Executive shall receive Severance Compensation as if the date of termination due to Disability were the date of a Termination of Employment. For purposes of this Section 4, the Executive will be deemed to be in a Holdover Period for the six-month period immediately following a Change in Control unless the Executive has received written notice from the Company stating that a Holdover Period is not applicable to the Executive or unless the time period prescribed by the Company for the Holdover Period has expired. The Executive shall also be eligible for disability benefits available under applicable law and under the terms of the Company's benefit plans and programs. 6 5. CERTAIN REDUCTION IN PAYMENTS Notwithstanding anything to the contrary in this Agreement, the provisions of this Section 5 shall apply in the event that any payment or distribution (whether paid or payable, or distributed or distributable, pursuant to the terms of this Agreement or otherwise, but determined without regard to any reductions in payments required under this Section 5 (a "Payment")) to the Executive would constitute a "parachute payment" within the meaning of Code Section 280G; this Section 5 shall not be applicable if no such Payment to the Executive constitutes a parachute payment under Code Section 280G. In the event that a nationally recognized accounting firm chosen by the Company (the "Accounting Firm") shall determine that receipt of all Payments would subject the Executive to the excise tax imposed by Code Section 4999, then the aggregate present value of all Payments shall be reduced (but not below zero) such that such aggregate present value of Payments equals the Reduced Amount. If the Accounting Firm determines that some amount of Payments would result in a Reduced Amount, the Company shall promptly notify the Executive of the Accounting Firm's decision and further provide a copy of the detailed computations, and the Executive shall be entitled solely to the Reduced Amount. The Executive may then elect which of the Payments shall be eliminated or reduced (as long as after such election the present value, as determined in accordance with Code Section 280G(d)(4) ("Present Value"), of the aggregate Payments equals the Reduced Amount). The Executive shall advise the Company in writing of such election within 20 days of his receipt of notice. If no such election is made by the Executive within the 20-day period, the Company may elect which of such Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Payments equals the Reduced Amount) and shall promptly notify the Executive of such election. All fees and expenses of the Accounting Firm shall be borne solely by the Company. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Payments without causing any Payment to be nondeductible by the Company because of Code Section 280G or subject to an excise tax on the Executive under Code Section 4999. For purposes of this Section 5, Present Value shall be determined in accordance with Code Section 280G(d)(4). 7 6. NO CONTRACT OF EMPLOYMENT This Agreement shall not be construed so as to create a contract, promise, or guarantee of employment for any particular term or duration, in any particular position or assignment, or at any particular level of compensation or benefits. 7. NON-ALIENATION OF BENEFITS No right or benefit at any time under the Agreement shall be subject to alienation, sale, transfer, assignment, pledge, or any encumbrance of any kind. If the Executive shall attempt to or shall alienate, sell, transfer, assign, pledge, or otherwise encumber his or her rights, benefits, or amounts payable under the Agreement, or any part thereof, or if by reason of his bankruptcy or other events happening at any time, such benefits would otherwise be received by anyone else, the Company in its sole discretion may terminate his interest in any such right or benefit and hold or pay it to, or for the benefit of, such person, his spouse, children, or other dependents, or any of them as the Company may determine. 8. TERM OF THIS AGREEMENT The Term of this Agreement shall commence on the date of this Agreement and end on the first anniversary of that date; PROVIDED, HOWEVER, that the Term shall automatically be extended without further action by the parties for additional one-year periods, unless written notice of the Company's intention not to extend has been given to the Executive at least six months prior to the expiration of the then effective Term. This Agreement shall be void and of no effect if (i) a Change in Control occurs after the expiration of the Term, or (ii) the Executive's employment with the Company and its subsidiaries is terminated for any reason prior to a Change in Control. 9. RESOLUTION OF DISPUTES (a) Any disputes arising under or in connection with this Agreement shall be resolved, in the Executive's discretion, either (i) by arbitration, to be held in Houston, Texas in accordance with the rules and procedures of the American Arbitration Association, or (ii) by litigation. (b) All costs, fees, and expenses of any arbitration or litigation in connection with this Agreement that results in any decision or settlement requiring the Company to make a payment to the Executive, including, without limitation, attorneys' fees of both the Executive and the Company, shall be borne by, and be 8 the obligation of, the Company. In no event shall the Executive be required to reimburse the Company for any of the costs and expenses incurred by the Company relating to arbitration or litigation. 10. MISCELLANEOUS 10.1 APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to principles of conflict of laws. 10.2 AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or modified otherwise than by a written agreement executed by the parties to this Agreement or their respective successors and legal representatives. No waiver by any party to this Agreement of any breach of any term, provision, or condition of this Agreement by the other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, or any prior or subsequent time. 10.3 NOTICES. All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other party, by facsimile transmission, by overnight courier, or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: D. Hughes Watler, Jr. 23 Woodsborough Circle. Houston, Texas 77055 If to the Company: TPC Corporation 200 West Lake Park Boulevard Suite 1000 Houston, Texas 77079. 10.4 PAYMENT OBLIGATION ABSOLUTE. Subject to Section 5 and to Subsection 2.4, the obligations of the Company to pay the benefits described in Section 2 shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense, or other right which the Company may have against the Executive. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned by the Executive as a result of employment by another employer. 9 10.5 TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all federal, state, city, or other taxes that are required by any law or governmental regulation or ruling. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and the Company has caused this Agreement to be executed in its name and on its behalf, all as of the day and year first above written. TPC CORPORATION By: /s/ John A. Strom ------------------------------- John A. Strom, President /s/ D. Hughes Watler, Jr. ---------------------------------- D. Hughes Watler, Jr. 10 EX-13 14 EXHIBIT 13 TPC CORPORATION SIGNS AGREEMENT TO BE ACQUIRED BY PACIFICORP HOLDINGS, INC. Houston, Texas (March 12, 1997) -- TPC Corporation (NYSE: TPC) announced today that TPC has entered into a definitive merger agreement with PacifiCorp Holdings, Inc., a wholly owned subsidiary of PacifiCorp (NYSE:PPW), of Portland, Oregon. Under the terms of the merger agreement, which was approved by TPC's Board of Directors at a meeting held yesterday, PacifiCorp, through a subsidiary, will commence a tender offer on Tuesday, March 18, 1997, to purchase all outstanding shares of TPC common stock for $13.41 per share. The aggregate purchase price for outstanding shares and stock options is expected to be approximately $288 million. The tender offer will be conditioned upon, among other things, the tender of TPC shares which represented at least a majority of the outstanding shares on a fully-diluted basis. In addition, the agreement provides that if it is terminated under specified circumstances, PacifiCorp will be entitled to receive from TPC a fee of $9 million. In the merger to occur following consummation of the tender offer, each share of TPC common stock which is outstanding and not purchased pursuant to the tender offer will be converted into the right to receive $13.41 in cash. PacifiCorp and TPC expect that the necessary filings with the Securities and Exchange Commission in connection with the tender offer will be made early next week, and that the tender offer documents will be mailed to TPC's shareholders promptly thereafter. -more- The transaction is the culmination of an exploration of strategic alternatives for increasing shareholder value that TPC's Board of Directors began last fall. Larry W. Bickle, chairman and chief executive officer of TPC, said, "TPC is excited to be able to combine its business with PacifiCorp. The acquisition recognizes the great progress TPC has made in expanding our gathering and processing business, our gas marketing operations, and our gas storage business through Market Hub Partners. The combination of our company and PacifiCorp makes us a formidable competitor in eastern energy markets." "This transaction is key in establishing PacifiCorp as full service energy company," said Fred Buckman, PacifiCorp president and chief executive officer. "To successfully compete, energy companies need to have the skills and assets that enable them to meet all aspects of customers' energy needs, be they electricity, gas or coal." Dennis Steinberg, PacifiCorp senior vice president of global sales and marketing, added, "Customers tell us they want to deal with an energy provider who can take care of their total energy needs. So we have taken this significant step toward building gas capabilities into our energy marketing portfolio." TPC Corporation was represented in the transaction by Lehman Brothers as financial advisors, and Baker & Botts, L.L.P., as legal advisors. For the year ended December 31, 1996, TPC had revenue of $617 million and net income of $5 million. At December 31, 1996, TPC had $349 million in total assets, total liabilities of $246 million (including $139 million of long-term debt) and stockholders' equity of $103 million. PACIFICORP IS THE PARENT COMPANY OF PACIFIC POWER AND UTAH POWER, SERVING 1.4 MILLION RETAIL ELECTRIC CUSTOMERS THROUGHOUT PORTIONS OF SEVEN WESTERN STATES. THE COMPANY ALSO HAS ELECTRIC OPERATIONS IN AUSTRALIA, IS A MAJOR WHOLESALE POWER MARKETER AND PROVIDES TELECOMMUNICATIONS SERVICES THROUGHOUT THE UNITED STATES THROUGH PACIFIC TELECOM, INC. TPC CORPORATION IS ENGAGED IN THE GATHERING, PROCESSING, HIGH-DELIVERABILITY STORAGE AND MARKETING OF NATURAL GAS. THROUGH ITS 66% OWNED AFFILIATE, MARKET HUB PARTNERS, THE COMPANY CURRENTLY HAS TWO FULLY OPERATIONAL MARKET HUBS--THE MOSS BLUFF HUB IN TEXAS AND THE EGAN HUB IN LOUISIANA; THREE OTHER SUCH MARKET HUBS ARE IN VARIOUS STAGES OF DEVELOPMENT IN STRATEGIC LOCATIONS IN MISSISSIPPI, PENNSYLVANIA AND THE MIDWEST AREA. INFORMATION ON TPC IS ACCESSIBLE ON THE INTERNET THROUGH THE WORLDWIDE WEB AT THE FOLLOWING ADDRESS: HTTP://WWW.TPC-CORP.COM. #### -----END PRIVACY-ENHANCED MESSAGE-----