<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PORTEC, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
Portec, Inc. Logo
PORTEC, Inc.
Suite 120
One Hundred Field Drive
Lake Forest, Illinois 60045
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 23, 1997
To the Stockholders of
PORTEC, Inc.
The Annual Meeting of Stockholders of PORTEC, Inc. will be held in the East
Auditorium of the American National Bank and Trust Company of Chicago, 1 North
LaSalle Street, Chicago, Illinois, at 9:30 A.M. on Wednesday, April 23, 1997,
for the following purposes:
1. To elect two directors to hold office for three-year terms.
2. To act upon such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business March 25, 1997, are
entitled to notice of, and to vote at, this meeting or any adjournment thereof.
If you are unable to attend the meeting in person, you are urged to sign,
date and return promptly the enclosed proxy in the enclosed envelope, which
requires no postage if mailed in the United States. Any stockholder who attends
the meeting may vote in person.
By Order of the Board of Directors
N. A. KINDL
Vice President, Treasurer
and Secretary
March 31, 1997
<PAGE> 3
Portec, Inc. Logo
PORTEC, Inc.
Suite 120
One Hundred Field Drive
Lake Forest, Illinois 60045
PROXY STATEMENT
This proxy statement is being mailed to stockholders on or about March 31,
1997. The accompanying proxy is solicited by the Board of Directors of the
Company for use at the Annual Meeting of Stockholders to be held April 23, 1997,
and at any adjournment thereof.
The record date for determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting was March 25, 1997. At that date, the Company
had issued only one class of voting securities, namely, Common Stock having a
par value of $1.00 per share, of which there were 4,373,552 shares outstanding
and entitled to vote. Each stockholder is entitled to one vote for each share
registered in his or her name at the close of business on March 25, 1997.
Proxies in the accompanying form, properly executed and received by the
Secretary prior to the meeting and not revoked, will be voted as directed
therein. Any proxy may be revoked by the stockholder granting it at any time
prior to the voting at the meeting by giving written notice of such revocation
to the Secretary of the Company.
1
<PAGE> 4
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes with the term of
office of one class expiring each year. The Board of Directors' nominees for the
class of directors to be elected at the 1997 Annual Meeting for three-year terms
are Frederick J. Mancheski and John F. McKeon. Messrs. Mancheski and McKeon
presently are directors in the class of directors whose terms expire at the 1997
Annual Meeting.
Except where authority to vote is withheld, it is intended that the proxies
solicited on behalf of the Board of Directors for the 1997 Annual Meeting will
be voted "FOR" the election of the Board's nominees for three-year terms.
If, at the time of the 1997 Annual Meeting, a nominee is unable to or
declines to serve, the discretionary authority provided in the proxy will be
exercised to vote for a substitute. The Board of Directors has no reason to
believe that any substitute nominee will be required. If any nominee is elected
but thereafter is unable or declines to serve, vacancies thereby created on the
Board of Directors may be filled by the remaining directors in office.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" NOMINEES MANCHESKI AND
MCKEON. UNDER DELAWARE LAW AND THE COMPANY'S CERTIFICATE OF INCORPORATION AND
BYLAWS, DIRECTORS WILL BE ELECTED BY A PLURALITY VOTE (I.E., THE TWO PERSONS
RECEIVING THE HIGHEST NUMBER OF VOTES CAST WILL BE ELECTED AS DIRECTORS).
BECAUSE DIRECTORS ARE ELECTED BY PLURALITY VOTE, ABSTENTIONS AND BROKER
NON-VOTES WILL NOT AFFECT THE OUTCOME OF THE ELECTION SINCE NO PARTICULAR
MINIMUM VOTE OF THE SHARES PRESENT OR REPRESENTED AT THE MEETING AND ENTITLED TO
BE VOTED IS REQUIRED.
Information with respect to each nominee and each director whose term of
office will continue after the 1997 Annual Meeting is as follows:
NOMINEES FOR ELECTION AS DIRECTORS:
(TO SERVE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 2000)
FRED MANCHESKI PHOTO
FREDERICK J. MANCHESKI
Mr. Mancheski, age 70, became a director in September
1990. He retired in February 1997 from Echlin Inc.,
Branford, Connecticut (manufacturer of products that
improve the efficiency and safety of motor vehicles) as
Chairman of the Board and Chief Executive Officer, a
position he had held since 1969. He continues as a
director of Echlin Inc. as well as RB&W Corporation.
2
<PAGE> 5
John McKeon Photo
JOHN F. McKEON
Mr. McKeon, age 71, became a director in January 1987. He
retired in April 1989 as President of LinkBelt
Construction Equipment Company (construction equipment),
a company owned 51 percent by FMC Corporation and 49
percent by Sumitomo Heavy Industries, Ltd., and held that
position commencing in 1986. He also retired in April
1989 as a Group Vice President of FMC Corporation
(construction equipment) and held that position for more
than ten years. He is a director of LinkBelt Equipment
Co.; LBS-Spa, an Italian company; Dumore Corp., and
Anderson Industries.
DIRECTORS WHOSE TERMS CONTINUE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 1998:
ALBERT FRIED PHOTO
ALBERT FRIED, JR.
Mr. Fried, age 67, became a director in December 1988 and
the Company's Chairman of the Board in October 1989. He
has been the Managing Partner of Albert Fried & Company,
LLC, New York, New York (investment banking) for more
than ten years and also is the Managing Partner of
Buttonwood Specialists, LLC, New York, New York
(specialists on the New York Stock Exchange). He is a
member of the New York Stock Exchange, Inc. and the New
York Futures Exchange, Inc. He is a director of EMCOR
Group, Inc. and is also a director of various civic and
philanthropic organizations.
L.L. White Photo
L. L. WHITE, JR.
Mr. White, age 69, became a director in November 1988. He
presently is retired and was employed by the Company in
various executive capacities from 1967 until he retired
as Senior Vice President--Commercial and Government
Relations in 1984. Thereafter, he was a private investor
until he served as the Company's Chairman of the Board
from December 1988 until October 1989 and as acting Chief
Executive Officer in December 1988.
3
<PAGE> 6
Michael Yonker Photo
MICHAEL T. YONKER
Mr. Yonker, age 54, became a director in December 1989.
He joined the Company as President and Chief Executive
Officer in December 1988, and continues to serve in that
capacity. For the period of October 1981 until December
1988, he was the Vice President and Drive Division
Manager of P.T. Components, Inc. of Philadelphia,
Pennsylvania (industrial gear drives). He is a director
of Modine Manufacturing Company and Woodward Governor
Company.
DIRECTORS WHOSE TERMS CONTINUE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 1999:
J. GRANT BEADLE PHOTO
J. GRANT BEADLE
Mr. Beadle, age 64, became a director in April 1984. He
retired in May 1991 from Union Special Corporation
(manufacturer of industrial sewing machines) after thirty
years of service and was Chairman and Chief Executive
Officer of that Company from December 1984 until his
retirement. For the period of October 1991 until July
1993, he was an Associate Director of the Institute for
the Learning Sciences at Northwestern University
(educational research). He is a director of Woodward
Governor Company, Batts, Inc., and Oliver Products
Company.
Frank MacInnis Photo
FRANK T. MacINNIS
Mr. MacInnis, age 50, is Chairman and Chief Executive
Officer of EMCOR Group, Inc. (mechanical/electrical
construction and facilities management) and has held that
position with that Company and its predecessor company,
JWP, Inc., since 1994. Prior to this he was Chairman of
Comstock Group, Inc. (New York-based construction group)
and before that he was Chairman and Chief Executive
Officer of H.C. Price Construction (a builder of large
diameter oil and gas pipelines). He is a director of
EMCOR Group, Inc. and MAPCO, Inc.
Arthur McSorley Photo
ARTHUR McSORLEY, JR.
Mr. McSorley, age 68, became a director in March 1977. He
is a director and President of Casey Co. (construction
management) and has held those positions with that
Company and its predecessor company, John F. Casey
Company, for more than ten years.
4
<PAGE> 7
BOARD OF DIRECTORS MATTERS
COMMITTEES
The Company's Board of Directors has three standing committees: Audit,
Nominating, and Stock Option and Compensation. All actions taken by a committee
are reported to and reviewed by the Board of Directors.
The Audit Committee, comprised of Messrs. Beadle, MacInnis, Mancheski, and
McKeon (Chairman), is responsible for recommending to the Board of Directors the
independent accountants to be engaged by the Company, reviewing the results and
scope of the annual examinations performed by the independent accountants,
reviewing with the appropriate officers and independent accountants (separately
and jointly) the scope, adequacy and results of the Company's system of internal
controls and approving in advance services to be performed by the independent
accountants.
The Nominating Committee, comprised of Messrs. Beadle (Chairman), Fried,
McSorley, White, and Yonker, is responsible for making recommendations to the
Board of Directors as to its size and composition as well as finding, screening
and recommending to the Board persons to be considered as director nominees. The
Nominating Committee will consider persons recommended by stockholders as
nominees for directors. Such recommendations, together with the basis therefor,
should be sent to the Nominating Committee in care of the corporate offices of
the Company.
The Stock Option and Compensation Committee, comprised of Messrs. MacInnis,
Mancheski, McKeon, McSorley (Chairman), and White, is responsible for making
recommendations to the Board of Directors for all compensation programs,
policies and levels for the directors, officers and other employees of the
Company.
MEETINGS
During 1996, the Company's Board of Directors held six meetings and the
Board's Audit, Nominating, and Stock Option and Compensation Committees held
three, one and two meetings, respectively. Each director attended more than 75
percent of the meetings of the Board and committees on which he served, except
Mr. Mancheski.
COMPENSATION
Directors of the Company, other than Mr. Yonker, are paid quarterly
retainer fees and fees for attendance at Board and Board committee meetings. The
1996 quarterly retainer, Board meeting, and committee meeting attendance fees
were $3,500, $1,000, and $1,000, respectively. Additionally, the Chairman of
each of the Audit, Nominating, and Stock Option and Compensation Committees is
compensated at the annual rate of $2,600.
In addition to the foregoing cash compensation, each non-employee director
is granted a stock option to purchase 7,000 shares of Common Stock of the
Company upon election to the Board. Additionally, each year at the time of the
Annual Meeting each non-employee director is granted a stock option to purchase
2,000 shares of Common Stock of the Company. The option exercise
5
<PAGE> 8
prices of all such stock options are set in accordance with the Company's 1988
Employees' Stock Benefit Plan. The exercise price of all options granted must be
equal to the fair market value of the stock on the grant date.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. L. L. White, Jr., a member of the Stock Option and Compensation
Committee of the Company's Board of Directors was employed by the Company in
various executive capacities from 1967 until he retired as Senior Vice
President -- Commercial and Government Relations in 1984. Thereafter, he also
served as the Company's Chairman of the Board from December 1988 until October
1989 and as acting Chief Executive Officer in December 1988.
STOCK OWNERSHIP
The following table contains information relative to persons known to the
management of the Company to be beneficial owners of more than five percent of
the Company's Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(A) OF CLASS(A)
------------------- ----------------------- -----------
<S> <C> <C>
Albert Fried, Jr. and Albert Fried & Company, LLC........... 1,143,293(b) 25.4%
40 Exchange Place
New York, New York 10005
Gabelli Funds, Inc.......................................... 458,980(c) 10.6%
One Corporate Center
Rye, New York 10580-1434
Heartland Advisors, Inc..................................... 385,500(d) 8.9%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
The TCW Group, Inc.......................................... 341,829(e) 7.9%
865 South Figueroa Street
Los Angeles, California 90017
Dimensional Fund Advisors, Inc.............................. 220,296(f) 5.1%
11th Floor
1299 Ocean Avenue
Santa Monica, California 90401
</TABLE>
- ---------------
(a) The figures shown are as of February 28, 1997, except as otherwise indicated
below. The information relating to directors and officers of the Company and
other persons in this Section is based on information furnished to the
Company by such persons and SEC reports.
(b) Included in these shares are 177,580 shares related to stock options granted
to Mr. Fried which are exercisable within 60 days of February 28, 1997, and
8,235 shares held for his account by the Company's Savings and Investment
Plan. Albert Fried & Company, LLC, of which Mr. Fried
6
<PAGE> 9
is managing partner, has sole voting and dispositive power with regard to
957,478 of these shares.
(c) Gabelli Funds, Inc. has sole voting and dispositive power with regard to
these shares.
(d) Heartland Advisors, Inc. has sole dispositive power with regard to these
shares and sole voting power with regard to all but 10,000 of these shares.
(e) The TCW Group, Inc. has sole voting and dispositive power with regard to
these shares.
(f) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 220,296 shares of PORTEC,
Inc. stock as of December 31, 1996, all of which shares are held in
portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, all of
which Dimensional Fund Advisors Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
The following table contains information, as of February 28, 1997, relative
to each director and director nominee, the three non-director executive officers
of the Company named in the Summary Compensation Table shown on Page 9, and all
directors and executive officers as a group as to their beneficial ownership of
the Company's Common Stock.
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL AMOUNT AND NATURE PERCENT OF
OR NUMBER OF OF BENEFICIAL COMMON
PERSONS IN GROUP OWNERSHIP(A) STOCK
------------------ ----------------- ----------
<S> <C> <C>
J. Grant Beadle........................................... 15,560(c) (b)
Frank T. MacInnis......................................... 7,000(c) (b)
Frederick J. Mancheski.................................... 24,805(c) (b)
John F. McKeon............................................ 18,421(c) (b)
Arthur McSorley, Jr....................................... 15,702(c) (b)
L. L. White, Jr........................................... 59,022(d) 1.4%
Albert Fried, Jr.......................................... 1,143,293(e) 25.4%
Michael T. Yonker......................................... 153,584(f) 3.4%
John S. Cooper............................................ 19,682(g) (b)
Nancy A. Kindl............................................ 39,903(h) (b)
Kevin C. Rorke............................................ 27,906(i) (b)
All Directors and Executive Officers as a Group(11)......... 1,524,878(j) 31.9%
</TABLE>
- ---------------
(a) All beneficial ownership is direct and arises from sole voting and
dispositive power, except as otherwise indicated below.
(b) Less than one percent.
(c) Included in the shares listed are the following shares related to stock
options which are exercisable within 60 days of February 28, 1997: Mr.
Beadle, 12,100 shares; Mr. MacInnis, 7,000 shares; Mr. Mancheski, 12,100
shares; Mr. McKeon, 12,100 shares and Mr. McSorley, 12,100 shares.
7
<PAGE> 10
(d) Mr. White has sole voting and dispositive power with respect to 46,069 of
these shares and his wife has sole voting and dispositive power with respect
to 853 of these shares. Included in these shares for Mr. White are 12,100
shares subject to stock options which are exercisable within 60 days of
February 28, 1997.
(e) Included in these shares for Mr. Fried are 177,580 shares related to stock
options which are exercisable within 60 days of February 28, 1997, and 8,235
shares held for his account by the Company's Savings and Investment Plan.
Albert Fried & Company, LLC, of which Mr. Fried is managing partner, has
sole voting and dispositive power with regard to 957,478 of these shares.
(f) Included in these shares for Mr. Yonker are 135,550 shares subject to stock
options which are exercisable within 60 days of February 28, 1997, and 5,534
shares which are held for his account by the Company's Savings and
Investment Plan.
(g) Included in the shares for Mr. Cooper are 10,855 shares subject to stock
options which are exercisable within 60 days of February 28, 1997, and 8,827
shares which are held for his account by the Company's Savings and
Investment Plan.
(h) Included in these shares for Ms. Kindl are 28,414 shares subject to stock
options which are exercisable within 60 days of February 28, 1997, and
10,213 shares which are held for her account by the Company's Savings and
Investment Plan.
(i) Included in these shares for Mr. Rorke are 22,870 shares subject to stock
options which are exercisable within 60 days of February 28, 1997, and 2,287
shares which are held for his account by the Company's Savings and
Investment Plan.
(j) Included in these shares for all directors and executive officers as a group
are 442,769 shares covered by stock options which are exercisable within 60
days of February 28, 1997. Also, 35,095 shares are held for the accounts of
officers by the Company's Savings and Investment Plan.
8
<PAGE> 11
COMPENSATION OF EXECUTIVE OFFICERS
The following Summary Compensation Table sets forth the total compensation
paid or accrued by the Company and its subsidiaries for the three completed
years ended December 31, 1996, for each of the executive officers of the Company
whose salary and bonus exceeded $100,000 in 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
---------------------------------- SECURITIES
OTHER UNDERLYING
ANNUAL OPTIONS/ ALL OTHER
NAME AND SALARY BONUS COMPENSATION SARS COMPENSATION
PRINCIPAL POSITION YEAR $(A) $ $(B) (SHARES) $(C)
------------------ ---- ------ ----- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael T. Yonker........... 1996 $251,556 $ 87,579 -- 10,000 $ 8,142
President and Chief 1995 247,836 0 -- 15,000 7,090
Executive Officer 1994 240,612 225,223 -- 11,000 5,205
Albert Fried, Jr............ 1996 $140,790 $ 20,852 -- 10,000 $11,729
Chairman of the 1995 139,020 0 -- 15,000 11,950
Board 1994 130,577 53,624 -- 11,000 4,602
John S. Cooper.............. 1996 $129,684 $ 14,395 -- 12,000 $ 8,703
Senior Vice President 1995 125,896 13,181 -- 2,000 8,169
and General Manager 1994 122,220 13,566 -- 2,200 5,842
of the Railway
Maintenance
Products Division
Nancy A. Kindl.............. 1996 $127,805 $ 26,699 -- 3,000 $ 7,222
Vice President, 1995 125,878 0 -- 5,000 6,401
Secretary, Treasurer 1994 122,258 68,663 -- 3,300 4,535
and Controller
Kevin C. Rorke.............. 1996 $137,282 $ 41,184 -- 3,000 $ 6,555
Vice President 1995 125,571 60,180 -- 5,000 6,134
and General Manager 1994 118,760 59,380 -- 5,500 5,068
of the Flomaster
Division
</TABLE>
- ---------------
(a) Includes amounts deferred under the Company's Savings and Investment Plan
and Directors Fees for Mr. Fried as follows: 1996 -- $21,000,
1995 -- $21,000, 1994 -- $16,000.
(b) The dollar value of perquisites and other personal benefits for each of the
above named executive officers was less than the established SEC reporting
threshold.
(c) The total amounts shown in this column for the last fiscal year consist of
the following: (i) Mr. Yonker: $6,702 -- Company contribution to the Savings
and Investment Plan, $1,440--Benefit attributed to Company owned life
insurance policy; (ii) Mr. Fried: $5,429 -- Company contribution to the
Savings and Investment Plan, $6,300 -- Benefit attributed to Company owned
life insurance policy; (iii) Mr. Cooper: $5,849 -- Company contribution to
the Saving and Investment Plan, $2,854 -- Benefit attributed to Company
owned life insurance
9
<PAGE> 12
policy; (iv) Ms. Kindl: $5,944 -- Company contribution to Savings and
Investment Plan, $1,278 -- Benefit attributed to Company owned life
insurance policy; (v) Mr. Rorke: $6,010 -- Company contribution to the
Saving and Investment Plan, $545 -- Benefit attributed to Company owned life
insurance policy.
OPTIONS
The following table sets forth the details of stock options granted by the
Company to the individuals named in the Summary Compensation Table during 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED EXERCISE GRANT DATE
OPTIONS TO EMPLOYEES OR BASE EXPIRATION PRESENT
NAME GRANTED(#) IN 1996 PRICE(C) DATE VALUE(D)
---- ---------- ------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Michael T. Yonker........................... 10,000(a) 6.80% $10.09 12/16/06 $40,600
Albert Fried, Jr. .......................... 10,000(a) 6.80% $10.09 12/16/06 $40,600
John S. Cooper.............................. 12,000(b) 8.16% $10.07 06/24/06 $48,600
Nancy A. Kindl.............................. 3,000(a) 2.04% $10.09 12/16/06 $12,180
Kevin C. Rorke.............................. 3,000(a) 2.04% $10.09 12/16/06 $12,180
</TABLE>
- ---------------
(a) All shares are exercisable through the expiration date and were granted
without stock appreciation rights.
(b) These options are exercisable as follows: 6,000 shares on July 1, 1997,
3,000 shares on July 1, 1998 and 3,000 shares on July 1, 1999. All shares
are exercisable through the expiration date and were granted without stock
appreciation rights.
(c) The exercise price for all options was the average of the high and low
reported sales prices of a share of Common Stock on the Composite Tape for
the ten consecutive trading days immediately preceding the date of grant.
(d) Amounts reflect estimated value on the date of grant based on a variation of
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants: expected volatility 44%; expected life of seven
years; dividend yield of 3.3%; and a risk-free interest rate of 6.7%. Actual
gains, if any, on stock option exercises depend on future performance of the
Company's Common Stock. No assurance can be made that the amounts reflected
in these columns will be achieved.
10
<PAGE> 13
The following table shows for the individuals named in the Summary
Compensation Table information with respect to options exercised during 1996 and
the value of unexercised options at December 31, 1996.
AGGREGATED OPTIONS EXERCISED DURING 1996,
AND VALUE OF OPTIONS AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS
ACQUIRED VALUE DECEMBER 31, 1996, AT DECEMBER 31, 1996,
NAME ON EXERCISE REALIZED(A) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(B)
---- ----------- ----------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Michael T. Yonker.......... 5,500 $ 37,525 130,050/20,000 $778,137/0
Albert Fried, Jr........... 32,500 $229,866 172,580/20,000 $1,068,308/0
John S. Cooper............. -- -- 10,855/12,000 $21,343/0
Nancy A. Kindl............. -- -- 26,747/6,333 $128,930/0
Kevin C. Rorke............. -- -- 21,203/6,333 $63,347/0
</TABLE>
- ---------------
(a) Based on the closing price of the Common Stock on the Composite Tape on the
date the options were exercised, less the applicable exercise price.
(b) Based on the closing price of the Common Stock on December 31, 1996, less
the applicable exercise price.
PENSION PLANS
Substantially all of the Company's employees, including executive officers,
are participants in the Company's Employees' Retirement Program. Also, officers
and certain other managerial employees of the Company may be participants in the
Company's Supplemental Non-Qualified Retirement Income Plan. Gross wages used in
calculating pension benefits under the two plans are capped at $350,000.
The following table shows the estimated annual pension benefits from the
above program and plan based on a straight life annuity that a participant will
receive if he or she retires at age 65, the normal retirement age:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
HIGHEST CONSECUTIVE
FIVE-YEAR AVERAGE
EARNINGS DURING YEARS OF CREDITED SERVICE
FINAL -----------------------------------------------------------------------------
10 YEARS OF SERVICE 5 10 15 20 25 30 35
------------------- ------- ------- ------- -------- -------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C>
$100,000 $ 8,292 $16,584 $24,877 $ 33,169 $ 41,461 $ 49,753 $ 58,045
150,000 12,792 25,584 38,377 51,169 63,961 76,753 89,545
200,000 17,292 34,584 51,877 69,169 86,461 103,753 121,045
250,000 21,792 43,584 65,377 87,169 108,961 130,753 152,545
300,000 26,292 52,584 78,877 105,169 131,461 157,753 184,045
350,000 30,792 61,584 92,377 123,169 153,961 184,753 215,545
</TABLE>
11
<PAGE> 14
For purposes of this program and plan, "earnings" means the amounts paid to
the employee by the Company as reported to the Internal Revenue Service on Form
W-2 plus the amount of compensation deferred by the employee pursuant to the
Company's benefit plans. Earnings for the individuals who are participants under
this program and plan and named in the above Summary Compensation Table are
included in the amounts set forth in said table.
At December 31, 1996, the individuals named in the Summary Compensation
Table had the indicated years of credited service under the aforementioned
program and plan: Mr. Yonker -- 8 years, Mr. Fried -- 7.2 years, Mr. Cooper 17.5
years, Ms. Kindl -- 21.8 years, and Mr. Rorke -- 9.9 years.
Pension benefits as above described are for the employee's life and are not
subject to any reduction for Social Security benefits or other offset amounts.
The Internal Revenue Code places certain limitations on pensions which may be
paid under the Employees' Retirement Program as qualified under the Internal
Revenue Code.
EMPLOYMENT, TERMINATION, AND CHANGE-IN-CONTROL AGREEMENTS
Mr. Yonker, President and Chief Executive Officer of the Company, entered
into an agreement with the Company in December 1988, which was amended in
December 1990, that sets forth the terms of his employment with the Company. His
current annual compensation rate is $255,276 and he participates in the employee
benefit plans as generally provided to executive officers of the Company. He has
agreed not to voluntarily terminate his employment with the Company without
giving 60 days prior written notice. The agreement also provides termination
benefits if his employment terminates (for any reason other than death,
disability, or certain specified causes) after an "event" whereby the Company is
acquired or 22 percent of its outstanding Common Stock is acquired by a party
who does not obtain the approval of the Company's Board of Directors prior to
the transaction and prior to acquiring as much as 17 percent of the Company's
Common Stock. The agreement provides that the "22 percent" figure is changed to
"27 percent" as applicable to the acquisition of voting securities of the
Company by Albert Fried & Company, The Fried Foundation, and Albert Fried, Jr.
(collectively called "Mr. Fried"). An event also includes the situation when
during any period of 24 consecutive months the individuals who at the beginning
of such period constitute the members of the Board of Directors of the Company,
plus all other members of such Board whose election or appointment to such Board
or nomination for election to such Board was approved by the vote of at least a
majority of the directors then still in office who either were directors of the
Company at the beginning of the period or whose election or appointment or
nomination for such election was previously so approved, cease for any reason to
constitute at least 75 percent of the members of such Board. If Mr. Yonker
elects to exercise his right of termination of his employment because of an
event, this must be done within ninety (90) days following the event. If the
Company terminates the agreement for reasons other than good cause or Mr. Yonker
terminates the agreement because of the Company's breach or an event, for a
period of two years from the date of such termination or until his death,
whichever is the shorter period, the Company shall (i) pay to him, in monthly
installments, a cash amount equal to his monthly salary from the Company in
effect immediately prior to such termination, and (ii) provide him with health,
disability
12
<PAGE> 15
and life insurance coverage in amounts substantially equal to those he was
receiving at the time of termination. In the event his employment is terminated
as a result of an event, Mr. Yonker may elect to receive a lump sum cash
settlement of the then present value of the cash payments due.
Ms. Kindl, Vice President, Treasurer and Secretary of the Company, entered
into an agreement with the Company in November 1989, which was amended in
December 1990, and sets forth the terms of her employment with the Company. Her
current annual compensation rate is $129,228 and she participates in the
employee benefit plans as generally provided to executive officers of the
Company. Ms. Kindl's agreement includes substantially the same "change in
control" provisions as described above with respect to Mr. Yonker, except that
the figure "22 percent" referred to in said paragraph is changed to "20
percent", and the "20 percent" figure is changed to "27 percent" as applicable
to the acquisition of voting securities of the Company by Mr. Fried. If she
elects to exercise her right of termination of her employment because of an
event, this must be done within ninety (90) days following the event. In the
event of a termination of the agreement by the Company for reasons other than
good cause or Ms. Kindl terminates the agreement because of the Company's breach
or an event, for a period of one year from the date of such termination or until
her death, whichever is the shorter period, the Company shall (i) pay to her, in
monthly installments, a cash amount equal to her monthly salary from the Company
in effect immediately prior to such termination, and (ii) provide her with
health, disability and life insurance coverage in amounts substantially equal to
those she was receiving at the time of termination. In the event her employment
is terminated as a result of an event, Ms. Kindl may elect to receive a lump sum
cash settlement of the then present value of the cash payments due.
Mr. Cooper, Senior Vice President of the Company, entered into an agreement
with the Company in December 1989, which provides for his employment with the
Company until a date determined by the Company with six months notice. His
current annual compensation rate is $132,252 and he participates in the
Company's employee benefit plans as generally provided to executive officers of
the Company. Following the termination date, he will be paid severance benefits
equal to his aforementioned compensation rate until the earlier of (i) six
months after the termination date, and (ii) the date he accepts new employment.
If he commences non-competitive new employment while receiving severance
benefits, in lieu of receiving additional severance benefits, he will receive a
lump sum payment equal to 50% of any remaining severance benefits he would have
received during said six month period. While he receives severance benefits, he
also will receive certain insurance benefits equal to what he received while an
employee. If he resigns prior to the termination date with the consent of the
Company, he will be paid a lump sum amount of $30,250.
REPORT OF THE STOCK OPTION AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Stock Option and Compensation Committee of the Board of Directors
("Committee") is composed of five non-employee directors. It is the
responsibility of the Committee to make recommendations to the Board of
Directors for all compensation policies for the Company and for compensation
levels for the executive officers.
13
<PAGE> 16
Compensation Policies Regarding Executive Officers
The objectives of the Company's executive compensation program are to
attract and retain qualified personnel and to provide a total executive
compensation plan that rewards the achievement of both short-term and long-term
performance goals. The Company's executive compensation program is comprised of
a base salary, an annual cash incentive program, a long-term incentive
compensation plan in the form of stock options, and severance agreements for
certain key executives. The Committee is cognizant of provisions under Section
162(m) of the Internal Revenue Code which limit the deductibility of certain
compensation expense. Section 162(m) was not relevant in 1996 as no executive
officer was paid compensation in excess of $1 million. The Committee will
continue to review the deductibility of compensation under Section 162(m) with
the goal of assuring that compensation paid is deductible to the extent this can
be accomplished in a manner that provides adequate incentives and allows the
Company to attract and retain qualified personnel.
Base Salary
Base salaries for the Company's executive officers were determined by
comparing salaries of its executives to those of executives in companies of
similar size and industry, by evaluating the responsibilities of the various
positions and by reviewing individual performance. Survey data, published by
Wyatt Data Services, Inc. for 39 durable goods manufacturing companies with
sales in the $50-$125 million range, were used for comparative purposes. The
Company was somewhat above the third quartile in sales of this group and
salaries were in the third quartile for both Mr. Yonker, the President and Chief
Executive Officer of the Company, and the executive officers as a group. Based
primarily on that comparison, during 1996, base salary increases of
approximately 3.0% were approved for the executive officers (including Mr.
Yonker) of the Company except for Mr. Rorke. Mr. Rorke received an increase of
approximately 5%.
Annual Cash Incentive Program
Under an Incentive Compensation Plan for Key Executives, a target bonus is
paid when a pre-tax profit objective is met by the Company. This objective is
set by the Committee early each year and is directly related to the budgeted
annual financial targets for the Company established by the Board of Directors.
No bonus is paid below a minimum threshold. If performance exceeds the
objective, additional bonus is paid subject to a cap. The Incentive Compensation
Plan fixes a cap for a bonus under the plan of 100 percent of base salary for
the Chief Executive Officer and limits ranging from 50 to 60 percent of base
salary for other officers, dependent upon the particular office. The "Bonus"
column of the Summary Compensation Table shows the annual bonuses of the
executive officers of the Company for the years 1994-1996 awarded under the
plan. During the 1994-1996 period, Mr. Cooper was covered by a profit-sharing
plan based on divisional performance. In 1996, bonus amounts awarded under the
Incentive Compensation Plan for Key Executives, ranged from 11% to 35% of base
salary with Mr. Yonker receiving a bonus of $87,579 (35% of base salary).
14
<PAGE> 17
Long-Term Incentive Compensation Plan
The Company uses stock options as its principal long-term incentive device
to promote strategic management and enhance stockholder value. Awards of stock
options or stock appreciation rights are granted under the Company's stock
option plan at the discretion of the Committee, with Board of Directors
approval, based on the Company's performance with respect to stated long-term
goals, individual performance, and the employee's position in the Company. The
number of options to be granted is determined by a comparison of the
relationship of the value of option grants to base salary with the value of
option grants defined as the number of shares under option times the stock
option exercise price. The stock option exercise price is equal to the fair
market value on the day of grant. Outstanding options held are considered in the
award of new options. During the years 1994-1996, stock options were granted to
the executive officers in the Summary Compensation Table herein. In 1996, Mr.
Yonker was granted an option to purchase 10,000 shares at an exercise price of
$10.09.
Benefit Plans
The Company provides its executive officers with insurance protection plans
including medical, dental, life, accidental death and long-term disability,
retirement programs and vacation and holiday plans. These plans are generally
available to all Company employees.
This report is submitted on behalf of the members of the Committee:
Arthur McSorley, Jr.,
Chairman of Stock Option and
Compensation Committee
Frank T. MacInnis, Member
Frederick J. Mancheski, Member
John F. McKeon, Member
L. L. White, Jr., Member
15
<PAGE> 18
PERFORMANCE GRAPH
The Securities and Exchange Commission requires a five-year comparison of
the Company's Common Stock with the cumulative total return of (i) a broad
equity market index, and (ii) a published industry or line-of-business index, or
an index of peer companies or companies with similar market capitalizations.
Since the Company's Common Stock is traded on the New York Stock Exchange and
Chicago Stock Exchange, the S&P 500 Index was selected as a broad equity market
index. The Company, because of its diversified business activities, does not
have a readily definable peer group. It has selected the Dow Jones
Industrial-Diversified Index as its second comparative index.
COMPARISON OF FIVE YEAR TOTAL RETURN
OF PORTEC, INC., S&P 500 INDEX,
AND DOW JONES INDUSTRIAL-DIVERSIFIED INDEX*
<TABLE>
<CAPTION>
MEASUREMENT PERIOD PORTEC, INC. S&P 500 INDEX DOW JONES
(FISCAL YEAR COVERED) INDUSTRIAL-
DIVERSIFIED INDEX
<S> <C> <C> <C>
1991 100 100 100
1992 205 108 116
1993 342 118 142
1994 468 120 130
1995 353 165 171
1996 365 203 221
</TABLE>
- ---------------
* Assumes that the value of the investment in the Company's Common Stock and
each index was $100 at December 31, 1991, and that all dividends were
reinvested.
There can be no assurance that the Company's Common Stock performance will
continue into the future with the same or similar trends depicted in the graph
above. The Company does not make nor endorse any predictions as to future Common
Stock performance.
16
<PAGE> 19
INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has appointed the firm of Price
Waterhouse LLP as its independent accountants for the year 1997 and Price
Waterhouse LLP has agreed to serve in this capacity. This appointment was made
upon the recommendation of the Audit Committee, which is composed of directors
who are not officers or employees of the Company. Price Waterhouse LLP has
served as the Company's independent accountants since 1974.
Representatives of Price Waterhouse LLP will be present at the 1997 Annual
Meeting and will be given an opportunity to make a statement, if they desire to
do so, and will respond to appropriate questions presented at the meeting.
STOCKHOLDER PROPOSALS
In order to be considered for inclusion in the Company's Proxy Statement
for the Company's Annual Meeting to be held in 1998, a stockholder proposal must
be received by the Secretary, PORTEC, Inc., One Hundred Field Drive, Suite 120,
Lake Forest, Illinois 60045, on or prior to November 25, 1997.
OTHER MATTERS
The cost of the solicitation of proxies will be borne by the Company. In
addition to the use of the mails, officers and other regular employees of the
Company may, without additional compensation, solicit proxies by telephone, by
telegraph, by telefax or in person. The Company will reimburse banks, brokerage
firms and other custodians, nominees and fiduciaries for reasonable expenses
incurred by them in sending proxy materials to beneficial owners of stock and
obtaining their proxies. The Company also has engaged Proxy Services
Corporation, a proxy solicitation firm, to assist in the solicitation of proxies
at a cost not anticipated to exceed $4,500 plus customary expenses.
The Board of Directors of the Company knows of no matters other than those
hereinbefore specified that will be presented at the meeting. If any other
matters properly come before the meeting or any adjournment thereof, the person
or persons voting the accompanying proxies will vote them in accordance with
their best judgment on such matters.
Even though you intend to attend the meeting in person, you are requested
to sign, date and return the enclosed proxy. If you do attend, you may revoke
the proxy and vote in person should you so desire. A prompt response will be
appreciated.
By Order of the Board of Directors
N. A. KINDL
Vice President, Treasurer and
Secretary
March 31, 1997
17
<PAGE> 20
PROXY PROXY
PORTEC, INC.
ANNUAL MEETING OF STOCKHOLDERS APRIL 23, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. Grant Beadle, Frank T. MacInnis, and
L.L. White, Jr., and each of them, as Proxies, with full power of substitution,
to vote all shares of Common Stock of PORTEC, Inc. which the undersigned is
entitled to vote at the Annual Meeting of Stockholders to be held in Chicago,
Illinois, on April 23, 1997, at 9:30 A.M., Chicago time, or any adjournment
thereof.
UNLESS OTHERWISE MARKED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES NAMED.
(Continued and to be signed on reverse side)
<PAGE> 21
PORTEC, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
<TABLE>
<S> <C>
1. Election of Directors For Withhold For All 2. In their discretion, the Proxies are authorized
Nominees: Frederick J. Mancheski and All All Except to vote upon such other matters as may properly
John F. McKeon. / / / / / / come before the meeting or any adjournment
(Instruction: To withhold authority to vote for thereof.
any individual nominee, write that nominee's
name in the space below.)
- -------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1
- -------------------------------------------------------
Dated: , 1997
----------------------------
Please sign Here and
Return Promptly
-------------------------------------------------
-------------------------------------------------
Please sign exactly as name or names appear
above. For joint accounts, each owner should
sign. When signing as executor, administrator,
attorney, trustee or guardian, etc., please give
your full title.
- FOLD AND DETACH HERE -
</TABLE>
To Our Shareholders:
Whether or not you are able to attend the Annual Meeting of
Shareholders, it is important that your shares be represented. Accordingly,
please complete and sign the proxy card printed above, tear at the perforation,
and mail the card in the enclosed postage paid envelope addressed to: PORTEC,
Inc., c/o Harris Trust and Savings Bank, P.O. Box A3800, Chicago, Illinois
60690-9608.
