<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
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):
[ ] No fee Required
[X] 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: Common
Stock, par value $1.00 per share, of Portec, Inc. to be acquired by MHD
Acquisition Corp.
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies: 5,017,753,
being the estimated maximum number of shares of Portec Common Stock to be
acquired by MHD Acquisition Corp. in the transaction.
- --------------------------------------------------------------------------------
(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): The filing fee of $16,056.81 has
been calculated pursuant to Rule 0-11(c)(1) under the Exchange Act and is equal
to 1/50 of 1% of $80,284,048, which represents $16.00 (the consideration per
share of Portec Common Stock) multiplied by 5,017,753 (the estimated maximum
number of shares of Portec Common Stock to be acquired in the transaction).
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction: $80,284,048.
- --------------------------------------------------------------------------------
(5) Total fee paid: $16,056.81
- --------------------------------------------------------------------------------
[X] 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.
<PAGE> 2
[PORTEC, INC. LOGO]
PORTEC, INC.
SUITE 120
ONE HUNDRED FIELD DRIVE
LAKE FOREST, ILLINOIS 60045
(847) 735-2800
Dear Fellow Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Portec, Inc., a Delaware corporation ("Portec"), to be held on Thursday, May 28,
1998 at 9:30 a.m., local time, in the Corporate Dining Room (57th floor) of the
First National Bank of Chicago, One First National Plaza, Chicago, Illinois (the
"Special Meeting").
At the Special Meeting, stockholders of record of Portec at the close of
business on April 24, 1998 will be asked to consider and vote upon the Agreement
and Plan of Merger, dated as of March 11, 1998 (the "Merger Agreement"), by and
between MHD Acquisition Corp., a Delaware corporation ("MHD"), and Portec, and
the transactions contemplated thereby, pursuant to which MHD will merge with and
into Portec (the "Merger"), and each share of Portec common stock, par value
$1.00 per share (other than treasury shares or shares with respect to which
appraisal rights are perfected under the Delaware General Corporation Law),
outstanding at the effective time of the Merger will be converted into the right
to receive $16.00 in cash, without interest.
Your Board of Directors believes that the Merger is advisable, fair to and
in the best interests of Portec and its stockholders, and recommends that you
vote FOR the adoption of the Merger Agreement.
Your Board of Directors has received a written opinion from Wasserstein
Perella & Co., Inc. that, as of the date of such opinion and subject to the
assumptions and limitations set forth therein, the $16.00 per share cash
consideration to be received by the stockholders of Portec pursuant to the
Merger is fair to such stockholders from a financial point of view. The written
opinion of Wasserstein Perella & Co., Inc. is included in the accompanying Proxy
Statement and should be read carefully by stockholders.
We encourage you to participate in the Special Meeting in person or by
mailing the enclosed proxy. Whether or not you plan to attend the Special
Meeting, please complete, sign and date the accompanying proxy card and return
it in the enclosed postage prepaid envelope as soon as possible so that your
shares will be represented at the Special Meeting. If you attend the Special
Meeting, you may revoke your proxy and vote in person. If you have any questions
regarding the proposed transaction, please call Morrow & Co., Inc., our proxy
solicitation agent, toll-free at (800) 556-9061 or collect at (212) 754-8000.
Sincerely,
M.T. YONKER
M. T. Yonker
President and Chief Executive Officer
May 5, 1998
<PAGE> 3
[PORTEC, INC. LOGO]
PORTEC, INC.
Suite 120
One Hundred Field Drive
Lake Forest, Illinois 60045
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held on May 28, 1998
To the Stockholders of
Portec, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Portec,
Inc., a Delaware corporation ("Portec"), will be held on Thursday, May 28, 1998
at 9:30 a.m., local time, in the Corporate Dining Room (57th floor) of the First
National Bank of Chicago, One First National Plaza, Chicago, Illinois (the
"Special Meeting") for the following purposes:
1. To consider and vote upon the Agreement and Plan of Merger, dated as
of March 11, 1998 (the "Merger Agreement"), by and between MHD
Acquisition Corp., a Delaware corporation ("MHD") and Portec, and the
transactions contemplated thereby, pursuant to which MHD will merge
with and into Portec (the "Merger"), and each share of Portec common
stock, par value $1.00 per share (other than treasury shares or
shares with respect to which appraisal rights are perfected under the
Delaware General Corporation Law), outstanding at the effective time
of the Merger will be converted into the right to receive $16.00 in
cash, without interest; and
2. To transact such other business as may properly come before the
Special Meeting.
The Portec Board of Directors has fixed the close of business on April 24,
1998 as the record date for the determination of the stockholders entitled to
notice of and to vote at the Special Meeting.
STOCKHOLDERS ARE INVITED TO ATTEND THE SPECIAL MEETING. WHETHER OR NOT YOU
EXPECT TO ATTEND THE SPECIAL MEETING, WE URGE YOU TO SIGN, DATE AND PROMPTLY
RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. IF YOU
ATTEND THE SPECIAL MEETING, YOU MAY VOTE YOUR SHARES IN PERSON, WHICH WILL
REVOKE ANY PREVIOUSLY EXECUTED PROXY.
If your shares are held of record by a broker, bank or other nominee and
you wish to attend the Special Meeting, you must obtain a letter from the
broker, bank or other nominee confirming your beneficial ownership of the shares
and bring it to the Special Meeting. In order to vote your shares at the Special
Meeting, you must obtain from the record holder a proxy issued in your name.
Regardless of how many shares you own, your vote is very important. Please
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY.
By Order of the Board of Directors
N.A. KINDL
N. A. KINDL
Vice President, Treasurer
and Secretary
May 5, 1998
<PAGE> 4
[PORTEC, INC. LOGO]
PORTEC, INC.
Suite 120
One Hundred Field Drive
Lake Forest, Illinois 60045
PROXY STATEMENT
This Proxy Statement ("Proxy Statement") is being furnished to the
stockholders of Portec, Inc. ("Portec") in connection with the solicitation of
proxies by the Portec Board of Directors (the "Portec Board") for use at a
special meeting of Portec stockholders to be held at 9:30 a.m., local time, on
Thursday, May 28, 1998 in the Corporate Dining Room (57th floor) of the First
National Bank of Chicago, One First National Plaza, Chicago, Illinois, and at
any adjournment or postponement thereof (the "Special Meeting").
At the Special Meeting, Portec stockholders will be asked to (i) consider
and vote upon the adoption of the Agreement and Plan of Merger, dated as of
March 11, 1998 (the "Merger Agreement") by and between MHD Acquisition Corp., a
Delaware corporation ("MHD") and Portec, and the transactions contemplated
thereby, and (ii) transact such other business as may properly come before the
Special Meeting.
Under the Merger Agreement, MHD will merge with and into Portec (the
"Merger"), and each share of Portec common stock, par value $1.00 per share (the
"Portec Common Stock") (other than treasury shares or shares with respect to
which appraisal rights are perfected under the Delaware General Corporation Law
("Dissenting Shares")), outstanding at the Effective Time (as defined) will be
converted into the right to receive $16.00 in cash, without interest (the
"Merger Consideration"). A copy of the Merger Agreement is attached to this
Proxy Statement as ANNEX A.
This Proxy Statement and the enclosed proxy card, together with Portec's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (which
includes audited financial statements), are first being sent to Portec
stockholders on or about May 5, 1998. Only holders of record of Portec Common
Stock as of the close of business on April 24, 1998 are entitled to vote at the
Special Meeting. Holders of Portec Common Stock are entitled to one vote for
each share held of record. On April 24, 1998 Portec had outstanding and entitled
to vote at the Special Meeting 4,455,954 shares of Portec Common Stock. The
presence, either in person or by proxy, of the holders of a majority of the
outstanding shares of Portec Common Stock at the Special Meeting will constitute
a quorum to transact business at the Special Meeting.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY..................................................... 1
The Companies............................................. 1
The Special Meeting....................................... 1
The Merger................................................ 2
THE SPECIAL MEETING......................................... 5
General................................................... 5
Purpose of the Special Meeting............................ 5
Record Date; Shares Outstanding........................... 5
Voting at the Special Meeting............................. 6
Solicitation of Proxies................................... 7
Dissenters' Appraisal Rights.............................. 7
THE MERGER.................................................. 7
General................................................... 7
Background of the Merger.................................. 8
Recommendation of the Portec Board of Directors and
Reasons for the Merger................................. 11
Opinion of Financial Advisor.............................. 12
Interests of Certain Persons in the Merger and Possible
Conflicts of Interest.................................. 18
Indemnification........................................... 19
MHD's Source and Amount of Funds.......................... 19
Accounting Treatment...................................... 20
Certain Federal Income Tax Consequences of the Merger..... 20
Regulatory Approval....................................... 21
Dissenters' Appraisal Rights.............................. 22
TERMS OF THE MERGER......................................... 23
The Merger; Effective Time................................ 23
Merger Consideration...................................... 24
Payment Procedures........................................ 24
Cancellation of Stock Options............................. 24
Representations and Warranties............................ 25
Certain Covenants......................................... 25
Certain Agreements Regarding Conduct of Business Pending
the Merger............................................. 27
Conditions to the Merger.................................. 29
Termination............................................... 30
Termination Fee........................................... 31
Expenses.................................................. 31
Amendment, Extension and Waiver........................... 32
SELECTED FINANCIAL INFORMATION.............................. 33
MARKET PRICE AND DIVIDENDS.................................. 34
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 35
</TABLE>
i
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<TABLE>
<S> <C>
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 37
OTHER MATTERS............................................... 37
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 37
ANNEX A -- AGREEMENT AND PLAN OF MERGER DATED AS OF MARCH
11, 1998 BY AND BETWEEN MHD ACQUISITION CORP AND
PORTEC, INC. A-i
ANNEX B -- SECTION 262 OF THE GENERAL CORPORATION LAW OF THE
STATE OF DELAWARE B-1
ANNEX C -- FAIRNESS OPINION OF WASSERSTEIN PERELLA & CO.,
INC. C-1
</TABLE>
ii
<PAGE> 7
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement, including the Annexes hereto, which are a part of this
Proxy Statement. This summary is not, and is not intended to be, complete in
itself. Reference is made to, and this summary is qualified in its entirety by,
the more detailed information contained elsewhere in this Proxy Statement.
Stockholders are encouraged to read carefully all of the information contained
in the Proxy Statement, including the Annexes hereto. Unless otherwise defined
herein, capitalized terms used in this summary have the respective meanings
ascribed to them elsewhere in this Proxy Statement.
THE COMPANIES
PORTEC. Portec is a leading manufacturer of highly engineered materials
handling equipment in the industrial automation market. Its products include
specialty conveyor systems such as power trains, electronic wire guidance
controllers for lift trucks, and conveyor systems used in the handling and
sorting of recycled materials. The principal executive office of Portec is
located at Suite 120, One Hundred Field Drive, Lake Forest, Illinois 60045, and
its telephone number is (847) 735-2800.
MHD. MHD is a wholly-owned subsidiary of J Richard Industries, L.P.
("JRI"), a manufacturer and distributor of components primarily used in the
materials handling, sports, fitness and automotive markets. MHD was organized to
effect the acquisition of Portec. The principal executive offices of MHD and JRI
are located at 3934 Concord Street, Toledo, Ohio 43621, and their telephone
number is (419) 476-4911.
THE SPECIAL MEETING
TIME, DATE AND PLACE. The Special Meeting will be held on Thursday, May 28,
1998 at 9:30 a.m., local time, in the Corporate Dining Room (57th floor) of the
First National Bank of Chicago, One First National Plaza, Chicago, Illinois. See
"THE SPECIAL MEETING -- General."
PURPOSE OF THE MEETING. Holders of Portec Common Stock will be asked to
consider and vote upon adoption of the Merger Agreement and the transactions
contemplated thereby. The attorneys-in-fact named in the accompanying proxy card
also will have discretionary authority to vote upon other business, if any, that
properly comes before the Special Meeting. See "THE SPECIAL MEETING--Purpose of
the Special Meeting."
RECORD DATE. The holders of record of shares of Portec Common Stock at the
close of business on April 24, 1998 (the "Record Date") are entitled to notice
of and to vote at the Special Meeting. There were 4,455,954 shares of Portec
Common Stock outstanding and entitled to vote as of the Record Date. As of that
date, Portec's directors and executive officers owned, exclusive of stock
options, 1,136,970 shares of Portec Common Stock (25.5% of the shares
outstanding), all of which are expected to be voted FOR the adoption of the
Merger Agreement. Included in this amount are 1,020,925 shares (22.9% of the
shares outstanding) held by the Chairman of the Board of Portec, Albert Fried,
Jr., which he has agreed to vote in favor of the Merger. See "THE SPECIAL
MEETING -- Record Date; Shares Outstanding."
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VOTING RIGHTS. Each share of Portec Common Stock is entitled to one vote
with respect to all matters presented at the Special Meeting. See "THE SPECIAL
MEETING -- Voting at the Special Meeting."
VOTE REQUIRED. The affirmative vote of the holders of at least a majority
of the outstanding shares of Portec Common Stock is required to adopt the Merger
Agreement and the transactions contemplated thereby. Under the Delaware General
Corporation Law ("Delaware Law"), holders of Portec Common Stock are entitled to
appraisal rights in connection with the Merger. See "THE SPECIAL MEETING --
Voting at the Special Meeting" and "THE MERGER -- Dissenters' Appraisal Rights."
REVOCABILITY OF PROXY. Any holder of Portec Common Stock who executes and
returns a proxy may revoke that proxy at any time before it is voted by (i)
filing with the Secretary of Portec, at or before the Special Meeting, a written
notice of revocation bearing a later date than the proxy, (ii) duly executing a
subsequent proxy relating to the same shares of Portec Common Stock and
delivering it to the Secretary of Portec at or before the Special Meeting or
(iii) attending the Special Meeting and voting in person by ballot. Attendance
at the Special Meeting will not, in and of itself, constitute revocation of a
proxy. See "THE SPECIAL MEETING -- Voting at the Special Meeting."
THE MERGER
GENERAL. Upon the terms and subject to the conditions of the Merger
Agreement, MHD will merge with and into Portec, with Portec as the surviving
corporation and wholly-owned subsidiary of JRI. See "THE MERGER -- General."
EFFECTIVE TIME. It is presently expected that the Merger will become
effective shortly after adoption of the Merger Agreement at the Special Meeting,
which is currently scheduled to take place on May 28, 1998, or as soon as
practicable thereafter. See "TERMS OF THE MERGER -- The Merger; Effective Time"
and "-- Conditions to the Merger."
MERGER CONSIDERATION. Each outstanding share of Portec Common Stock (other
than treasury shares and Dissenting Shares) at the Effective Time will be
converted into the right to receive $16.00 in cash, without interest (the
"Merger Consideration").
Upon consummation of the Merger, each holder of a certificate or
certificates representing shares of Portec Common Stock ("Certificates")
outstanding immediately prior to the Effective Time will, upon the surrender
thereof (duly endorsed, if required) to a designated exchange agent (the "Paying
Agent"), be entitled to receive the Merger Consideration. After the Effective
Time, the Paying Agent will mail a letter of transmittal with instructions to
all holders of record of Portec Common Stock as of the Effective Time for use in
surrendering their Certificates in exchange for the Merger Consideration.
Certificates should not be surrendered until the letter of transmittal and
instructions are received. See "Terms of the Merger -- Payment Procedures."
DISSENTERS' APPRAISAL RIGHTS. Under Delaware Law, Portec stockholders who
do not vote for the Merger and who comply with the other statutory requirements
of the Delaware Law may elect to
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receive, in cash, the judicially determined appraised value of their shares of
Portec Common Stock. See "THE MERGER--Dissenters' Appraisal Rights" and "ANNEX
B."
RECOMMENDATION OF THE PORTEC BOARD AND REASONS FOR THE MERGER. The Portec
Board reviewed the terms and conditions of the Merger Agreement and determined
that the Merger was advisable, fair to and in the best interests of Portec and
its stockholders. The Portec Board (with one director absent) unanimously
approved the Merger Agreement and the transactions contemplated thereby and
unanimously recommends that the Portec stockholders vote FOR the adoption of the
Merger Agreement. See "SUMMARY -- The Merger -- Interests of Certain Persons in
the Merger and Possible Conflicts of Interest" and "THE MERGER -- Interests of
Certain Persons in the Merger and Possible Conflicts of Interest."
The determination of the Portec Board to approve the Merger Agreement was
based upon consideration of a number of factors, including the following: (i)
the business, operations, financial condition, competitive position and
prospects of Portec and the nature of the industry in which Portec operates,
both on an historical and prospective basis; (ii) current and prospective
industry, economic and market conditions; (iii) the historical and prospective
market prices of Portec Common Stock compared to the Merger Consideration to be
received by Portec stockholders in the Merger; (iv) the strategic alternatives
available to Portec other than the proposed Merger; (v) the ongoing public
disclosure by Portec of its exploration of strategic alternatives to maximize
stockholder value; (vi) the fact that such public disclosure and other
procedures to elicit proposals to acquire Portec had been implemented in the
context of a comprehensive auction process to maximize stockholder value; (vii)
the fact that Portec held exploratory talks with a strategic buyer which did not
lead to a definitive proposal; (viii) the fact that MHD submitted the highest
bid in the auction process and evidenced a strong ability to finance and
complete the Merger in a relatively short time frame; (ix) the Portec Board's
review of presentations by, and discussion of the terms and conditions of the
Merger Agreement with, senior management of Portec, representatives of its legal
counsel and its financial advisor, Wasserstein Perella & Co., Inc. ("Wasserstein
Perella"); (x) the Portec Board's receipt of a written fairness opinion of
Wasserstein Perella; and (xi) the Portec Board's consideration of the terms of
the Merger Agreement, including inclusion of a "fiduciary out" provision
(subject to the payment of a breakup fee) in the event of an unsolicited
Acquisition Proposal (as defined in the Merger Agreement) that is more
attractive than the Merger.
If the Merger is not consummated, Portec will continue to operate as an
independent company and will review alternatives that may become available to it
from time to time. See "THE MERGER -- Recommendation of the Portec Board and
Portec's Reasons for the Merger."
OPINION OF WASSERSTEIN PERELLA. Wasserstein Perella delivered an oral
opinion on March 8, 1998 (which it subsequently confirmed in writing on that
same date) to the Portec Board to the effect that, as of the date of such
opinion and subject to the assumptions and limitations set forth therein, the
Merger Consideration to be received by the stockholders of Portec pursuant to
the Merger is fair to such stockholders from a financial point of view. A copy
of the written opinion of Wasserstein Perella dated March 8, 1998 setting forth
the assumptions made, the matters considered, the scope and limitations on the
review undertaken and the procedures followed by Wasserstein Perella in
rendering such opinion is attached as ANNEX C to this Proxy Statement. The
opinion
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of Wasserstein Perella should be carefully read in its entirety. See "THE MERGER
- -- Opinion of Financial Advisor to Portec."
INTERESTS OF CERTAIN PERSONS IN THE MERGER AND POSSIBLE CONFLICTS OF
INTEREST. Portec stockholders should be aware that the directors and certain
members of senior management of Portec may be deemed to have an interest in the
Merger in addition to their interests as Portec stockholders. Directors' and
officers' liability insurance will be continued for the directors and officers
of Portec for a six-year period following the Merger. In addition, two members
of Portec's senior management have employment agreements providing for, among
other things, severance payments following termination of employment as a result
of the Merger that total approximately $658,992, and three members of Portec's
senior management have bonus arrangements providing for payments upon the
closing of the Merger that total approximately $163,940. The Merger Agreement
also requires Portec to cash out all outstanding stock options. The estimated
cost of cashing out the outstanding stock options held by all of Portec's
directors and officers totals approximately $4,508,905. The Portec Board was
aware of these interests and considered them, among other matters, in approving
the Merger Agreement and the transactions contemplated thereby and in
recommending that stockholders adopt the Merger Agreement. See "THE
MERGER--Interests of Certain Persons in the Merger and Possible Conflicts of
Interest" and "TERMS OF THE MERGER--Cancellation of Stock Options."
CONDITIONS TO THE MERGER. The respective obligations of Portec and MHD to
effect the Merger are subject to the satisfaction or waiver of certain
conditions described elsewhere herein. Neither Portec nor MHD has any present
intention to waive any material condition to the Merger. See "TERMS OF THE
MERGER -- Conditions to the Merger -- Conditions to Portec's Obligation to
Effect the Merger."
TERMINATION, TERMINATION FEE AND EXPENSE REIMBURSEMENT. The Merger
Agreement may be terminated at any time prior to the Effective Time, whether
before or after stockholder approval, by the mutual consent of Portec and MHD or
by either Portec or MHD under certain circumstances as described herein. Under
certain termination scenarios, Portec may be obligated to pay a $2,500,000
termination fee to MHD and to reimburse MHD for expenses incurred in the
transaction up to certain specified levels. See "TERMS OF THE MERGER --
Termination," "-- Termination Fee" and "-- Expenses."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. The receipt by
Portec stockholders of cash for shares of Portec Common Stock in the Merger or
pursuant to the exercise of dissenters' appraisal rights will be taxable
transactions for federal income tax purposes and may also be taxable
transactions under applicable state, local, foreign and other laws. See "THE
MERGER -- Certain Federal Income Tax Consequences of the Merger to Portec
Stockholders."
4
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THE SPECIAL MEETING
GENERAL
This Proxy Statement is being furnished to holders of Portec Common Stock
in connection with the solicitation of proxies by the Portec Board for use at
the Special Meeting. Each copy of this Proxy Statement mailed to Portec
stockholders is accompanied by a proxy card for use at the Special Meeting, and
an Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (which
includes audited financial statements). The Special Meeting is scheduled to be
held on Thursday, May 28, 1998, at 9:30 a.m., local time, in the Corporate
Dining Room (57th floor) of the First National Bank of Chicago, One First
National Plaza, Chicago, Illinois.
HOLDERS OF PORTEC COMMON STOCK ARE REQUESTED TO COMPLETE, SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO PORTEC IN THE ENCLOSED POSTAGE
PREPAID ENVELOPE.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, holders of Portec Common Stock will be asked to
consider and vote upon the adoption of the Merger Agreement and the transactions
contemplated thereby. Holders of Portec Common Stock will also be asked to
transact such other business as may properly come before the Special Meeting.
The Portec Board, based upon the factors described elsewhere herein,
including the fairness opinion of Wasserstein Perella, has concluded that the
Merger is advisable, fair to and in the best interests of the holders of Portec
Common Stock and has approved the Merger Agreement. THE PORTEC BOARD UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF PORTEC COMMON STOCK VOTE IN FAVOR OF THE ADOPTION OF
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AT THE SPECIAL
MEETING. See "THE MERGER -- Recommendation of the Portec Board and Reasons for
the Merger," "-- Opinion of Financial Advisor" and "-- Interests of Certain
Persons in the Merger and Possible Conflicts of Interest."
RECORD DATE; SHARES OUTSTANDING
The Portec Board has fixed the close of business on April 24, 1998 as the
record date for the determination of the holders of Portec Common Stock entitled
to notice of and to vote at the Special Meeting. On the Record Date, there were
4,455,954 shares of Portec Common Stock issued and outstanding and held by
approximately 1,073 stockholders of record. All directors and executive officers
of Portec are expected to vote, or cause to be voted, all shares of Portec
Common Stock, exclusive of stock options, over which they exercise voting
control (an aggregate of 1,136,970 shares of Portec Common Stock or 25.5% of the
outstanding shares of Portec Common Stock on the Record Date) FOR the adoption
of the Merger Agreement and the transactions contemplated thereby. The Chairman
of the Board of Portec, Albert Fried, Jr., has entered into a voting agreement
with MHD and executed an irrevocable proxy, in each case without the payment of
any compensation to Mr. Fried, obligating him to vote his 1,020,925 shares
(22.9% of the outstanding shares of Portec Common Stock) FOR the adoption of the
Merger Agreement and the transactions contemplated thereby.
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VOTING AT THE SPECIAL MEETING
The presence, either in person or by proxy, of the holders of a majority of
the outstanding shares of Portec Common Stock at the Special Meeting will
constitute a quorum to transact business at the Special Meeting. The adoption of
the Merger Agreement requires the affirmative vote of the holders of at least a
majority of the outstanding shares of Portec Common Stock. Votes may be cast for
or against the Merger Agreement or stockholders may abstain from voting.
At the Special Meeting, abstentions and broker non-votes will be counted
for purposes of determining the presence or absence of a quorum. An abstention
with respect to the adoption of the Merger Agreement will have the effect of a
vote against that proposal. A "broker non-vote" will occur when a broker holding
shares of Portec Common Stock in street name (i.e., as nominee for the
beneficial owner) returns an executed proxy (or voting directions) indicating
that the broker does not have discretionary authority to vote on a proposal.
Under the rules of the New York Stock Exchange ("NYSE"), brokers who hold shares
of Portec Common Stock as nominees will not have discretionary authority to vote
such shares on the proposal to adopt the Merger Agreement in the absence of
specific instructions from the beneficial owners thereof. Under Delaware Law, a
broker non-vote is counted as present for quorum purposes but is not considered
to be entitled to vote on the specified matter. Therefore, broker non-votes
generally have no effect on the outcome of a vote on a specific matter. However,
because the adoption of the Merger Agreement requires the affirmative vote of a
specified minimum percentage of all of the outstanding shares of Portec Common
Stock, rather than the vote of a specified percentage of the shares present at
the Special Meeting and entitled to vote, broker non-votes will have the effect
of votes against the adoption of the Merger Agreement and the transactions
contemplated thereby.
Proxies will be voted as specified by the holders of Portec Common Stock.
If a Portec stockholder does not return a signed proxy, such stockholder's
shares will not be voted. Portec stockholders are urged to mark the appropriate
box on the proxy card enclosed herewith to indicate how their shares are to be
voted. Each Portec stockholder is entitled to cast one vote per share of Portec
Common Stock held by such stockholder on each matter to be voted upon at the
Special Meeting. If a Portec stockholder returns a signed proxy, but does not
indicate how such stockholder's shares are to be voted, the shares of Portec
Common Stock represented by the proxy will be voted FOR the adoption of the
Merger Agreement. The proxy also confers discretionary authority on the
attorneys-in-fact named in the accompanying proxy card to vote the shares of
Portec Common Stock represented thereby on any other matter that may properly
arise at the Special Meeting, including consideration of a motion to adjourn or
postpone the Special Meeting to another time and/or place.
Returning a signed proxy will not affect a Portec stockholder's right to
attend the Special Meeting and vote in person. Any Portec stockholder who
executes and returns a proxy may revoke such proxy at any time before it is
voted by (i) filing with the Secretary of Portec, at or prior to the Special
Meeting, a written notice of revocation bearing a later date than the proxy,
(ii) duly executing a subsequent proxy relating to the same shares of Portec
Common Stock and delivering it to the Secretary of Portec at or before the
Special Meeting or (iii) attending the Special Meeting and
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voting in person by ballot. Attendance at the Special Meeting will not, in and
of itself, constitute revocation of a proxy.
As of the date of this Proxy Statement, the Portec Board does not know of
any other matters to be presented for action by Portec stockholders at the
Special Meeting. If, however, any other matters not now known are properly
brought before the Special Meeting, the attorneys-in-fact named in the
accompanying proxy card will vote the proxies upon such matters according to
their discretion and best judgment.
SOLICITATION OF PROXIES
Pursuant to the Merger Agreement, the entire cost of Portec's solicitation
of proxies will be borne by Portec, except that Portec and MHD will share
equally all printing, mailing and distribution costs associated with this Proxy
Statement. In addition to solicitations by mail, solicitations may also be made
by personal interview, facsimile transmission, telegram and telephone. Portec
has retained Morrow & Co., Inc., a proxy solicitation firm, for assistance in
connection with the Special Meeting at an estimated expense of approximately
$5,500 plus reasonable out-of-pocket expenses. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to send proxies
and proxy material to their principals, and Portec will reimburse them for their
customary expenses in so doing.
DISSENTERS' APPRAISAL RIGHTS
Under Delaware Law, holders of Portec Common Stock are entitled to
appraisal rights in connection with the Merger. See "THE MERGER -- Dissenters'
Appraisal Rights."
THE MERGER
GENERAL
Upon the terms and subject to the conditions of the Merger Agreement, MHD
will acquire Portec in a business combination in which MHD will merge with and
into Portec, with Portec as the surviving corporation and becoming a
wholly-owned subsidiary of JRI. The Merger will become effective (the "Effective
Time") upon the filing of a Certificate of Merger with the Delaware Secretary of
State, or at such later date or time specified in the Certificate of Merger.
Under the Merger Agreement, each outstanding share of Portec Common Stock (other
than treasury shares and Dissenting Shares) will be converted into the right to
receive the Merger Consideration. See "TERMS OF THE MERGER -- Merger
Consideration." Following consummation of the Merger, the Portec Common Stock
will be delisted from the NYSE and the Chicago Stock Exchange, the registration
of Portec Common Stock under the Exchange Act will be terminated and Portec will
no longer be required to file periodic reports with the Commission under the
Exchange Act.
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BACKGROUND OF THE MERGER
In early 1997, Portec's management began a comprehensive examination of its
three businesses, Construction Equipment, Railroad Products and Materials
Handling, with a view to identifying structural and strategic changes which
might better enable Portec to increase stockholder value. Although Portec's
earnings had improved over prior years and the Portec Board had reinstituted the
quarterly cash dividend in the fourth quarter of 1996, management sought to
consider and analyze information relating to the internal and external forces
most likely to affect Portec's prospects, including (i) competitive pressures,
(ii) the relatively small size of each of Portec's businesses, (iii) increasing
consolidation in the industries in which Portec operated, and (iv) Portec's
growth potential for each of its businesses.
On June 10, 1997, Portec engaged Wasserstein Perella as financial advisor
to assist in examining ways to maximize stockholder value. At the Portec Board
meeting held on June 24, 1997, Wasserstein Perella outlined various strategic
alternatives available to Portec, including (i) a sale of one or more of
Portec's three businesses, (ii) a sale of the entire company, (iii) a
restructuring of the company or (iv) the pursuit of acquisitions in an effort to
grow one or more of Portec's three businesses. After discussion, the Portec
Board requested that Wasserstein Perella undertake the exploration of Portec's
strategic alternatives by seeking bids for each of the Construction Equipment,
Railroad Products and Materials Handling businesses to determine levels of
interest in an acquisition transaction. It was agreed that the Portec Board
would defer any decision with respect to the strategic direction of Portec until
it had reviewed and analyzed with Wasserstein Perella the results of the bidding
for Portec's three businesses. The Portec Board made clear that it intended to
maintain flexibility to proceed with one or more transactions or to forego any
transaction depending upon the price and other terms of the potential bids.
In July and August of 1997, in response to the Portec Board's direction,
Wasserstein Perella, together with Portec's management, sought to identify
companies that reasonably could be expected to be interested in, and have the
financial wherewithal to complete, the purchase of one or more of Portec's
businesses or the purchase of the company as a whole. During this period,
Wasserstein Perella prepared and distributed a confidential information offering
memorandum with respect to each of Portec's three businesses to an aggregate of
78 parties, each of whom executed a confidentiality and standstill agreement. At
meetings held on August 28, 1997 and September 23, 1997, Wasserstein Perella
reported to the Portec Board on the status of its work and the bidding process
with respect to each of Portec's businesses. The Portec Board instructed
Wasserstein Perella to focus on the independent sales of the Construction
Equipment and Railroad Products businesses, while continuing work with respect
to the possible sale of the Materials Handling business. The Portec Board
indicated its intention to pursue the sales of the Construction Equipment and
Railroad Products businesses regardless of whether a sale of the Materials
Handling business (or a subsequent merger or other transaction involving the
company as a whole) could ultimately be arranged. The Portec Board further
determined that, whether or not the sales of the Construction Equipment and
Railroad Products businesses were consummated, it would consider the
continuation of Portec as a public company among the strategic alternatives
available to Portec.
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Portec reached agreement in October 1997 to sell its Construction Equipment
business to Astec Industries, Inc. in an asset transaction at a purchase price
of $25.5 million, subject to a purchase price adjustment as provided in the
definitive asset purchase agreement. In November 1997 Portec entered into an
agreement with Rail Products Acquisition Corp. for the sale of the assets of its
Railroad Products business at a purchase price of $26.5 million, subject to a
purchase price adjustment as provided in the definitive asset purchase
agreement. Portec closed each of these two sales in December 1997, with the
purchase price adjustments finalized in early 1998. As reflected in "Selected
Financial Information," the operating results of the Construction Equipment
business and the Railroad Products business are reported as discontinued
operations.
Following the sales of the Construction Equipment and Railroad Products
businesses, the Portec Board and management revisited issues relating to the
strategic direction of the company. They determined to consider all available
options to maximize stockholder value, including a sale of the company. In
December 1997, the Portec Board authorized Wasserstein Perella to contact those
entities which were most likely to be both interested in and financially and
otherwise capable of engaging in a business combination with Portec. Wasserstein
Perella contacted 46 parties regarding their interest in a business combination
with Portec, and received indications of interest from 11 parties by January
1998. Wasserstein Perella distributed bid instructions and a draft merger
agreement to the five parties (including CHS on behalf of MHD) which had
presented the most attractive indications of interest. Throughout this period,
several of these parties conducted due diligence of Portec as part of the
auction process and made on-site visits to Portec's Materials Handling operating
facilities in Canon City, Colorado. Portec's management and Wasserstein Perella
met with representatives of CHS and MHD on December 17, 1997 to discuss Portec's
business, and CHS' and MHD's representatives visited the Canon City facilities
on January 20, 1998.
Portec also held several meetings during this period with a potential
strategic buyer engaged in the materials handling business. Discussions focused
on possible business synergies and other potential benefits of a business
combination between the two companies, and the optimal structure for the
potential transaction. The parties analyzed financial, legal and regulatory
issues associated with a potential transaction, conducted due diligence and made
on-site investigations of each other's operating facilities. No agreement was
ever reached with respect to price or structure, and in late February 1998 the
other party advised Portec that it did not wish to pursue a business combination
with Portec.
With the withdrawal of the potential strategic buyer, Portec turned its
attention to the three potential financial buyers (including CHS on behalf of
MHD) who had emerged as the highest bidders in the auction process which ended
in late February 1998. The Portec Board met on Monday, March 2, 1998 to consider
these three proposals. Wasserstein Perella reviewed the terms of each proposal
and advised the Portec Board regarding the status of each bidder's due diligence
and financing plans. Of the three proposals, the CHS cash offer of $15.70 per
share for 100% of the outstanding shares of Portec Common Stock represented the
highest cash price, although another proposal offering a combination of cash and
securities had the potential to deliver a higher value in the future depending
on market conditions and certain terms of the securities to be negotiated by the
parties. The Portec Board discussed the relative merits of the proposals,
focusing in particular
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on the contingencies set forth in the proposals, and concluded that an all cash
transaction would be in the best interests of the Portec stockholders. At the
conclusion of the March 2, 1998 meeting, the Portec Board directed Wasserstein
Perella to hold further discussions with CHS to determine if CHS would be
willing to improve its proposal. On Tuesday, March 3, 1998, CHS increased its
proposed cash price to $16.00 per share, and a meeting was held later that same
day with CHS, Wasserstein Perella and each side's legal advisors to consider the
terms of a definitive merger agreement and to discuss a tentative schedule for
the proposed transaction. CHS indicated that one of the conditions to its
willingness to proceed would be receipt of an agreement from Albert Fried, Jr.,
Portec's Chairman of the Board, to vote all of his 1,020,925 shares in favor of
the proposed transaction. During the period of March 3, 1998 through March 7,
1998, representatives of Portec and CHS negotiated substantially all of the
terms of a definitive merger agreement, as well as the terms of the requested
voting agreement. CHS also began its due diligence investigation of Portec
during this period, consisting principally of preliminary legal, accounting and
financial review of Portec's operations. In addition, Wasserstein Perella
contacted CHS' proposed financing sources to obtain information for Portec about
the nature and status of CHS' plans to fund its purchase of Portec.
At a meeting of the Portec Board on Sunday, March 8, 1998, Portec's
management and its financial and legal advisors reported on the prior week's
developments with respect to the CHS proposal. Wasserstein Perella reviewed
certain financial information concerning CHS and its financing plans, and the
financial terms of the proposed transaction. It was explained that CHS would
form a new corporation, MHD, to serve as the acquisition vehicle in the
transaction and that prior to closing it was likely that MHD would assign its
rights and obligations under the definitive merger agreement to JRI. Wasserstein
Perella rendered its oral opinion (which it subsequently confirmed in writing)
that, as of such date, and subject to the assumptions and limitations set forth
therein, the cash price of $16.00 per share to be received by the stockholders
of Portec pursuant to the Merger was fair to such stockholders from a financial
point of view. Portec's legal advisors reviewed the terms of the then-current
versions of the definitive merger agreement and the Albert Fried voting
agreement and irrevocable proxy, and the legal standards applicable to the
Portec Board's consideration of the proposed merger transaction. Following
discussion of and questions by the Portec Board to Portec's management and its
financial and legal advisors, the members of the Portec Board (with one director
absent) voted unanimously to approve the Merger, subject to the satisfactory
resolution of all remaining open issues under the definitive merger agreement.
The reasons for the Portec Board's approval of the Merger, including the terms
of the fairness opinion obtained by the Portec Board from Wasserstein Perella,
are described below under "--Recommendation of the Portec Board of Directors and
Reasons for the Merger" and "-- Opinion of Financial Advisor."
Negotiations between the parties resumed on Monday, March 9, 1998 and
Tuesday, March 10, 1998 to resolve the remaining contract issues. The Portec
Board met again on Wednesday, March 11, 1998 to approve the final changes to the
definitive merger agreement. Shortly following the Portec Board meeting on March
11, 1998, the parties executed the Merger Agreement, and Portec issued a press
release announcing the transaction.
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RECOMMENDATION OF THE PORTEC BOARD OF DIRECTORS AND REASONS FOR THE MERGER
At its March 8, 1998 meeting, the Portec Board determined that the Merger
was advisable, fair to and in the best interests of Portec and its stockholders.
Accordingly, at such meeting the Portec Board (with one director absent)
unanimously approved the Merger Agreement, directed that the Merger Agreement be
submitted to the Portec stockholders and unanimously recommended that the Portec
stockholders vote FOR adoption of the Merger Agreement.
The determination of the Portec Board to approve the Merger Agreement was
based upon consideration of a number of factors, including the following:
(i) The Portec Board's familiarity with the business, operations,
financial condition, competitive position and prospects of Portec and the
nature of the industry in which Portec operates, both on a historical and
prospective basis;
(ii) The Portec Board's consideration of, among other things,
information with respect to the financial condition, results of operations
and business of Portec on both an historical and a prospective basis, and
the influence of current and prospective industry, economic and market
conditions, including increased competition in the industry in which Portec
operates;
(iii) The Portec Board's review of the historical and prospective
market prices of Portec Common Stock compared to the Merger Consideration
to be received by the Portec stockholders in the Merger;
(iv) The Portec Board's extensive study of strategic alternatives
available to Portec prior to and subsequent to the sale of the Construction
Equipment and the Railroad Products businesses, and the Portec Board's
ultimate view that the Merger represented the most favorable strategic
alternative to the Portec stockholders;
(v) The fact that the Portec Board had publicly announced that it was
exploring strategic alternatives to maximize stockholder value and
continued to publicly disclose its ongoing strategic planning;
(vi) The fact that the foregoing public announcements and other
procedures to elicit proposals to acquire Portec had been implemented in
the context of a comprehensive auction process to maximize stockholder
value;
(vii) The fact that Portec held exploratory talks with a strategic
buyer which did not lead to a definitive proposal;
(viii) The fact that MHD submitted the highest bid in the auction
process and evidenced a strong ability, based upon CHS' prior deal
experience and reputation, to finance and complete the Merger in a
relatively short time frame, notwithstanding the conditions in the Merger
Agreement relating to completion of due diligence and delivery of financing
commitments on or prior to April 10, 1998;
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(ix) The Portec Board's review of presentations by, and discussion of
the terms and conditions of the Merger Agreement with, senior management of
Portec, representatives of its legal counsel and Wasserstein Perella;
(x) The Portec Board's receipt of the written opinion of Wasserstein
Perella to the effect that, as of the date of such opinion and based upon
and subject to certain matters stated therein, the Merger Consideration to
be received by the Portec stockholders was fair to such stockholders from a
financial point of view; and
(xi) The Portec Board's consideration of the terms of the Merger
Agreement, including the inclusion of a "fiduciary out" provision (subject
to the payment of a breakup fee) in the event of an unsolicited Acquisition
Proposal (as defined in the Merger Agreement) that is more attractive than
the Merger.
The foregoing list of factors considered by the Portec Board in its
evaluation of the Merger is not intended to be exhaustive. In view of the wide
variety of factors considered in connection with its evaluation of the Merger,
the Portec Board did not find it practicable to, and did not, quantify or
otherwise attempt to assign relative weights to the specific factors considered
in reaching its determination. In addition, individual members of the Portec
Board may well have given different weights to different factors.
THE PORTEC BOARD UNANIMOUSLY RECOMMENDS THAT THE PORTEC STOCKHOLDERS VOTE
IN FAVOR OF THE ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY AT THE SPECIAL MEETING.
OPINION OF FINANCIAL ADVISOR
On June 10, 1997, Portec retained Wasserstein Perella to act as its
financial advisor with respect to assisting Portec in exploring and implementing
various strategies to enhance stockholder value, including the possible sale of
the three separate businesses of Portec and a possible sale of the entire
company. In connection with the Merger Agreement, representatives of Wasserstein
Perella attended the meeting of the Portec Board on March 8, 1998 at which the
Portec Board considered and approved the Merger Agreement. At that meeting,
Wasserstein Perella orally rendered its opinion to the Portec Board
(subsequently confirmed in its written opinion dated March 8, 1998) that, as of
such date and subject to the assumptions and limitations set forth therein, the
$16.00 per share cash consideration to be received by the Portec stockholders
pursuant to the Merger is fair to such stockholders from a financial point of
view.
THE FULL TEXT OF THE WASSERSTEIN PERELLA FAIRNESS OPINION (THE "OPINION"),
WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND QUALIFICATIONS AND
LIMITATIONS ON THE REVIEW UNDERTAKEN BY WASSERSTEIN PERELLA, IS ATTACHED AS
ANNEX C TO THIS PROXY STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE. PORTEC
STOCKHOLDERS ARE URGED TO AND SHOULD READ THE OPINION IN ITS ENTIRETY. THE
SUMMARY OF THE OPINION SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF OPINION. WASSERSTEIN PERELLA DELIVERED
THE OPINION TO THE PORTEC BOARD FOR ITS USE AND BENEFIT AND IS DIRECTED ONLY TO
THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE MERGER CONSIDERATION TO THE
PORTEC STOCKHOLDERS. THE OPINION DOES NOT ADDRESS THE MERITS OF
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THE UNDERLYING DECISION BY PORTEC TO ENGAGE IN THE MERGER AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY PORTEC STOCKHOLDER AS TO HOW SUCH STOCKHOLDER
SHOULD VOTE WITH RESPECT TO THE MERGER AGREEMENT OR ANY TRANSACTION RELATED
THERETO.
The summary set forth below does not purport to be a complete description
of the analyses underlying the Opinion or the presentations made by Wasserstein
Perella to the Portec Board. The preparation of a fairness opinion is a complex
analytic process involving various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to partial analysis or summary description. In arriving at its
opinion, Wasserstein Perella did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevance of each analysis and factor. Wasserstein Perella
believes that its analyses must be considered as a whole and that selecting
portions of its analyses without considering all analyses would create an
incomplete view of the process underlying its opinion.
In performing its analyses, numerous assumptions were made with respect to
industry performance, general business, regulatory, economic, market and
financial conditions and other matters, many of which are beyond the control of
Wasserstein Perella, Portec or MHD. Any estimates contained in the analyses
performed by Wasserstein Perella are not necessarily indicative of actual values
or future results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, estimates of the value of businesses
or securities do not purport to be appraisals or to reflect the prices at which
such businesses or securities might actually be sold. Accordingly, such analyses
and estimates are inherently subject to substantial uncertainty, and Wasserstein
Perella assumes no responsibility for their accuracy. In addition, as described
above, the Opinion and the presentations to the Portec Board by Wasserstein
Perella were among several factors taken into consideration by the Portec Board
in making its determination to approve the Merger Agreement. Consequently, the
Wasserstein Perella analyses described below should not be viewed as
determinative of the decision of the Portec Board or Portec's senior management
with respect to the fairness of the Merger Consideration from a financial point
of view.
In connection with rendering its Opinion, Wasserstein Perella (i) reviewed
and analyzed the Merger Agreement; (ii) reviewed and analyzed certain publicly
available business and financial information relating to Portec for recent years
and interim periods to date, as well as certain internal financial and operating
information, including financial forecasts, projections and analyses prepared by
or on behalf of Portec and provided to Wasserstein Perella for purposes of its
analyses; (iii) met with certain representatives of Portec to review and discuss
such information and, among other matters, Portec's business, financial
condition, results of operations and prospects, including the financial
forecasts, projections and analyses referred to below; (iv) reviewed and
considered certain financial and stock market data relating to Portec and
compared those data with similar data for certain other companies, the
securities of which are publicly traded and that Wasserstein Perella believed
might be relevant or comparable in certain respects to Portec or one or more of
its businesses or assets; (v) reviewed and considered the financial terms of
certain recent acquisitions and business combination transactions in the
materials handling industry specifically, and in other
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industries generally, which Wasserstein Perella believed to be reasonably
comparable in certain respects to the Merger or otherwise relevant to its
analysis; and (vi) performed such other studies, analyses and investigations and
reviewed such other information as Wasserstein Perella considered appropriate.
No limitations were imposed by Portec upon Wasserstein Perella with respect to
its investigation or the procedures followed by it in rendering its Opinion.
In its review, Wasserstein Perella assumed and relied on the accuracy and
completeness of all the financial and other information provided to or discussed
with it or made publicly available, including financial projections, forecasts,
analysis or other information provided to Wasserstein Perella, without assuming
any responsibility for independent verification of, or expressing an opinion as
to, any of such information. Wasserstein Perella relied on the reasonableness
and accuracy of the financial forecasts, projections and analyses and other
information furnished to Wasserstein Perella and assumed, with the consent of
the Portec Board, that such forecasts, projections, analyses and other
information were reasonably prepared in good faith and on bases reflecting the
best currently available judgments and estimates of Portec's management as of
March 8, 1998 and that Portec's management is unaware of any facts that would
make the projections, forecasts and other information provided to Wasserstein
Perella incomplete or misleading. Wasserstein Perella also did not review any of
the books and records of Portec or conduct, or assume any responsibility for
conducting, a physical inspection of the properties or facilities of Portec, or
for making or obtaining an independent valuation or appraisal of the assets or
liabilities of Portec, and no such independent valuation or appraisal was
provided to it. Wasserstein Perella's Opinion was based on economic and market
conditions and other circumstances as they existed and could be evaluated by it
on March 8, 1998.
The following summary sets forth the material analyses presented by
Wasserstein Perella to the Portec Board in connection with the rendering of its
Opinion on March 8, 1998.
Stock Price and Premium Analysis. Wasserstein Perella reviewed the weekly
stock price and volume of Portec from March 1, 1996 through February 27, 1998
(including a comparison of the relative stock price performance of Portec as
compared to other materials handling companies).
Wasserstein Perella also reviewed 54 announced transactions from March 1,
1997 through February 27, 1998 involving the merger or sale of publicly held
companies where transaction values were less than $100 million to derive a range
of premiums paid over the public trading prices one day, one week, four weeks
and eight weeks prior to the announcement of such transaction. In connection
therewith, Wasserstein Perella noted, among other things, that (i) the reasons
for, and circumstances surrounding, each of the transactions analyzed were
diverse, (ii) the characteristics of the companies involved were not necessarily
comparable to those of Portec and MHD and (iii) premiums fluctuate based on
perceived growth, synergies, strategic value, the type of consideration utilized
in the transaction, information in the securities markets and other factors.
The foregoing analyses indicated that the medians of premiums paid in the
transactions over the public per share trading prices one day, one week, four
weeks and eight weeks prior to the announcement were 21.3%, 28.9%, 26.7%, and
27.0%, respectively, and that the means of premiums paid in the transactions
over the public per share trading prices one day, one week, four weeks and
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eight weeks prior to the announcement were 24.0%, 31.0%, 35.8%, and 35.9%. The
closing price of the shares on October 16, 1997 was $13.69, the date of the
first public announcement that Portec was considering its strategic
alternatives, including the possible sale. The proposed Merger Consideration
represents a premium over the trading price of the Share prices one day, one
week, four weeks and eight weeks prior to the announcement of 19.1%, 22.5%,
22.5%, and 39.1%, respectively.
Comparable Company Analysis. Wasserstein Perella reviewed and compared
certain financial information of Portec to corresponding financial information
for six publicly traded companies: Cascade Corporation; Centrum Industries,
Inc.; Columbus McKinnon, Inc.; DT Industries, Inc.; SI Handling Systems, Inc.;
and TCC Industries, Inc. (collectively, the "Comparable Companies"). Such
financial information was used to calculate the latest 12 months of 1997 ("LTM")
and next fiscal year 1998 ("NFY") multiples, including the adjusted market value
as of March 3, 1998 (defined generally as the Market Value plus net debt (short
and long-term debt less cash)) ("Adjusted Market Value") as a multiple of the
net sales, earnings before interest, taxes, depreciation and amortization
("EBITDA"), and earnings before interest ("EBIT"). Adjusted Market Value was
based on the closing price per share on March 3, 1998 and LTM and NFY financial
results for Portec were based on the estimated financial results provided in the
Management Case of the Discounted Cash Flow analysis described below (and
included $1.0 million in corporate office expenses, although actual corporate
office expenses have ranged from $2.0 million to $3.0 million in the prior three
years when Portec had three divisions). Such analyses, excluding certain
multiples of SI Handling Systems, Inc. which Wasserstein Perella determined were
not meaningful, indicated that, (i) as of March 3, 1998, as compared to the LTM
financial results, (a) Portec traded at an Adjusted Market Value multiple of
1.1x net sales, compared to a range of 0.6x to 1.2x for the Comparable Companies
(and a median of 1.1x); (b) Portec traded at an Adjusted Market Value multiple
of 5.9x EBITDA, as compared to a range of 4.9x to 8.0x for the Comparable
Companies (and a median of 6.8x); and (c) Portec traded at an Adjusted Market
Value multiple of 6.9x EBIT, compared to a range of 6.6x to 11.1x for the
Comparable Companies (and a median of 8.2x) and; (ii) as compared to the NFY
financial results, (a) Portec traded at an Adjusted Market Value multiple of
0.9x net sales, compared to a range of 0.8x to 1.1x for the Comparable Companies
(and a median of 1.0x); (b) Portec traded at an Adjusted Market Value multiple
of 4.8x EBITDA, compared to a range of 5.6x to 7.2x for the Comparable Companies
(and a median of 6.4x), (c) Portec traded at an Adjusted Market Value multiple
of 5.5x EBIT compared to a range of 8.5x to 8.7x for the Comparable Companies
(and a median of 8.6x). The above analysis produced an implied per share price,
based on the median of the Comparable Companies' multiples, of (i) for the LTM,
$14.50 based on sales, $14.92 based on EBITDA, and $15.16 based on EBIT, and
(ii) for the NFY, $14.71 based on sales, $16.00 based on EBITDA, and $17.26
based on EBIT.
Comparable Acquisitions. Using publicly available information, Wasserstein
Perella reviewed and compared financial information on 19 completed merger or
acquisition transactions in the materials handling industry announced since
July 1993, the majority which were completed since March 1997. Materials
handling transactions included: Chartwell Investments/Harnischfeger Industries
- -- Materials Handling Unit; Columbus McKinnon/Univeyor A/S; Apax Partners &
Co./Interlake Corp. -- Dexion Group; BT Industries/Raymond Corp.; Thyssen
AG/Giddings & Lewis, Inc.; Key
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Equity Capital/Crown-Simplimatic; R-B Capital Corp./Peerless Industrial; Terex
Corporation/Simon Engineering plc -- Access Division; Worthington
Industries/Gertenslager; Cascade Corp./Kenhar Corp.; Citicorp Venture
Capital/Clark Material Handling; DT Industries Inc. (Harbour Group Ltd.)/
Hansford Manufacturing Corp.; Ingersoll-Rand Co./Zimmerman International Corp.;
Columbus McKinnon/Yale Industries; Illinois Tool Works Inc./Azon Ltd. (Boral
Ltd.); Investor Group/Pinnacle Automation; Columbus McKinnon/Lift-Tech; BTR
plc/Rexnord Corp.; and Dover Industries/ Heil Co. (collectively, the "Comparable
Transactions"). Wasserstein Perella noted that none of the Comparable
Transactions reviewed were identical to the Merger and that, accordingly, the
analysis of comparable transactions necessarily involved complex considerations
and judgment concerning differences in financial and operating characteristics
of Portec and other factors that could affect the analytical value of Comparable
Transactions. Wasserstein Perella compared adjusted market value of the
Comparable Transactions (defined generally as the purchase price of the equity
plus net debt (short and long-term debt less cash) plus present value of other
consideration) ("Adjusted Market Value") as a multiple of net sales, EBITDA and
EBIT. Net sales, EBITDA and EBIT for each of the Comparable Transactions was
based on the latest 12 months publicly available information prior to the
transaction announcement. Financial information for Portec was based on the
estimated financial results for the latest 12 months provided in the Management
Case of the Discounted Cash Flow Analysis described below (and included $1.0
million in corporate office expenses, although actual corporate office expenses
have ranged from $2.0 million to $3.0 million in the prior three years when
Portec had three divisions). Such analyses indicated that: (a) Adjusted Market
Value of the Comparable Transactions multiples of net sales ranged from 0.3x to
1.5x net sales (and a median of 0.8x), (b) Adjusted Market Value of the
Comparable Transactions multiples of EBITDA ranged from 4.3x to 11.6x (and a
median of 7.8x), and (c) Adjusted Market Value of the Comparable Transactions
multiples of EBITDA ranged from 6.7x to 17.3x (and a median of 11.6x). The above
analysis produced an implied per share price, based on the median of the
Comparable Transactions' multiples for the latest 12 months of $12.68 based on
sales, $15.89 based on EBITDA, and $17.92 based on EBIT.
Discounted Cash Flow Analysis. Wasserstein Perella also performed
discounted cash flow analyses of Portec ("DCF") based on certain alternative
financial forecasts provided to Wasserstein Perella by the management of Portec.
The management case (the "Management Case") considered by Wasserstein Perella
was predicated on the forecasts for 1998 through 2002 that were developed by
Portec's management. Management assumed sales growth of 22.3% in 1998, a sales
decline of 5.1% in 1999 and sales growth of 9.6%, 5.0% and 5.0% in 1999, 2000
and 2001, respectively. For analytical purposes only, Wasserstein Perella also
considered two alternative cases (i) a revised Management Case with a major
customer loss (the "Downside Case") which was predicated on the Management Case
but assumed that Portec lost its business with the U.S. Postal Service
throughout the forecast period resulting in sales growth of 22.3% in 1998, a
sales decline of 19.5% in 1999 and sales growth of 9.6%, 5.0% and 5.0% in 1999,
2000 and 2001, respectively and (ii) a revised Management Case which assumed a
severe recession in 1999 (the "Recession Case") which was predicated on the
Management Case but assumed that sales growth followed the same pattern as
experienced by Portec during the preceding recession period of 1990
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to 1994, assuming sales growth of 22.3% in 1998, a sales decline of 29.8% in
1999, and sales growth of 37.9%, 9.6% and 4.8% in 2000, 2001, and 2002,
respectively.
In performing the discounted cash flow analyses, Wasserstein Perella, using
the forecasts as described above, discounted the unlevered free cash flows of
Portec (unlevered net income, plus depreciation and amortization, less changes
in working capital and capital expenditures) over the specified forecast period
using a range of risk adjusted discount rates between 10% and 12%. The sum of
the present values of such free cash flows for Portec was then added to the net
cash and the present value of Portec's terminal value computed using a forward
multiple range of EBITDA (a five-year forecast was used for all cases) of 6.0x
to 7.0x. Portec's net cash was calculated as of December 31, 1997 based on
management's unaudited financial information including cash and securities less
short and long-term debt, less the cash cost of the redemption of outstanding
options, less management's estimate of corporate obligations associated with the
Merger and dissolution of corporate offices (whether or not accrued by December
31, 1997 on the unaudited financial statements including taxes, severance,
pension and post-retirement benefits, litigation settlement and professional
fees). Based on this analysis, Wasserstein Perella calculated the following
implied price per share ranges. The Management Case resulted in a per share DCF
valuation range from (i) $17.06 to $18.12 using a discount rate of 10%, (ii)
$16.70 to $17.72 using a discount rate of 11% and (iii) $16.36 to $17.34 using a
discount rate of 12%. The Downside Case resulted in a per share DCF valuation
range from (i) $15.70 to $16.58 using a discount rate of 10%, (ii) $15.40 to
$16.25 using a discount rate of 11% and (iii) $15.12 to $15.93 using a discount
rate of 12%. The Recession Case resulted in a per share DCF valuation range from
(i) $16.29 to $17.31 using a discount rate of 10%, (ii) $15.97 to $16.93 using a
discount rate of 11% and (iii) $15.65 to $16.58 using a discount rate of 12%.
Wasserstein Perella Engagement Agreement. In accordance with a letter
agreement dated June 6, 1997 and a letter agreement dated February 11, 1998
(collectively, the "Letter Agreement"), Portec agreed to pay Wasserstein Perella
as follows: (i) an advisory fee of $100,000 on July 2, 1997, (ii) in connection
with the sale or sales of less than substantially all of Portec's businesses, a
transaction fee equal to 2.75% of the aggregate consideration and (iii) in
connection with the sale or sales of substantially all of Portec's businesses, a
transaction fee equal to 1.75% of the aggregate consideration plus $200,000,
less any amounts previously paid. In connection with the Letter Agreement,
Portec has previously paid Wasserstein Perella a transaction fee of $1,416,250
and an additional $337,530 is contingent upon the consummation of the Merger.
Portec has also agreed to reimburse Wasserstein Perella, subject to certain
limitations, for all reasonable out-of-pocket expenses incurred by Wasserstein
Perella (including the reasonable fees and disbursements of counsel) in
connection with the matters contemplated by the Letter Agreement. In addition,
pursuant to the terms of an indemnification agreement, Portec agreed to
indemnify Wasserstein Perella (and its affiliates, their respective directors,
officers, agents, employees, and controlling persons) against certain
liabilities arising out of or in connection with Wasserstein Perella's
engagement, including liabilities under the federal securities laws.
The terms of the fee arrangement between Portec and Wasserstein Perella,
with which each party believes is customary in transactions of this nature, were
negotiated at arm's-length between
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Portec and Wasserstein Perella, and the Portec Board was aware of this
arrangement including the fact that a significant portion of the aggregate fee
payable to Wasserstein Perella is contingent upon consummation of the Merger.
Portec retained Wasserstein Perella based upon its experience and
expertise. Wasserstein Perella is an internationally recognized investment
banking and advisory firm and has substantial experience in transactions such as
the Merger and in valuing companies. Wasserstein Perella, as part of its
investment banking business, is continuously engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
competitive biddings and valuations for corporate and other purposes. In the
ordinary course of its business, Wasserstein Perella may actively trade in the
securities of Portec for its own account and for the accounts of its customers
and, accordingly, may at any time hold a long or short position in such
securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER AND POSSIBLE CONFLICTS OF INTEREST
Portec stockholders should be aware that the directors and certain members
of senior management of Portec may be deemed to have interests in the Merger in
addition to their interests as Portec stockholders. MHD has agreed to indemnify
the directors and officers of Portec against claims related to their service as
directors or officers existing or occurring at or prior to the Effective Time
and to provide indemnification insurance with respect to this obligation.
Directors' and officers' liability insurance will be continued for the directors
and officers of Portec by MHD for a six-year period following the Effective
Time. In addition, M. T. Yonker, President and Chief Executive Officer of
Portec, and N. A. Kindl, Vice President, Secretary and Treasurer of Portec, each
have an employment agreement with Portec which provides the payment of certain
severance benefits following termination of employment as a result of the
Merger. In Mr. Yonker's case, he will be entitled to two years' annual salary
(approximately $525,888) and continuing health, accident, disability and life
insurance coverage in amounts substantially equal to those in effect at the time
of termination for two years following the termination of his employment with
Portec, provided further that Mr. Yonker's health insurance coverage will
continue until such time that Mr. Yonker and his wife qualify for Medicare
coverage. Ms. Kindl will be entitled to one year's annual salary (approximately
$133,104) and continuing insurance coverage in amounts substantially equal to
those in effect at the time of termination for one year following the
termination of her employment with Portec. In addition, Mr. Yonker, Ms. Kindl,
and Mr. Kevin C. Rorke, Vice President and General Manager of Portec's Flomaster
Division of the Materials Handling business, will be entitled to bonuses of
approximately $78,883, $39,931 and $45,126, respectively, upon the closing of
the Merger. The directors and executive officers of Portec will have their
options to acquire Portec Common Stock canceled and purchased for cash equal to
the difference between the Merger Consideration and the applicable option
exercise price at an aggregate cost to Portec of approximately $4,508,905. The
Portec Board was aware of these interests and considered them, among other
matters, in approving the Merger Agreement and the transactions contemplated
thereby and in recommending that the Portec stockholders vote for the adoption
of the Merger Agreement and the transactions contemplated thereby. See "--
Indemnification," and "THE TERMS OF THE MERGER."
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INDEMNIFICATION
Portec and MHD have agreed that, from and after the Effective Time, the
surviving corporation will indemnify and hold harmless each present and former
director and officer of Portec and its subsidiaries, determined as of the
Effective Time (the "Indemnified Parties"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that Portec or such subsidiary
would have been permitted under applicable law and the Certificate of
Incorporation or Bylaws of Portec (the "Portec Certificate of Incorporation" and
"Portec Bylaws," respectively) or such subsidiary in effect on the date of the
Merger Agreement to indemnify such person (and the surviving corporation will
also advance expenses as incurred to the fullest extent permitted under
applicable law provided the person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
person is not entitled to indemnification). In addition, for a period of six
years after the Effective Time, the surviving corporation will maintain in
effect the current policies of directors' and officers' liability insurance
maintained by Portec (provided that MHD may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions which are no
less advantageous in all material respects to the Indemnified Parties), with
respect to claims arising from facts or events which occurred before the
Effective Time; provided, however, that the surviving corporation shall not be
obligated to make annual premium payments for such insurance to the extent such
premiums exceed 200% of the premiums paid as of the date of the Merger Agreement
by Portec for such insurance.
MHD'S SOURCE AND AMOUNT OF FUNDS
MHD has advised Portec that the total amount of funds required to pay the
Merger Consideration (including payments required in connection with the
cancellation and cash out of stock options) and related fees and expenses, and
to refinance JRI's currently outstanding bank facilities is estimated at $91
million. A portion of the necessary financing will be provided by excess cash on
hand at Portec at the time of consummation of the Merger. MHD has obtained
financing commitments with respect to the balance of the financing required as
part of a larger refinancing of JRI's credit facilities. The financing
arrangements as they relate to Portec and the Merger are described below.
MHD has provided Portec with a copy of (i) a financing commitment from PNC
Bank to provide senior credit facilities of up to $48 million (the "PNC Bank
Letter") and (ii) a commitment from Code, Hennessey & Simmons II, L.P., a
private equity fund affiliated with CHS, to provide $8 million of equity and
junior subordinated financing (the "CHS Letter"). This financing will be
provided to J Richard Holdings L.P. ("Holdings"), the parent company of JRI, and
JRI as part of a refinancing of JRI's existing indebtedness.
The PNC Bank Letter contemplates a facility consisting of a revolving
credit loan of $10 million with a five-year term, a five-year term loan of
$24.5 million and a seven-year term loan of
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$13.5 million. Interest will be payable at a floating rate based on LIBOR or the
prime rate plus a margin and commitment fee based on a pricing grid which is
tied to the borrower's leverage ratio.
The CHS Letter contemplates an investment of $8 million in equity and
junior subordinated notes of Holdings. Certain members of the management of
Portec have been offered the opportunity to invest in up to three percent of the
equity and junior subordinated notes of Holdings on the same terms as CHS. The
amount and terms of management's investment have not yet been finalized, nor has
any member of management determined to make any investment in Holdings. In
addition, existing investors in Holdings have been offered preemptive rights
with respect to the investment.
The obligations of the respective financing sources under the commitments
described above are subject to the satisfaction of the conditions set forth in
the Merger Agreement and the negotiation and execution of definitive
documentation. MHD expects that the definitive documentation will be in
customary form and contain representations, warranties and covenants typical for
transactions of the type contemplated thereby. MHD is required under the terms
of the Merger Agreement to use its reasonable efforts to complete the financing
contemplated by the arrangements described above.
ACCOUNTING TREATMENT
MHD will account for the Merger as a purchase for accounting and financial
reporting purposes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following summary discusses certain material federal income tax
consequences of the Merger to Portec stockholders. The summary is based upon the
Internal Revenue Code of 1986, as amended, (the "Code"), applicable Treasury
Regulations thereunder and administrative rulings and judicial authority as of
the date hereof, including modifications made by the Taxpayer Relief Act of
1997. All of the foregoing are subject to change, and any such change could
affect the continuing validity of the discussion. The discussion assumes that
holders of shares of Portec Common Stock hold such shares as a capital asset,
and does not address the tax consequences that may be relevant to a particular
stockholder subject to special treatment under certain federal income tax laws,
such as dealers in securities, banks, insurance companies, tax-exempt
organizations, corporate stockholders which are collapsible corporations,
non-United States persons and stockholders who acquired shares of Portec Common
Stock pursuant to the exercise of options or otherwise as compensation or
through a tax-qualified retirement plan, nor any consequences arising under the
laws of any state, locality or foreign jurisdiction.
The receipt of cash by a Portec stockholder in the Merger or pursuant to
the exercise of dissenters' appraisal rights will be a taxable transaction for
federal income tax purposes under the Code and may also be a taxable transaction
under applicable state, local, foreign income or other tax laws. Generally, a
stockholder will recognize gain or loss in an amount equal to the difference
between the cash received by the stockholder pursuant to the Merger and the
stockholder's adjusted tax basis in the Portec Common Stock purchased pursuant
to the Merger. For federal income tax purposes, such gain or loss will be a
capital gain or loss if the shares are a capital asset
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in the hands of the stockholder, and a long-term capital gain or loss if the
stockholder meets one of the holding periods set forth below as of the Effective
Time. There are significant limitations on the deductibility of capital losses
by individuals or corporations. Capital losses can offset capital gains on a
dollar-for-dollar basis and, in the case of an individual stockholder, capital
losses in excess of capital gains can be deducted to the extent of $3,000
annually. An individual can carry forward unused capital losses indefinitely. A
corporation can utilize capital losses only to offset capital gain income; a
corporation's unused capital losses can be carried back three years and forward
five years.
Long-term capital gains recognized after July 28, 1997, on marketable
securities such as the shares of Portec Common Stock will be taxable at a
maximum rate of 20% for individuals if the individual's holding period is more
than 18 months and 28% if the holding period is more than one year but not more
than 18 months, and 35% for corporations. Ordinary income is taxable at a
maximum rate of 39.6% for individuals and 35% for corporations.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT THERETO. THUS,
PORTEC STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, AND OTHER
APPLICABLE TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
REGULATORY APPROVAL
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Merger cannot be consummated until requisite
pre-merger notifications have been filed and certain information has been
furnished to the Antitrust Division of the U.S. Department of Justice (the
"Antitrust Division") and the FTC, and a specified waiting period has expired or
been terminated. Portec and MHD each filed its pre-merger notification and
report forms under the HSR Act with the FTC and the Antitrust Division on April
15, 1998. On April 27, 1998, the FTC granted early termination of the waiting
period. At any time before or after the Effective Time, the Antitrust Division,
if it deems it to be necessary or desirable in the public interest to do so,
could act under the federal antitrust laws and seek to enjoin consummation of
the Merger or seek the divestiture of substantial assets of Portec or MHD. At
any time before or after the Effective Time, and notwithstanding that the HSR
Act waiting period has expired, any state attorney general also could take
action under its antitrust laws to seek to enjoin consummation of the Merger or
seeking divestiture of substantial assets of Portec or MHD. Private parties also
may take legal action under federal and/or state antitrust laws under certain
circumstances. Portec and MHD believe that the Merger will comply with federal
and state antitrust laws. However, there can be no assurance that a challenge to
consummation of the Merger on antitrust grounds will not be made or that, if
such a challenge were made, Portec and MHD would prevail or would not be
required to accept certain conditions, including certain divestitures, in order
to consummate the Merger.
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Other than the expiration or early termination of the relevant waiting
periods under the HSR Act, there are no regulatory approvals required from any
governmental authorities to consummate the Merger.
DISSENTERS' APPRAISAL RIGHTS
Delaware Law sets forth certain rights and remedies applicable to
stockholders of record of Portec who may object to the Merger. These rights are
available only to stockholders holding shares of Portec Common Stock through the
Effective Time (the "Dissenting Shares") and who comply with the requirements of
Section 262 of Delaware Law. Set forth below is a summary of the rights provided
to the holders of Portec Common Stock by Section 262 of Delaware Law. A copy of
Section 262 of the Delaware Law is attached to this Proxy Statement as ANNEX B.
The following discussion is not a complete statement of the law relating to
appraisal rights and is qualified in its entirety by reference to ANNEX B. This
discussion and ANNEX B should be reviewed carefully by any holder who wishes to
exercise statutory appraisal rights or who wishes to preserve the right to do
so, because the failure to comply strictly with the procedures set forth herein
or therein will result in the loss of such appraisal rights. Any Portec
stockholder who contemplates the assertion of appraisal rights is urged to
consult his or her own counsel.
Under Section 262 of the Delaware Law, when a merger is to be submitted for
approval at a meeting of stockholders, not less than 20 days prior to the
meeting, a constituent corporation must notify each of the holders of its stock
for which appraisal rights are available that such appraisal rights are
available and include in each such notice a copy of Section 262 of the Delaware
Law. This Proxy Statement constitutes such notice to Portec stockholders.
Portec stockholders who desire to exercise their appraisal rights must
satisfy all of the following conditions. Any such Portec stockholder must be a
stockholder of record of Portec from the date he or she makes a written demand
for appraisal (as described below) through the Effective Time and must
continuously hold his or her Dissenting Shares throughout the period between
such dates. A written demand for appraisal of the Dissenting Shares must be
delivered to the Secretary of Portec before the stockholder vote at the Special
Meeting. The demand will be sufficient if it reasonably informs Portec of the
identity of the Portec stockholder and that the Portec stockholder intends
thereby to demand the appraisal of his or her Dissenting Shares. Any written
demand for appraisal of Dissenting Shares must be in addition to and separate
from any proxy or vote abstaining from or voting against the Merger Agreement.
Although a Portec stockholder must vote against, abstain from voting or fail to
vote on the Merger Agreement to preserve his or her rights to appraisal, a vote
against, a failure to vote or an abstention from voting will not, in and of
itself, constitute a demand for appraisal within the meaning of Section 262 of
Delaware Law.
Holders of Dissenting Shares electing to exercise their appraisal rights
under Section 262 of Delaware Law must neither vote for adoption of the Merger
Agreement nor consent thereto in writing. A Portec stockholder who signs and
returns a proxy card without expressly specifying a vote against adoption of the
Merger Agreement or a direction to abstain, by checking the applicable box on
the proxy card enclosed herewith, effectively will waive appraisal rights as to
those shares because, in the absence of express instructions to the contrary,
such Dissenting Shares will be
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voted in favor of the adoption of the Merger Agreement. Accordingly, a Portec
stockholder who desires to perfect his or her appraisal rights with respect to
any Dissenting Shares must, as one of the procedural steps involved in such
perfection, either (i) refrain from executing and returning a proxy card and
from voting in person in favor of the adoption of the Merger Agreement or (ii)
check either the "Against" or the "Abstain" box on the proxy card or
affirmatively vote in person at the Special Meeting against the adoption of the
Merger Agreement or register in person at the Special Meeting an abstention with
respect thereto.
A demand for appraisal must be executed by or for the Portec stockholder,
fully and correctly, exactly as such Portec stockholder's name appears on the
certificate or certificates representing his or her Dissenting Shares. If the
Dissenting Shares are owned of record by more than one person, as in a joint
tenancy or tenancy in common, such demand must be executed by all joint owners.
An authorized agent, including an agent for two or more joint owners, may
execute the demand for appraisal for a Portec stockholder; however, the agent
must identify the beneficial owner and expressly disclose the fact that, in
exercising the demand, such person is acting as agent for the record owner. If a
Portec stockholder holds Dissenting Shares through a broker who in turn holds
the shares through a central securities depository nominee, a demand for
appraisal of such Dissenting Shares must be made by or on behalf of the
depository nominee and must identify the depository nominee as the holder of
record.
TERMS OF THE MERGER
The following is a summary of certain provisions of the Merger Agreement. A
copy of the Merger Agreement is attached as ANNEX A to this Proxy Statement and
is incorporated herein by reference. All capitalized terms not defined herein
shall have the meaning assigned to them in the Merger Agreement. The following
summary does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement.
THE MERGER; EFFECTIVE TIME
Upon the terms and subject to the conditions of the Merger Agreement, at
the Effective Time, MHD will merge with and into Portec, with Portec as the
surviving corporation. The Merger will become effective upon the execution and
filing of a Certificate of Merger with the Secretary of State of Delaware. Such
filing will be made or otherwise become effective on the closing date, which
date will be no later than the first business day after satisfaction or waiver
of the conditions to the Merger set forth in the Merger Agreement (the "Closing
Date"). It is presently contemplated that the Closing Date and the Effective
Time will occur shortly after adoption of the Merger Agreement at the Special
Meeting, which is currently scheduled to take place on May 28, 1998, or as soon
as practicable thereafter.
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MERGER CONSIDERATION
GENERAL. At the Effective Time, each outstanding share of Portec Common
Stock (other than treasury shares and Dissenting Shares) will be converted into
the right to receive the Merger Consideration.
TREASURY SHARES. Each share of Portec Common Stock issued and outstanding
immediately prior to the Effective Time which is then held as a treasury share
by Portec immediately prior to the Effective Time shall, by virtue of the Merger
and without any action on the part of Portec, be canceled and cease to exist,
without any conversion thereof.
PAYMENT PROCEDURES
PAYMENT OF THE MERGER CONSIDERATION. Promptly after the Effective Time, the
Paying Agent will mail to each person who was, as of the Effective Time, a
holder of record of shares of Portec Common Stock, a letter of transmittal to be
used by such holders in forwarding their Certificates, and instructions for
effecting the surrender of the Certificates in exchange for the Merger
Consideration. The Paying Agent will also have letters of transmittal and
instructions available at its offices immediately after the Effective Time in
order to accommodate Portec stockholders desiring to receive the Merger
Consideration at the earliest possible date. Upon surrender to the Paying Agent
of a Certificate for cancellation, together with a properly completed letter of
transmittal, the holder of such Certificate will be entitled to receive the
Merger Consideration which such holder has the right to receive in respect of
the Certificate surrendered, and the Certificate so surrendered will be
canceled. PORTEC STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE A LETTER OF TRANSMITTAL.
On or after the Effective Time, there will be no transfers on the transfer
books of Portec of shares of Portec Common Stock which were outstanding
immediately prior to the Effective Time.
No interest will be paid or accrued on the Merger Consideration payable
upon surrender of Certificates.
In the event that any Certificate has been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such Certificate
to be lost, stolen or destroyed and, if required by MHD, the posting by such
person of a bond in such reasonable amount as MHD may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Paying Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration payable in respect thereof.
CANCELLATION OF STOCK OPTIONS
As of the Record Date, there were options (the "Stock Options") to purchase
561,920 shares of Portec Common Stock outstanding. Each Stock Option outstanding
immediately prior to the Effective Time will be canceled by Portec in exchange
for the right to receive from Portec an amount in cash (less applicable
withholding taxes) equal to the product of (i) the number of shares of Portec
Common Stock subject to such Stock Option and (ii) the excess, if any, of the
Merger
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Consideration over the option exercise price per share of Portec Common Stock
subject to such Stock Option. The Stock Options will be canceled at an aggregate
cost to Portec of approximately $4,984,183.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
Portec (certain of which are qualified by reference to Material Adverse Effect,
as defined below), regarding among other things: organization, standing and
corporate power to conduct business, capitalization, significant subsidiaries,
corporate power and authority to enter into the Merger Agreement, absence of
conflicting agreements, consents and approvals, filings with the Commission,
absence of certain changes or events, absence of undisclosed liabilities,
employee benefit plans, taxes and tax returns, compliance with all applicable
laws, opinion of financial advisor, brokerage and finder's fees, environmental
matters, litigation, labor relations, intellectual property, real estate and
voting requirements. The Merger Agreement also contains various representations
and warranties of MHD, regarding among other things: organization, standing and
corporate power to conduct business, corporate power and authority to enter into
the Merger Agreement, absence of conflicting agreements, financing and brokerage
and finder's fees. All representations and warranties made by either party under
the Merger Agreement will terminate upon the closing of the Merger.
Under the Merger Agreement, the term "Material Adverse Effect" with respect
to Portec is defined to mean a material adverse effect on the business, assets,
properties, liabilities, results of operations or financial condition of Portec
and its subsidiaries taken as a whole.
CERTAIN COVENANTS
SPECIAL STOCKHOLDERS MEETING. In the Merger Agreement, Portec has agreed to
take all action necessary in accordance with applicable law, the Portec
Certificate of Incorporation and the Portec Bylaws to convene a meeting of its
stockholders for the purpose of obtaining the requisite stockholder approval of
the Merger. Moreover, Portec also has agreed, through the Portec Board, to
recommend to its stockholders approval of the Merger.
NO SOLICITATION. Portec has agreed not to, nor to authorize or permit any
officer, director or employee of, or any investment banker, attorney or other
advisor or representative of, Portec or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Acquisition
Proposal (as defined), (ii) participate in any discussions or negotiations
regarding, or furnish to any person any non-public information with respect to,
or take any other action to facilitate any inquiries or the making of any
proposal that constitutes an Acquisition Proposal, or (iii) enter into agreement
with respect to an Acquisition Proposal; provided, however, that the Portec
Board may furnish non-public information to, or enter into discussions or
negotiations with, any person or entity that makes an unsolicited Acquisition
Proposal after the date of the Merger Agreement, if (but only if) (x) the Portec
Board determines reasonably and in good faith, after due investigation and after
consultation with and based upon the advice of its outside financial advisor,
that such Acquisition Proposal is, or could reasonably be expected to lead to, a
Superior Proposal (as defined); (y) the Portec Board determines reasonably and
in good faith after due investigation and
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after consultation with and based upon advice of outside counsel, that the
failure to take such action would cause the Portec Board to violate its
fiduciary duties to stockholders under applicable law; and (z) Portec (a)
provides at least two business days' notice to MHD to the effect that it is
taking such action and (b) receives from such person or entity an executed
confidentiality agreement substantially similar to the confidentiality agreement
between Portec and CHS dated August 18, 1997 (the "Confidentiality Agreement"),
except that such confidentiality agreement need not prohibit such person or
entity from making an unsolicited Acquisition Proposal directly and privately to
the Portec Board. If Portec executes such a confidentiality agreement, the
Confidentiality Agreement shall automatically be amended to provide CHS with the
right to make an unsolicited Acquisition Proposal directly and privately to the
Portec Board.
Portec is required to promptly advise MHD orally and in writing of the
receipt by it after the date of the Merger Agreement of any Acquisition
Proposal, or any inquiry which could reasonably lead to an Acquisition Proposal,
the material terms and conditions of such Acquisition Proposal or inquiry, and
the identity of the person or entity making any such Acquisition Proposal or
inquiry, provided that Portec has no obligation to disclose the identity of such
person or entity if such disclosure would violate the terms of any agreement
outstanding on the date of the Merger Agreement with such person or entity, or
the Portec Board, after consultation with and based upon the advice of outside
counsel, concludes in good faith that such disclosure would violate its
fiduciary duties. An "Acquisition Proposal" means any bona fide proposal with
respect to a merger, consolidation, share exchange or similar transaction
involving Portec or any significant subsidiary, or any purchase of all or any
significant portion of the assets or capital stock of Portec or any significant
subsidiary, or any other business combination (including without limitation the
acquisition of an equity interest therein) involving Portec, other than the
transactions contemplated by the Merger Agreement. "Superior Proposal" means an
Acquisition Proposal which the Portec Board believes in good faith, after due
investigation (taking into account, among other things, the financing terms and
the likelihood of consummation) and based upon the advice of its outside legal
and financial advisors, is more favorable to Portec stockholders from a
financial point of view than the Merger.
PORTEC BOARD ACTION. The Portec Board has agreed not to (i) withdraw or
modify its approval or recommendation of the Merger Agreement or the Merger, or
(ii) approve or recommend an Acquisition Proposal, unless Portec receives an
unsolicited Acquisition Proposal and the Portec Board determines in good faith,
after due investigation and after consultation with and based upon the advice of
outside counsel, that the failure of the Portec Board to withdraw or modify its
approval or recommendation of the Merger Agreement or the Merger, or to approve
or recommend such Acquisition Proposal would cause the Portec Board to violate
its fiduciary duties to stockholders under applicable law. Notwithstanding the
foregoing, Portec may take and disclose to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or may make any
disclosure to its stockholders which, in the good faith judgment of the Portec
Board based on advice of outside counsel, is required under applicable law;
provided that Portec does not withdraw or modify its position with respect to
the Merger Agreement or the Merger or approve or recommend an Acquisition
Proposal, except under the circumstances described in the preceding sentence and
on two business days' notice to MHD to the effect that it is taking such action.
26
<PAGE> 33
FAILURE TO CLOSE. If the Merger Agreement is terminated for any reason, MHD
and Portec have agreed that for a period of two years from the date of
termination of the Merger Agreement, MHD will not, and will cause its
subsidiaries not to, solicit for employment any officer or employee of Portec or
its subsidiaries.
CERTAIN AGREEMENTS REGARDING CONDUCT OF BUSINESS PENDING THE MERGER
CONDUCT OF BUSINESS BY PORTEC. Portec has agreed, from the date of the
Merger Agreement through the Effective Time, to cause its management and that of
its subsidiaries to consult on a regular basis and in good faith with the
employees and representatives of MHD concerning the management of Portec and its
subsidiaries' businesses. During the period from the date of the Merger
Agreement to the Effective Time, Portec has agreed to, and has agreed to cause
its subsidiaries to, act and carry on their respective businesses in the
ordinary course of business and, to the extent consistent therewith, use best
efforts to preserve intact their current business organizations, keep in full
force and effect their licenses, permits and franchises, keep available the
services of their current key officers, employees and agents, and preserve the
goodwill of regulators, or those engaged in material business relationships with
them.
During the period from the date of the Merger Agreement to the Effective
Time, Portec has agreed to not, and has agreed to not permit any of its
subsidiaries to, without the prior consent of MHD:
(i) adopt or propose any change to the Portec Certificate of
Incorporation or the Portec Bylaws;
(ii) (a) declare, set aside or pay any dividends on, or make any other
distributions with respect to, any of Portec's outstanding capital stock
(other than the regular quarterly cash dividends not in excess of $.08 per
share of Portec Common Stock so long as the Portec Common Stock remains
outstanding, in accordance with usual record and payment dates and in
accordance with Portec's present dividend policy, except that no dividends
shall be declared, set aside or paid prior to July 31, 1998); (b) split,
combine or reclassify any of its outstanding capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its outstanding capital stock; or (c)
purchase, redeem or otherwise acquire any shares of capital stock or other
securities of, or other ownership interests of Portec other than the Stock
Options to be canceled and purchased as described herein;
(iii) issue, sell, grant, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities other than upon the
exercise of Stock Options outstanding on the date of the Merger Agreement;
(iv) acquire any business or any corporation, partnership, joint
venture, association or other business organization or division, or acquire
any material assets or make any investment in any person or enter into any
reorganization;
27
<PAGE> 34
(v) take any action that, if taken prior to the date of the Merger
Agreement, would have been required to be disclosed in Portec's Disclosure
Schedule to the Merger Agreement or that would otherwise cause any of its
representations and warranties contained in the Merger Agreement not to be
true and correct in all material respects at any time;
(vi) sell, mortgage or otherwise encumber or subject to any lien or
otherwise dispose of any of its properties or assets that are material to
Portec or its subsidiaries taken as a whole, except in the ordinary course
of business;
(vii) (a) except for the dollar amount required to cancel and cash out
the Stock Options, incur any indebtedness for borrowed money or guarantee
or otherwise become responsible for any such indebtedness of another
person, other than indebtedness owing to or guarantees of indebtedness
owing to Portec or any direct or indirect wholly-owned subsidiary of Portec
or enter into any agreement for indebtedness; or (b) make any loans or
advances to any other person, other than to Portec or to any direct or
indirect wholly-owned subsidiary of Portec, and other than routine advances
in the ordinary course of business to employees or agents;
(viii) make any tax election or settle or compromise any income tax
liability that would reasonably be expected to be material to Portec and
its subsidiaries taken as a whole;
(ix) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with the past practice or in
accordance with their terms of liabilities reflected or reserved against
in, or contemplated by, the September 30, 1997 consolidated financial
statements (or the notes thereto) of Portec filed with the Commission or
incurred since the date of such financial statements in the ordinary course
of business consistent with past practice;
(x) except in the ordinary course of business, modify, amend or
terminate, or waive, release or assign any material rights or claims under
any material agreement, permit, concession, franchise, license or similar
instrument to which Portec or any of its subsidiaries is a party;
(xi) make any capital expenditures other than as contemplated by
Portec's annual budget;
(xii) (a) enter into, adopt or amend or increase the amount or
accelerate the payment or vesting of any benefit or amount payable under,
any Benefit Plan (as defined in the Merger Agreement), or increase in any
manner, the compensation or fringe benefits, or otherwise extend, expand or
enhance the engagement, employment or any related rights, of any director,
officer or other employee of Portec or any of its subsidiaries, except for
normal increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to Portec or any of its subsidiaries; (b)
enter into or amend any employment, severance or special pay arrangement
with respect to the termination of employment with any director or officer
or other employee other than in the ordinary course of business consistent
with past practice; or (c) deposit into any trust (including any "rabbi
trust") amounts in respect of any employee benefit obligations or
obligations to directors;
28
<PAGE> 35
(xiii) make any changes in accounting methods, except as required by
law, rule, regulation, the Commission or generally accepted accounting
principles;
(xiv) enter into any agreement or arrangement with any affiliate
(other than wholly owned subsidiaries); or
(xv) authorize any of, or commit or agree to take any of the foregoing
actions.
CONDITIONS TO THE MERGER
CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective
obligations of Portec and MHD to consummate the Merger are subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions: (i) the Portec stockholders shall have adopted the Merger Agreement
and the transactions contemplated thereby, (ii) Portec and MHD shall have
obtained all required consents, approvals, permits and authorizations required
by any Governmental Entity (as defined in the Merger Agreement) to consummate
the transactions contemplated by the Merger Agreement, in each case without any
condition that could reasonably be expected to have a Material Adverse Effect,
(iii) the waiting period (and any extension thereof) applicable to the Merger
under the HSR Act shall have been terminated or shall have otherwise expired,
(iv) no proceeding shall have been commenced and be continuing which seeks to
restrain or enjoin the consummation of the Merger, and (v) MHD shall have
obtained the proceeds of the Financing (as defined in the Merger Agreement)
contemplated by the Financing Commitments (as defined in the Merger Agreement).
ADDITIONAL CONDITIONS TO PORTEC'S OBLIGATION TO EFFECT THE MERGER. The
obligation of Portec to effect the Merger is further subject to the following
additional conditions unless waived by Portec: (i) the representations and
warranties of MHD contained in the Merger Agreement shall be true and correct on
the date of the Merger Agreement and (except to the extent specifically given as
of an earlier date) and on and as of the Closing Date as though made on the
Closing Date, and (ii) MHD shall have performed in all material respects all
obligations required to be performed by it under the Merger Agreement at or
prior to the Closing Date.
ADDITIONAL CONDITIONS TO MHD'S OBLIGATION TO EFFECT THE MERGER. The
obligation of MHD to effect the Merger is further subject to the following
additional conditions unless waived by MHD: (i) the representations and
warranties of Portec shall be true and correct on the date of the Merger
Agreement and (except to the extent specifically given as of an earlier date) on
and as of the Closing Date as though made on the Closing Date, (ii) Portec shall
have performed in all material respects all obligations required to be performed
by it under the Merger Agreement at or prior to the Closing Date, (iii) Portec
shall have obtained all authorizations, consents and approvals of any third
party required to be obtained by Portec which, if not obtained, would have a
Material Adverse Effect, and (iv) no event, effect or change shall have occurred
since the date of the Merger Agreement which has had or which would reasonably
be expected to have a Material Adverse Effect.
29
<PAGE> 36
TERMINATION
The Merger Agreement may be terminated and abandoned at any time prior to
the Effective Time, whether before or after adoption of the Merger Agreement by
the Portec stockholders, (i) by mutual written consent of Portec and MHD; (ii)
by either Portec or MHD (a) if the Merger fails to receive the requisite vote
for adoption by the Portec stockholders at the Special Meeting, (b) if the
Merger is not consummated on or before July 31, 1998, provided that either party
may terminate the Agreement on or after such earlier date on which it can be
reasonably determined that it will be impossible to consummate the Merger by
July 31, 1998, unless the failure to consummate the Merger is the result of a
material breach of the Merger Agreement by the party seeking to terminate the
Merger Agreement, (c) if any Governmental Entity issues an order, decree or
ruling or takes any other action or there is enacted any law having the effect
of, permanently enjoining, restraining or otherwise prohibiting, or making
illegal the Merger and such order, decree, ruling or other action shall have
become final and nonappealable, provided the person seeking to terminate the
Merger Agreement on this ground shall have used reasonable efforts to remove or
overturn such order, decree, ruling or other action; (iii) by Portec, upon a
material breach of any representation or warranty of MHD or MHD fails to comply
in any material respect with any of its covenants or agreements, or if any
representation or warranty of MHD is or becomes untrue in any material respect,
which breach or non-compliance is not curable, or, if curable, is not cured by
MHD within 30 days after written notice of such breach or non-compliance from
Portec; (iv) by MHD, upon a material breach of any representation or warranty of
Portec or Portec fails to comply in any material respect with any of its
covenants or agreements, or if any representation or warranty of Portec is or
becomes untrue in any material respect, which breach or non-compliance is not
curable, or, if curable, is not cured by Portec within 30 days after written
notice of such breach or non-compliance from MHD; (v) by Portec, if the Portec
Board determines to enter into and enters into a definitive agreement providing
for a Superior Proposal; provided, however, that Portec must provide MHD with
written notice of the material terms of the Superior Proposal at least two
business days prior to such termination, and simultaneously pay to MHD the
Termination Payment (as defined); or (vi) by MHD, if: (a) the Portec Board
withdraws or modifies its approval or recommendation of the Merger Agreement or
the Merger, or approves or recommends an Acquisition Proposal, (b) a tender
offer or exchange offer for 30% or more of the Portec Common Stock is commenced,
and the Portec Board fails to recommend against acceptance of such tender offer
or exchange offer by its stockholder within the time period required by Section
14e-2 of the Exchange Act (the taking of no position by the expiration of such
period with respect to the acceptance of such tender offer or exchange offer by
its stockholders constituting such a failure), (c) Portec shall have
intentionally breached its no solicitation covenant under the Merger Agreement,
or (d) there shall be pending any proceeding seeking material damages on account
of the consummation of the Merger which MHD determines in good faith, after due
investigation and consultation with counsel representing Portec in such
proceeding, could reasonably be expected to result in Portec incurring a
material amount of damages or expenses, after taking into account applicable
insurance coverage; provided, however, MHD shall not then be in material breach
of its obligations under the Merger Agreement.
30
<PAGE> 37
TERMINATION FEE
In the event of termination of the Merger Agreement by either Portec or
MHD, except as provided below, the Merger Agreement will become null and void
and have no effect, without any liability or obligation on the part of Portec or
MHD, other than with respect to (i) the Confidentiality Agreement, (ii) expenses
(as described below), and (iii) the Termination Payment (as defined).
In the event of termination of the Merger Agreement by (a) Portec, if the
Portec Board enters into a definitive agreement providing for a Superior
Proposal, or (b) MHD, if the Portec Board withdraws or modifies its approval or
recommendation of the Merger Agreement or the Merger, or approves or recommends
an Acquisition Proposal, or (c) MHD, if a tender offer or exchange offer for 30%
or more of the Portec Common Stock is commenced and the Portec Board fails to
recommend against acceptance of such tender offer or exchange offer by its
stockholders within the time period required by Section 14e-2 of the Exchange
Act (the taking of no position constituting such failure), Portec shall pay MHD
$2,500,000 in cash as liquidated damages and not as a penalty, immediately upon
such termination, in same-day funds by wire transfer to an account designated by
MHD (the "Termination Payment").
Portec also shall pay the Termination Payment (less the amount of Covered
Expenses (as defined) in excess of $500,000 paid as described below under
"Expenses") if all of the following occur: (i) the Merger Agreement is
terminated because it failed to receive the requisite vote for adoption by the
Portec stockholders at the Special Meeting; and (ii) Portec, within twelve
months from the date of the Merger Agreement enters into a written agreement to
effect an Acquisition Proposal with, or an Acquisition Proposal is made by, a
party other than MHD or any of its subsidiaries, and (iii) in each such case,
the Acquisition Proposal is thereafter consummated within such twelve-month
period. The Termination Payment contemplated by the prior sentence is to be paid
in cash, in same-day funds by wire transfer to an account designated by MHD, on
the earlier of the consummation of the Acquisition Proposal or within 60 days
after the meeting at which the Portec stockholders approve the Acquisition
Proposal. The Termination Payment, if paid, will be paid only once and is MHD's
sole and exclusive remedy under the Merger Agreement for the termination thereof
under the circumstances in which the Termination Payment is paid (regardless of
any breach of the Merger Agreement) except for the reimbursement of MHD's
Covered Expenses, and upon delivery of the Termination Payment to MHD, no person
will have any further claim or rights against Portec under the Merger Agreement;
provided, however, that MHD shall have the right to assert a counterclaim in
response to any action brought by Portec against MHD.
EXPENSES
Portec and MHD will each pay its own costs and expenses incident to
preparing for, entering into and carrying out the Merger Agreement and the
consummation of the transactions contemplated thereby, except as set forth in
the next succeeding paragraph and except that the expenses incurred in
connection with the printing, mailing and distribution of this Proxy Statement
will be borne equally by Portec and MHD. Portec has agreed that, assuming the
Closing Date occurs on or before July 31, 1998, the fees and expenses of Portec
incurred in connection with the Merger
31
<PAGE> 38
Agreement and the Merger shall not exceed $1,100,000, and that all such fees and
expenses shall have been accrued or paid as of the Effective Time.
In circumstances where the Merger Agreement is terminated and Portec is
obligated to pay a Termination Payment to MHD, Portec also must reimburse MHD
for up to a maximum of $500,000 in cash, in same-day funds, for MHD's
out-of-pocket costs and expenses reasonably incurred and due to third parties in
connection with the Merger Agreement and the transactions contemplated thereby
(including fees and disbursements of counsel, accountants, financial advisors
and consultants, commitment fees, due diligence expenses, travel costs, filing
fees and similar fees, all of which must be conclusively established by vouchers
or other statements therefor) (collectively, "Covered Expenses"). If the Merger
Agreement is terminated by either party because it failed to receive the
requisite vote for adoption by the Portec stockholders at the Special Meeting,
or by MHD based solely on Portec's intentional breach of a representation or
warranty or intentional non-compliance with a covenant, Portec must reimburse
MHD for its Covered Expenses up to a maximum of $1,100,000. If the Merger
Agreement is terminated by MHD due to the existence of a proceeding which seeks
material damages on account of the Merger and which meets certain other
requirements specified in the Merger Agreement, Portec must reimburse MHD for
one-half of its Covered Expenses up to a maximum obligation of Portec of
$350,000. Portec must reimburse MHD for all costs incurred in connection with
the collection of the Termination Payment and the Covered Expenses.
AMENDMENT, EXTENSION AND WAIVER
The Merger Agreement may be amended by the parties thereto by written
agreement prior to the Effective Time, provided that after the approval of the
Merger by the Portec stockholders, no amendment may be made which reduces the
Merger Consideration or adversely affects the rights of the Portec stockholders
without the approval of such stockholders.
At any time prior to the Effective Time, MHD and Portec may (i) extend the
time for the performance of any of the obligations or other acts of the other
party, (ii) waive any inaccuracies in the representations and warranties
contained in the Merger Agreement or in any document delivered pursuant thereto
and (iii) waive compliance with any of the agreements or conditions contained in
the Merger Agreement, except the requirement that an amendment to the Merger
Agreement be in writing. Any agreement on the part of a party thereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
32
<PAGE> 39
SELECTED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
The following selected financial information for the years ended December
31, 1993, 1994, 1995, 1996 and 1997 has been derived from the audited
consolidated financial statements of Portec. The selected financial information
set forth below should be read in conjunction with the historical financial
statements and related notes of Portec incorporated by reference in this Proxy
Statement and set forth in Portec's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997, a copy of which accompanies this Proxy Statement.
<TABLE>
<CAPTION>
YEAR END DECEMBER 31,
---------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INCOME AND OPERATING DATA(A)
Net sales....................................... $ 25,521 $ 27,217 $ 24,755 $ 16,943 $ 12,394
Cost of products sold........................... 14,631 17,110 15,784 9,555 6,457
Selling, general and administrative expense..... 7,935 5,856 5,716 6,589 6,241
Depreciation and amortization................... 703 606 464 390 270
Other income, net............................... 234 130 455 518 62
Interest expense................................ 635 788 805 527 641
Income (loss) from continuing operations before
provision for taxes........................... 1,851 2,987 2,441 400 (1,153)
Income tax provision (benefit).................. 679 (596) 177 86 (172)
Income (loss) from continuing operations........ 1,172 3,583 2,664 314 (981)
Income from discontinued operations, net of
tax........................................... 2,866 3,308 634 6,511 5,677
Gain on disposal of discontinued operations, net
of tax........................................ 11,263 -- -- -- --
Net income...................................... 15,301 6,891 2,898 6,825 4,696
--------- --------- --------- --------- ---------
FINANCIAL DATA
Working capital................................. $ 43,702 $ 25,713 $ 19,375 $ 12,797 $ 8,554
Property, plant and equipment -- net............ 3,918 14,543 14,171 13,372 12,129
Total assets.................................... 64,458 66,218 57,818 57,522 42,478
Long-term debt.................................. -- 10,768 10,117 7,623 5,277
Stockholders' equity............................ 49,516 34,986 28,028 24,959 17,744
Average common shares outstanding............... 4,376,963 4,329,761 4,296,466 4,262,728 4,059,034
Average common shares and common equivalent
shares outstanding............................ 4,539,301 4,576,358 4,596,469 4,572,468 4,464,937
--------- --------- --------- --------- ---------
PER SHARE OF COMMON STOCK(B)
Net income
Basic......................................... $ 3.50 $ 1.59 $ .68 $ 1.60 $ 1.16
Diluted....................................... 3.37 1.50 .63 1.49 1.05
Stockholders' equity -- end of year............. 11.31 8.00 6.47 5.83 4.19
--------- --------- --------- --------- ---------
Number of employees............................. 212 671 637 779 619
Number of stockholders.......................... 1,085 1,168 1,262 1,335 1,412
--------- --------- --------- --------- ---------
</TABLE>
- ---------------
(a) Adjusted to reflect continued operations. As described in Portec's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997, Portec's
consolidated statements of income and consolidated statements of cash flow
have been restated to include the Construction Equipment and the Railroad
Products businesses (each of which was sold in December 1997) as
discontinued operations.
(b) Adjusted retroactively for 10% stock dividends paid in December 1993 and
1994.
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<PAGE> 40
MARKET PRICE AND DIVIDENDS
The Portec Common Stock is listed and traded on the NYSE under the symbol
"POR." The following table sets forth for the calendar periods indicated the
high and low sales prices per share of Common Stock as reported by the NYSE and
the quarterly cash dividends declared on Portec Common Stock for each quarter
since January 1, 1996. The prices reflected in the following table do not
include mark-ups, mark-downs or commissions.
<TABLE>
<CAPTION>
PORTEC COMMON STOCK
---------------------------
CASH
DIVIDENDS
HIGH LOW DECLARED
---- --- ---------
<S> <C> <C> <C>
1996:
First Quarter............................................. $10.00 $ 8.88 --
Second Quarter............................................ 11.13 9.25 --
Third Quarter............................................. 10.50 9.25 --
Fourth Quarter............................................ 10.88 9.50 .08
----
$.08
1997:
First Quarter............................................. $12.13 $ 9.50 $.08
Second Quarter............................................ 11.88 9.88 .08
Third Quarter............................................. 13.25 11.25 .08
Fourth Quarter............................................ 15.00 12.81 .08
----
$.32
1998:
First Quarter............................................. $15.56 $13.69 $.08
Second Quarter (through May 1, 1998)...................... $15.94 $15.19 --
------ ------ ----
$.08
</TABLE>
The last reported sales price per share of Portec Common Stock on March 10,
1998, the last trading day prior to the public announcement of the execution of
the Merger Agreement was $14.69, as reported in The Wall Street Journal's NYSE
Composite Transactions Report.
The last reported sales price per share of Portec Common Stock on May 1,
1998, the last full trading day for which information was available prior to the
printing of this Proxy Statement, was $15.94, as reported in The Wall Street
Journal's NYSE Composite Transactions Report.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE PORTEC
COMMON STOCK PRIOR TO MAKING ANY DECISION WITH RESPECT TO THE MERGER.
34
<PAGE> 41
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the stock ownership of all persons known by
Portec to be the beneficial owners of more than 5% of the outstanding shares of
Portec Common Stock (exclusive of treasury shares) as of April 24, 1998 (unless
otherwise noted).
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(A)
NAME AND ADDRESS OF -----------------------
BENEFICIAL OWNER NUMBER PERCENTAGE
------------------- ------ ----------
<S> <C> <C>
Albert Fried, Jr. and Albert Fried & Company LLC............ 1,191,905(b) 26.8%
40 Exchange Place
New York, New York 10005
Gabelli Funds, Inc. ........................................ 1,187,019(c) 24.9%
One Corporate Center
Rye, New York 10580-1434
Heartland Advisors, Inc. ................................... 339,300(d) 7.6%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
The TCW Group, Inc. ........................................ 341,829(e) 7.0%
865 South Figueroa Street
Los Angeles, California 90017
Dimensional Fund Advisors, Inc. ............................ 270,496(f) 6.1%
11th Floor
1299 Ocean Avenue
Santa Monica, California 90401
</TABLE>
- ---------------
(a) The information shown is based on information furnished to Portec by such
persons and reports filed with the Commission.
(b) Included in these shares are 170,980 shares related to stock options granted
to Mr. Fried which are exercisable within 60 days of April 24, 1998, and
10,147 shares held for his account by Portec'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 1,010,778 of these shares.
(c) Gabelli Funds, Inc. has sole voting and dispositive power with regard to
these shares. Stock ownership information for the Gabelli Funds, Inc. is as
of March 17, 1998.
(d) Heartland Advisors, Inc. has sole voting and dispositive power with regard
to these shares. Stock ownership information for Heartland Advisors, Inc. is
as of February 28, 1998.
(e) The TCW Group, Inc. has sole voting and dispositive power with regard to
these shares. Stock ownership information for The TCW Group, Inc. is as of
February 28, 1998.
(f) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 270,496 shares of Portec
Common Stock as of December 31, 1997, 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
35
<PAGE> 42
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, all of which
entities are advised by Dimensional in its capacity as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
The following table sets forth the beneficial ownership of Portec Common
Stock by each director of Portec, the four highest paid executive officers of
Portec with compensation in 1997 in excess of $100,000, and all executive
officers and directors as a group as of April 24, 1998.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(A)
------------------------------
NAME NUMBER PERCENTAGE
---- ------ ----------
<S> <C> <C>
J. Grant Beadle........................................... 17,560(c) (b)
Frank T. MacInnis......................................... 9,000(c) (b)
Frederick J. Mancheski.................................... 26,805(c) (b)
John F. McKeon............................................ 20,421(c) (b)
Arthur McSorley, Jr....................................... 17,702(c) (b)
L. L. White, Jr........................................... 61,022(c)(d) 1.4%
Albert Fried, Jr.......................................... 1,191,905(c)(e)(f) 26.8%
Michael T. Yonker......................................... 169,356(c)(f) 3.8%
Nancy A. Kindl............................................ 45,839(c)(f) 1.0%
Kevin C. Rorke............................................ 32,006(c)(f) (b)
John S. Cooper............................................ 24,365(c)(f) (b)
All Directors and Executive Officers as a Group............. 1,615,981(c)(f) 33.0%
</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 April 24, 1998: Mr. Beadle,
14,100 shares; Mr. MacInnis, 9,000 shares; Mr. Mancheski, 14,100 shares; Mr.
McKeon, 14,100 shares; Mr. McSorley, 14,100 shares; Mr. White, 14,100
shares; Mr. Fried, 170,980 shares; Mr. Yonker, 143,550 shares; Ms. Kindl,
33,080 shares; Mr. Rorke, 27,536 shares; Mr. Cooper (whose employment with
Portec terminated in December 1997 upon the sale of the Railroad Products
business), 16,830 shares; and all directors and executive officers as a
group, 471,476 shares.
(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.
(e) See footnote (b) on page 35.
(f) Included in the shares listed are the following shares held for the
officers' accounts by Portec's Savings and Investment Plan: Mr. Fried,
10,147 shares; Mr. Yonker, 6,306 shares; Ms. Kindl, 11,483 shares; Mr.
Rorke, 4,470 shares; Mr. Cooper, 7,535 shares; and all directors and
executive officers as a group, 39,941 shares.
36
<PAGE> 43
INDEPENDENT PUBLIC ACCOUNTANTS
It is anticipated that a representative from Price Waterhouse will be
present at the Special Meeting and will have the opportunity to make a statement
and to respond to appropriate questions.
OTHER MATTERS
As of the date of this Proxy Statement the Portec Board does not intend to
present, and has not been informed that any other person intends to present, any
matters for action at the Special Meeting other than as discussed herein.
If the Merger is not consummated, or if it is not consummated within the
time period currently contemplated, Portec presently intends to hold a 1998
Annual Meeting of Stockholders. As described in Portec's proxy statement
relating to its 1997 Annual Meeting of Stockholders, in order for proposals of
Portec's stockholders to be considered for inclusion in the proxy statement
relating to its 1998 Annual Meeting of Stockholders, such proposals must have
been received by the Secretary of Portec not later than November 25, 1997. No
such proposals were received by Portec by such date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS (EXCLUDING
EXHIBITS THERETO UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE
INTO SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE UPON ORAL OR WRITTEN REQUEST
TO PORTEC, SUITE 120, ONE HUNDRED FIELD DRIVE, LAKE FOREST, ILLINOIS 60045,
ATTENTION: N.A. KINDL, VICE PRESIDENT, TREASURER AND SECRETARY, TELEPHONE NUMBER
(847) 735-2806. IN ORDER TO ENSURE TIMELY DELIVERY OF DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY MAY 20, 1998.
The following documents filed by Portec with the Commission pursuant to the
Exchange Act are incorporated by reference into this Proxy Statement: (i)
Portec's Annual Report on Form 10-K for the fiscal year ended December 31, 1997
(a copy of which is delivered herewith); and (ii) Portec's Current Report on
Form 8-K dated March 11, 1998.
All documents and reports filed by Portec with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Proxy Statement and prior to the date of the Special Meeting shall be deemed to
be incorporated by reference herein and to be a part hereof from the date of
filing of such documents and reports. Any statement incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement to the extent that a statement contained herein or in any other
subsequently filed document or report which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement.
37
<PAGE> 44
ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 11, 1998
BY AND BETWEEN
MHD ACQUISITION CORP.
AND
PORTEC, INC.
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<PAGE> 45
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 THE MERGER........................................ A-1
SECTION 1.1 The Merger.................................... A-1
SECTION 1.2 Closing....................................... A-1
SECTION 1.3 Effective Time................................ A-1
SECTION 1.4 Certificate of Incorporation.................. A-2
SECTION 1.5 By-Laws....................................... A-2
SECTION 1.6 Directors..................................... A-2
SECTION 1.7 Officers...................................... A-2
SECTION 1.8 Effect of Merger on Acquiror Capital Stock.... A-2
SECTION 1.9 Conversion of Common Shares................... A-2
SECTION 1.9.1 Outstanding Common Shares................... A-2
SECTION 1.9.2 Treasury Shares............................. A-2
SECTION 1.10 Exchange of Certificates and Related
Matters........................................... A-2
SECTION 1.10.1 Paying Agent............................... A-2
SECTION 1.10.2 Exchange Procedures........................ A-3
SECTION 1.10.3 Letter of Transmittal...................... A-3
SECTION 1.10.4 No Further Ownership Rights in Shares...... A-3
SECTION 1.10.5 Termination of Payment Fund................ A-4
SECTION 1.10.6 No Liability............................... A-4
SECTION 1.11 Stock Options................................ A-4
SECTION 1.12 Dissenting Shares............................ A-4
SECTION 1.13 Further Assurances........................... A-5
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..... A-5
SECTION 2.1 Organization, Standing and Corporate Power.... A-5
SECTION 2.2 Capital Structure............................. A-6
SECTION 2.3 Subsidiaries.................................. A-6
SECTION 2.4 Authority; Noncontravention................... A-7
SECTION 2.5 SEC Documents................................. A-8
SECTION 2.6 Absence of Certain Changes or Events.......... A-8
SECTION 2.7 Absence of Undisclosed Liabilities............ A-9
SECTION 2.8 Benefit Plans................................. A-9
SECTION 2.9 Taxes......................................... A-11
SECTION 2.10 Compliance with Applicable Laws.............. A-12
SECTION 2.11 Opinion of Financial Advisor................. A-12
SECTION 2.12 Brokers...................................... A-12
SECTION 2.13 Environmental................................ A-13
SECTION 2.14 Litigation................................... A-14
SECTION 2.15 Labor Relations.............................. A-14
SECTION 2.16 Contracts.................................... A-15
SECTION 2.17 Intellectual Property........................ A-15
</TABLE>
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<PAGE> 46
<TABLE>
<S> <C>
SECTION 2.18 Real Estate.................................. A-15
SECTION 2.19 Voting Requirements.......................... A-16
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF ACQUIROR........ A-16
SECTION 3.1 Organization, Standing and Corporate Power.... A-16
SECTION 3.2 Authority; Noncontravention................... A-16
SECTION 3.3 Financing..................................... A-17
SECTION 3.4 Brokers....................................... A-17
ARTICLE 4 ADDITIONAL AGREEMENTS............................. A-17
SECTION 4.1 Preparation of Proxy Statement................ A-17
SECTION 4.1.1 Proxy Statement............................. A-17
SECTION 4.1.2 Company Information......................... A-17
SECTION 4.1.3 Acquiror Information........................ A-18
SECTION 4.2 Meeting of Stockholders....................... A-18
SECTION 4.3 Access to Information; Confidentiality........ A-18
SECTION 4.4 Reasonable Efforts............................ A-18
SECTION 4.5 Public Announcements.......................... A-19
SECTION 4.6 Acquisition Proposals......................... A-19
SECTION 4.7 Fiduciary Duties.............................. A-20
SECTION 4.8 Filings; Other Action......................... A-20
SECTION 4.9 Indemnification............................... A-21
SECTION 4.10 Failure to Close............................. A-21
SECTION 4.11 Financing Commitments........................ A-21
ARTICLE 5 COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO
MERGER.................................................... A-22
SECTION 5.1 Conduct of Business by the Company............ A-22
SECTION 5.2 Management of the Company and Subsidiaries.... A-24
SECTION 5.3 Conduct of Business by Acquiror............... A-24
SECTION 5.4 Other Actions................................. A-24
SECTION 5.5 Notification.................................. A-24
ARTICLE 6 CONDITIONS PRECEDENT.............................. A-25
SECTION 6.1 Conditions to Each Party's Obligation To
Effect the Merger................................. A-25
SECTION 6.1.1 Stockholder Approval........................ A-25
SECTION 6.1.2 Governmental and Regulatory Consents........ A-25
SECTION 6.1.3 HSR Act..................................... A-25
SECTION 6.1.4 No Proceedings.............................. A-25
SECTION 6.1.5 Financing................................... A-25
SECTION 6.2 Conditions to Obligations of Acquiror......... A-25
SECTION 6.2.1 Representations and Warranties.............. A-25
SECTION 6.2.2 Performance of Obligations of the Company... A-25
SECTION 6.2.3 Third Party Approvals....................... A-25
SECTION 6.2.4 No Material Adverse Effect.................. A-25
SECTION 6.3 Conditions to Obligation of the Company....... A-26
SECTION 6.3.1 Representations and Warranties.............. A-26
</TABLE>
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<PAGE> 47
<TABLE>
<S> <C>
SECTION 6.3.2 Performance of Obligations of Acquiror...... A-26
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER................. A-26
SECTION 7.1 Termination................................... A-26
SECTION 7.2 Effect of Termination......................... A-28
SECTION 7.3 Amendment..................................... A-29
SECTION 7.4 Extension; Waiver............................. A-29
SECTION 7.5 Procedure for Termination, Amendment,
Extension or Waiver............................... A-29
ARTICLE 8 SURVIVAL OF PROVISIONS............................ A-29
SECTION 8.1 Survival...................................... A-29
ARTICLE 9 NOTICES........................................... A-30
SECTION 9.1 Notices....................................... A-30
ARTICLE 10 MISCELLANEOUS.................................... A-31
SECTION 10.1 Entire Agreement............................. A-31
SECTION 10.2 Expenses..................................... A-31
SECTION 10.3 Counterparts................................. A-31
SECTION 10.4 No Third Party Beneficiary................... A-31
SECTION 10.5 Governing Law................................ A-31
SECTION 10.6 Assignment; Binding Effect................... A-32
SECTION 10.7 Disclosure Schedule.......................... A-32
SECTION 10.8 Enforcement of this Agreement................ A-32
SECTION 10.9 Headings, Gender, etc. ...................... A-32
</TABLE>
A-iv
<PAGE> 48
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of March 11, 1998 by and between MHD Acquisition Corp., a Delaware
corporation ("Acquiror"), and Portec, Inc., a Delaware corporation (the
"Company").
PREAMBLE
WHEREAS, the respective Boards of Directors of Acquiror and the Company
have determined that the Merger (as defined in Section 1.1) is in the best
interests of their respective stockholders and have approved the Merger, upon
the terms and subject to the conditions set forth herein;
WHEREAS, Acquiror and the Company desire to make certain representations,
warranties, covenants and agreements in connection with such Merger; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.3), Acquiror shall be
merged with and into the Company (the "Merger"), in accordance with the Delaware
General Corporation Law (the "Delaware Code"), and the separate corporate
existence of Acquiror shall cease and the Company shall continue as the
surviving corporation under the laws of the State of Delaware (as such, the
"Surviving Corporation") with all the rights, privileges, immunities and powers,
and subject to all the duties and liabilities, of a corporation organized under
the Delaware Code. The Merger shall have the effects set forth in the Delaware
Code.
SECTION 1.2 Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 7.1, and subject to the satisfaction or waiver of the conditions set
forth in Article 6, the closing of the Merger (the "Closing") will take place at
9:00 a.m. on the first business day following the date on which the last of the
conditions set forth in Section 6.1 shall be fulfilled or waived in accordance
with this Agreement (the "Closing Date"), at the offices of Schiff Hardin &
Waite, 7200 Sears Tower, 233 Wacker Drive, Chicago, Illinois 60606, unless
another date, time or place is agreed to in writing by the parties hereto.
SECTION 1.3 Effective Time. The parties hereto will file with the Secretary
of State of the State of Delaware (the "Delaware Secretary of State") on the
date of the Closing (or on such other date as Acquiror and the Company may
agree) a certificate of merger or other appropriate documents, mutually
satisfactory in form and substance to Acquiror and the Company and executed in
accordance with the relevant provisions of the Delaware Code, and make all other
filings or
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<PAGE> 49
recordings required under the Delaware Code in connection with the Merger. The
Merger shall become effective upon the filing of the certificate of merger with
the Delaware Secretary of State, or at such later time as is specified in the
certificate of merger (the "Effective Time").
SECTION 1.4 Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of the Company shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with its terms and as provided by applicable law.
SECTION 1.5 By-Laws. The By-Laws of Acquiror, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving Corporation
until thereafter amended as provided by law, the By-Laws or the Certificate of
Incorporation of the Surviving Corporation.
SECTION 1.6 Directors. The directors of Acquiror at the Effective Time
shall be the directors of the Surviving Corporation and will hold office from
the Effective Time until their respective successors are duly elected or
appointed and qualify in the manner provided in the Certificate of Incorporation
or By-Laws of the Surviving Corporation, or as otherwise provided by law.
SECTION 1.7 Officers. The officers of Acquiror at the Effective Time shall
be the officers of the Surviving Corporation and will hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualify in the manner provided in the Certificate of Incorporation or
By-Laws of the Surviving Corporation, or as otherwise provided by law.
SECTION 1.8 Effect of Merger on Acquiror Capital Stock. Each share of
capital stock of Acquiror issued and outstanding immediately prior to the
Effective Time shall be converted into one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
SECTION 1.9 Conversion of Common Shares.
SECTION 1.9.1 Outstanding Common Shares. Subject to the other
provisions of this Section 1.9, each share of common stock, $1.00 par
value, of the Company (the "Common Shares") issued and outstanding
immediately prior to the Effective Time (other than shares held as
treasury shares by the Company and Dissenting Shares (as defined in
Section 1.12)) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into the right to receive
$16.00 in cash, without interest (the "Merger Consideration").
SECTION 1.9.2 Treasury Shares. Each Common Share issued and
outstanding immediately prior to the Effective Time which is then held as
a treasury share by the Company immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the
Company, be cancelled and retired and cease to exist, without any
conversion thereof.
SECTION 1.10 Exchange of Certificates and Related Matters.
SECTION 1.10.1 Paying Agent. At the Effective Time, Acquiror shall
cause the Surviving Corporation to deposit with a paying agent appointed
by the Company and reasonably acceptable to Acquiror (the "Paying
Agent"), for the benefit of the holders of Common Shares, cash in an
aggregate amount equal to the aggregate Merger Consideration (such amount
being sometimes hereinafter referred to as the "Payment Fund").
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<PAGE> 50
SECTION 1.10.2 Exchange Procedures. Upon surrender to the Paying Agent
for cancellation of a certificate which immediately prior to the Effective
Time represented Common Shares, together with a letter of transmittal and
such other customary documents as may be required by the instructions to
the letter of transmittal (collectively, the "Certificate") and acceptance
thereof by the Paying Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor the amount of cash into which the
number of Common Shares previously represented by such Certificate shall
have been converted pursuant to Section 1.9.1. The Paying Agent shall
accept such Certificate upon compliance with such reasonable terms and
conditions as the Paying Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. If the Merger
Consideration (or any portion thereof) is to be delivered to any person
other than the person in whose name the Certificate representing Common
Shares surrendered in exchange therefor is registered on the record books
of the Company, it shall be a condition to such exchange that the
Certificate so surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the person requesting such exchange shall
pay to the Paying Agent any transfer or other taxes required by reason of
the payment of such consideration to a person other than the registered
holder of the Certificate surrendered, or shall establish to the
satisfaction of the Paying Agent that such tax has been paid or is not
applicable. After the Effective Time, there shall be no further transfer on
the records of the Company or its transfer agent of any Certificate
representing Common Shares and if any such Certificate is presented to the
Company for transfer, it shall be cancelled against delivery of the Merger
Consideration as hereinabove provided. Until surrendered as contemplated by
this Section 1.10.2, each Certificate representing Common Shares (other
than a Certificate representing Common Shares to be cancelled in accordance
with Section 1.9.2), shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the Merger
Consideration, without any interest thereon.
SECTION 1.10.3 Letter of Transmittal. \Promptly after the Effective
Time (but in no event more than five business days thereafter), the
Surviving Corporation shall require the Paying Agent to mail to each
record holder of Certificates that immediately prior to the Effective Time
represented Common Shares which have been converted pursuant to Section
1.9, a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title shall pass, only upon proper delivery
of Certificates representing Common Shares to the Paying Agent and shall
be in such form and have such provisions as the Surviving Corporation
reasonably may specify) and instructions for use in surrendering such
Certificates and receiving the Merger Consideration to which such holder
shall be entitled therefor pursuant to Section 1.9. The Surviving
Corporation also shall require the Paying Agent to have such letter of
transmittal and instructions available at its offices immediately after
the Effective Date in order to accommodate record holders of Certificates
desiring to receive the Merger Consideration at the earliest possible
date.
SECTION 1.10.4 No Further Ownership Rights in Shares. The Merger
Consideration paid upon the surrender for exchange of Certificates
representing Common Shares in accordance with the terms of this Article I
shall be deemed to have been issued and paid in full satisfaction of all
rights pertaining to the Common Shares theretofore represented by such
Certificates, subject,
A-3
<PAGE> 51
however, to the Surviving Corporation's obligation (if any) to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared by the Company on such Common
Shares in accordance with the terms of this Agreement or prior to the date
of this Agreement and which remain unpaid at the Effective Time.
SECTION 1.10.5 Termination of Payment Fund. Any portion of the Payment
Fund which remains undistributed to the holders of the Certificates
representing Common Shares for 120 days after the Effective Time shall be
delivered to Acquiror, upon demand, and any holders of Common Shares who
have not theretofore complied with this Article I shall thereafter look
only to Acquiror and only as general creditors thereof for payment, without
interest, of their claim for any Merger Consideration with respect to their
Common Shares.
SECTION 1.10.6 No Liability. None of Acquiror, the Surviving
Corporation or the Paying Agent shall be liable to any person in
respect of any cash, shares, dividends or distributions payable from the
Payment Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates
representing Common Shares shall not have been surrendered prior to seven
years after the Effective Time (or immediately prior to such earlier date
on which any Merger Consideration in respect of such Certificate would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 2.4)), any such cash, shares, dividends or
distributions payable in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of the Surviving
Corporation free and clear of all claims or interest of any person
previously entitled thereto.
SECTION 1.11 Stock Options. Immediately prior to the Effective Time, each
outstanding option to purchase Common Shares (each, a "Stock Option") granted
under the 1988 Portec, Inc. Employees' Stock Benefit Plan (the "Plan") or
pursuant to any other stock option plan or agreement entered into by the Company
with any employee or director of the Company or any Subsidiary (as defined in
Section 2.3) thereof, whether or not then vested or exercisable, shall become
vested, exercisable and cancelled, and each holder of a Stock Option shall be
entitled to receive as soon as practicable thereafter from the Company in
consideration for the cancellation of such Stock Option an amount in cash (less
applicable withholding taxes) equal to the product of (i) the number of Common
Shares previously subject to such Stock Option multiplied by (ii) the excess, if
any, of the Merger Consideration over the exercise price per Common Share
previously subject to such Stock Option.
SECTION 1.12 Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, the Common Shares outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger or
consented thereto in writing and who has demanded properly in writing appraisal
for such Common Shares in accordance with Section 262 of the Delaware Code and
who shall not have withdrawn such demand or otherwise have forfeited appraisal
rights shall not be converted into or represent the right to receive the Merger
Consideration ("Dissenting Shares"). Such stockholders shall be entitled to
receive payment of the appraised value of such Common Shares held by them in
accordance with the provisions of such Section 262, except that all Dissenting
Shares held by stockholders who shall have failed to perfect or who effectively
shall have withdrawn or lost their rights to appraisal of such Common Shares
held by them under such
A-4
<PAGE> 52
Section 262 shall thereupon be deemed to have been converted into and to have
become exchangeable, as of the Effective Time, for the right to receive, without
any interest thereon, the Merger Consideration, upon surrender, in the manner
provided in Section 1.10.2, of the Certificate or Certificates that formerly
evidenced such Common Shares. The Company shall give Acquiror prompt notice of
any demands for appraisal received by the Company, withdrawals of such demands,
and any other instruments served pursuant to Delaware law and received by the
Company, and Acquiror shall have the right to participate in all negotiations
and proceedings with respect to such demands. Prior to the Effective Time, the
Company shall not, except with the prior written consent of Acquiror, make any
payment with respect to any demands for appraisal, or settle or offer to settle,
any such demands.
SECTION 1.13 Further Assurances. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title and interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Company or Acquiror, or (ii) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either the Company or Acquiror, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of such
corporations, all such other acts and things as may be necessary, desirable or
proper to vest, perfect or confirm the Surviving Corporation's right, title and
interest in, to and under any of the rights, privileges, powers, franchises,
properties or assets of such corporations and otherwise to carry out the
purposes of this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Acquiror, except as set forth
in the written disclosure schedule delivered on or prior to the date hereof by
the Company (the "Disclosure Schedule") as follows:
SECTION 2.1 Organization, Standing and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
carry on its business as now being conducted. The Company is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, except where the failure to
be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. As used in this Agreement, the term "Material Adverse Effect"
means with respect to the Company a material adverse effect on the business,
assets, properties, liabilities, results of operations or financial condition of
the Company and its Subsidiaries (as defined in Section 2.3) taken as a whole.
The Company has delivered to Acquiror complete and correct copies of its
Certificate of Incorporation and By-Laws, as amended to the date of this
Agreement.
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<PAGE> 53
SECTION 2.2 Capital Structure. The authorized capital stock of the Company
consists of 10,000,000 Common Shares and 1,000,000 shares of preferred stock,
without par value. At the close of business on March 10, 1998, (i) 4,449,601
Common Shares were issued and outstanding; (ii) no Common Shares were held as
treasury stock; (iii) 719,657 Common Shares were reserved for issuance upon the
exercise of Stock Options; and (iv) no shares of preferred stock were issued or
outstanding. All outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. No bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which the stockholders of
the Company may vote are issued or outstanding. Section 2.2 of the Disclosure
Schedule sets forth the following information with respect to each Stock Option
outstanding on the date hereof, (a) the name of the recipient, (b) the number of
Common Shares subject to such Stock Option, and (c) the applicable exercise
price for each Stock Option. Except as set forth above or in Section 2.2 of the
Disclosure Schedule, the Company does not have any outstanding option, warrant,
subscription or other right, agreement or commitment which either obligates the
Company to issue, sell or transfer, repurchase, redeem or otherwise acquire or
vote any shares of capital stock of the Company, or which restricts the transfer
of Common Shares.
SECTION 2.3 Subsidiaries. (i) Section 2.3(i) of the Disclosure Schedule
sets forth the name of each Subsidiary (as defined below) of the Company and the
state or jurisdiction of its incorporation. Each Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power and authority and
all necessary government approvals to own, lease and operate its properties and
to carry on its business as now being conducted, except where the failure to be
so organized, existing and in good standing or to have such power and authority
or necessary governmental approvals would not, individually or in the aggregate,
have a Material Adverse Effect. Each Subsidiary is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing has
not had and would not, individually or in the aggregate, have a Material Adverse
Effect. As used herein, "Subsidiary" means any corporation, partnership, joint
venture or other legal entity and of which the Company (either alone or through
or together with any other Subsidiary), owns, directly or indirectly, 50% or
more of the capital stock or other equity interests the holders of which are
generally entitled to vote with respect to matters to be voted on in such
corporation, partnership, joint venture or other legal entity. Except as
disclosed in the Filed SEC Documents (as herein defined), the Company and its
Subsidiaries are not subject to any material joint venture, joint operating or
similar arrangement or any material shareholders agreement relating thereto.
(ii) Section 2.3(ii) of the Disclosure Schedule sets forth, as to each
Subsidiary, its authorized capital stock and the number of its issued and
outstanding shares of capital stock. The Company is, directly or indirectly, the
record and beneficial owner of all of the outstanding shares of capital stock of
each of the Subsidiaries, and no capital stock of any Subsidiary is or may
become required to be issued by reason of any options, warrants, rights to
subscribe to, calls or commitments of any
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character whatsoever relating to, or securities or rights convertible into or
exchangeable or exercisable for, shares of any capital stock of any Subsidiary,
and there are no contracts, commitments, understandings or arrangements by which
the Company or any Subsidiary is or may be bound to issue, redeem, purchase or
sell additional shares of capital stock of any Subsidiary or securities
convertible into or exchangeable or exercisable for any such shares. All of such
shares so owned by the Company are validly issued, fully paid and nonassessable
and are owned by it or by another wholly-owned Subsidiary thereof free and clear
of all liens, claims, encumbrances, restraints on alienation, or any other
restrictions with respect to the transferability or assignability thereof (other
than restrictions on transfer imposed by federal or state securities laws).
SECTION 2.4 Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company, subject, in the case of the Merger, to the approval of its
stockholders as set forth in Section 4.2. The Board of Directors of the Company
has determined that the Merger is advisable and fair to and in the best
interests of the stockholders of the Company and has approved (and has resolved
to recommend to stockholders for approval) the Merger and this Agreement. This
Agreement has been duly executed and delivered by the Company and, assuming this
Agreement has been duly executed and delivered by Acquiror, constitutes a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms except that the enforcement thereof may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditor's rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity). Except as disclosed in Section 2.4 of the
Disclosure Schedule, the execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated by this Agreement and
compliance with the provisions hereof will not, (i) conflict with or violate any
of the provisions of the Certificate of Incorporation or By-Laws of the Company,
(ii) subject to the governmental filings and other matters referred to in the
following sentence, conflict with, result in a breach of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
material benefit under, or require the consent of any person under, any loan
agreement, note, indenture or other agreement, permit, concession, franchise,
lease, contract, license or similar instrument, obligation or undertaking to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries or any of their assets is bound or affected, or
(iii) subject to the governmental filings and other matters referred to in the
following sentence, contravene any law, rule or regulation of any state or of
the United States or any political subdivision thereof or therein, or any order,
writ, judgment, injunction, decree, determination or award currently in effect,
subject, in the case of clauses (ii) and (iii), to those conflicts, breaches,
defaults and similar matters, which, individually or in the aggregate, have not
had and would not reasonably be expected to have a Material Adverse Effect, nor
materially and adversely affect the Company's ability to consummate the
transactions contemplated hereby. No consent, approval or authorization of, or
declaration or filing with, or notice to, any governmental agency or regulatory
body, court, agency, commission, division,
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department, public body or other authority (a "Governmental Entity") which has
not been received or made, is required by or with respect to the Company or any
Subsidiary in connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the transactions contemplated
hereby, except for (i) the filing of premerger notification and report forms
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") with respect to the Merger, (ii) the filing with the SEC of (x) a
proxy statement relating to the approval by the stockholders of the Company of
the Merger (the "Proxy Statement"), and (y) such reports under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement, (iii) the filing of the certificate of merger with the Delaware
Secretary of State and appropriate documents with the relevant authorities of
other states in which the Company is qualified to do business, and (iv) such
other consents, approvals, authorizations, filings or notices as are set forth
in Section 2.4 of the Disclosure Schedule.
SECTION 2.5 SEC Documents. The Company has timely filed all required
reports, schedules, forms, statements and other documents with the SEC since
January 1, 1996 (such reports, schedules, forms, statements and other documents
are hereinafter referred to as the "SEC Documents"). As of their respective
dates, the SEC Documents complied 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 of the SEC promulgated thereunder applicable
to such SEC Documents, and none of the SEC Documents as of such dates contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of the Company included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as permitted by Rule 10-01 of
Regulation S-X) and fairly present, in all material respects, the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited interim financial
statements, to normal recurring adjustments).
SECTION 2.6 Absence of Certain Changes or Events. Except as disclosed in
the SEC Documents filed prior to the date hereof (the "Filed SEC Documents") or
in Section 2.6 of the Disclosure Schedule or as otherwise contemplated or
permitted by this Agreement, since the date of the most recent audited financial
statements included in the Filed SEC Documents, the Company and its Subsidiaries
have conducted their business only in the ordinary course (which conduct has not
had a Material Adverse Effect), and except as otherwise expressly permitted by
this Agreement, there has not been (i) any event, effect or change which has had
or which would reasonably be expected to have a Material Adverse Effect, (ii)
any declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
outstanding capital stock (other than regular quarterly cash dividends of $.08
per Common Share in
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accordance with usual record and payment dates and in accordance with the
Company's present dividend policy), (iii) any split, combination or
reclassification of any of its outstanding capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its outstanding capital stock, (iv) (a) any
granting by the Company or any of its Subsidiaries to any director, officer or
other employee of the Company or any of its Subsidiaries of any increase in
compensation, except in the case of employees in the ordinary course of business
consistent with prior practice, or as was required under employment agreements
in effect as of the date of the most recent audited financial statements
included in the Filed SEC Documents, (b) any granting by the Company or any of
its Subsidiaries to any such director, officer or other employee of any increase
in severance or termination pay, except as was required under any employment,
severance or termination agreements in effect as of the date of the most recent
audited financial statements included in the Filed SEC Documents, (c) any entry
by the Company or any of its Subsidiaries into any employment, severance, change
of control, termination or similar agreement with any officer, director or other
employee, (v) any change in the method of accounting or policy used by the
Company or any of its Subsidiaries, except as disclosed in the financial
statements included in the Filed SEC Documents, (vi) any loss or material
interference with the Company's business or assets from fire, accident, flood or
other casualty (whether or not covered by insurance) that has had or would
reasonably be expected to have a Material Adverse Effect; or (viii) any material
increase in indebtedness.
SECTION 2.7 Absence of Undisclosed Liabilities. Except as disclosed in the
Filed SEC Documents or in Section 2.7 of the Disclosure Schedule or which were
incurred after December 31, 1997 in the ordinary course of business (which has
not had a Material Adverse Effect), or in connection with the transactions
contemplated by this Agreement, the Company and its Subsidiaries (i) do not have
any material liabilities or obligations (whether direct or indirect, contingent
or otherwise) and (ii) have not entered into any material oral or written
agreement or other transaction which has had or would reasonably be expected to
have a Material Adverse Effect.
SECTION 2.8 Benefit Plans. Schedule 2.8 sets forth a complete and correct
list of all Benefit Plans (as defined below). Except as disclosed in Section 2.8
of the Disclosure Schedule:
(i) Each "employee pension benefit plan" (as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (hereinafter a "Pension Plan"), "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA) (hereinafter a "Welfare Plan"), and
each other plan, arrangement or policy (written or oral) relating to stock
options, stock purchases, stock incentives, compensation, deferred
compensation, severance, employment, consulting, vacation, bonus, fringe
benefits or other employee benefits, in each case maintained or contributed
to, or required to be maintained or contributed to, by the Company or any
person or entity that together with the Company is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code (each a
"Commonly Controlled Entity") for the benefit of any present or former
officers, employees, agents, directors or independent contractors (or their
beneficiaries) of the Company or its Commonly Controlled Entities or with
respect to which the Company or its Commonly Controlled Entities may have
any liability (all the foregoing being herein called "Benefit Plans") has
been administered in accordance with its
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terms. The Company, its Subsidiaries and all the Benefit Plans are in
compliance with the applicable provisions of ERISA, the Internal Revenue
Code of 1986, as amended (the "Code"), all other applicable laws and all
applicable collective bargaining agreements. Complete and correct copies of
all current and prior documents, including all amendments thereto, with
respect to each Benefit Plan have been delivered to Acquiror.
(ii) None of the Company or any Commonly Controlled Entity has
incurred any liability to a Pension Plan covered by Title IV of ERISA
(other than for contributions not yet due) or to the Pension Benefit
Guaranty Corporation (other than for the payment of premiums not yet due)
which liability has not been fully paid as of the date hereof. The
aggregate present value of all benefits, including the maximum value of all
subsidized benefits pursuant to each Benefit Plan covered by Title IV or
ERISA, determined on an ongoing basis and on the basis of projected
compensation for active participants, and earnings, mortality and other
actuarial assumptions set forth in the most recent actuarial report for the
Benefit Plan does not exceed the current fair market value of the Benefit
Plan's assets. All contributions and other amounts payable as of the
Effective Time by the Company or its Subsidiaries with respect to each
Benefit Plan in respect of current or prior plan years have been either
paid or accrued on the balance sheet of the Company or its Subsidiaries.
(iii) No Commonly Controlled Entity is required to contribute to, or
has or could have any liability with respect to, any "multiemployer plan"
(as defined in Section 4001(a)(3) of ERISA) or has withdrawn from any
multiemployer plan where such withdrawal has resulted or could result in
any "withdrawal liability" (within the meaning of Section 4201 of ERISA)
that has not been fully paid.
(iv) No matter is pending or, to the knowledge of the Company
threatened, relating to any Benefit Plan before any court or governmental
agency.
(v) Neither the Company nor a Commonly Controlled Entity, nor any of
their respective employees or directors, nor any fiduciary, has engaged in
any transaction, including the execution and delivery of this Agreement and
other agreements, instruments and documents for which execution and
delivery by the Company is contemplated herein, in violation of Section
406(a) or (b) of ERISA or which is a "prohibited transaction" (as defined
in Section 4975(c)(i) of the Code) for which no exemption exists under
Section 408(b) of ERISA or Section 4975(d) of the Code or for which no
administrative exemption has been granted under Section 408(a) of ERISA.
(vi) The Benefit Plans and their related trusts intended to qualify
under Sections 401 and 501(a) of the Code, respectively, received favorable
determination letters from the Internal Revenue Service and the Company
believes such Plans and their related trusts continue to qualify and
operate as designed. Any voluntary employee benefit association which
provides benefits to current or former employees of the Company and its
Subsidiaries, or their beneficiaries received a favorable determination
letter from the Internal Revenue Service and the Company believes such
associations continue to qualify and operate as designed. Each Benefit Plan
which is intended to meet the requirements of Section 125 of the Code meets
those
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requirements and each program of benefits for which employee contributions
are provided pursuant to elections under any such Benefit Plan meets the
requirements of the Code applicable thereto.
(vii) Neither the Company nor any of its Subsidiaries has any
liability (contingent or otherwise) under Section 4069, Section 4212(c) or
Section 4062(c) of ERISA.
(viii) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, as a result of
such transactions or any event occurring thereafter (i) result in any
payment becoming due to any employee (current, former or retired) director
or consultant of the Company or its Subsidiaries, or to a trustee under any
"rabbi trust" or similar arrangement, (ii) increase any benefits under any
Benefit Plan or (iii) result in the acceleration of the time of payment of,
vesting of or other rights with respect to any such benefits. Neither the
Company nor any Subsidiary has made any payments or provided any
compensation or benefits nor are they or any successor under any agreement,
arrangement or Benefit Plan obligated to make any payments or provide any
compensation or benefits, the deductibility of which may be limited by
Section 280G or 162(m) of the Code. Neither the Company nor any Commonly
Controlled Entity or any officer or employee thereof has made any promises,
commitments or representations, whether legally binding or not, to create
any additional benefit plan, agreement or arrangement, or modify or change
any existing Benefit Plan. No event, condition or circumstance exists that
would prevent the amendment or termination of any Benefit Plan.
SECTION 2.9 Taxes. Except as disclosed in Section 2.9 of the Disclosure
Schedule:
(i) Each of the Company and its Subsidiaries has filed all tax returns
and reports required to be filed by it or requests for extensions to file
such returns or reports have been timely filed, granted and have not
expired. All tax returns filed by the Company and each of its Subsidiaries
are complete and accurate except to the extent that such failure to be
complete and accurate would not have a Material Adverse Effect. The Company
and each of its Subsidiaries has paid (or the Company has paid on the
Subsidiaries' behalf) all taxes shown as due on such returns and all taxed
required to be paid. The most recent financial statements contained in the
SEC Documents reflect an adequate reserve for all taxes payable by the
Company and the Subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against the Company or any of its Subsidiaries that are not
adequately reserved for, and, except as set forth on Section 2.9 of the
Disclosure Schedule, no requests for waivers of the time to assess any such
taxes have been granted or are pending. The Federal income tax returns of
the Company and each of its Subsidiaries consolidated in such returns have
been examined by and settled with the United States Internal Revenue
Service, or the statute of limitations on assessment or collection of any
Federal income taxes due from the Company or the any of its Subsidiaries
has expired, through such taxable years as are set forth in Section 2.9 of
the Disclosure Schedule.
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(iii) As used in this Agreement, "taxes" shall include all Federal,
state, local and foreign income, property, premium, franchise, sales,
excise, employment, payroll, withholding and other taxes, tariffs or
governmental charges of any nature whatsoever and any interest, penalties,
additional amounts and additions to taxes relating thereto.
(iv) Neither the Company nor any of its Subsidiaries has made any
election, filed any consent or entered into any agreement with respect to
taxes that is not reflected on the federal income tax returns of the
Company and its Subsidiaries for the three years ended December 31, 1996
(copies of which returns have been made available to Acquiror for review
prior to the date of this Agreement) and that would reasonably be expected
to be material to the Company and the Subsidiaries taken as a whole.
SECTION 2.10 Compliance with Applicable Laws. Except as disclosed in
Section 2.10 of the Disclosure Schedule:
(i) The business of the Company and each of the Subsidiaries is being,
and has been since December 31, 1995, conducted in compliance in all
material respects with all applicable federal, state, local and foreign
laws, statutes, ordinances, rules and regulations, decrees, judgments and
orders of any Governmental Entity, and all material notices, reports,
documents and other information required to be filed thereunder within the
last three years were properly filed and were in compliance in all material
respects with such laws. The assets, properties, facilities and operations
of the Company and each of the Subsidiaries are in compliance in all
material respects with all applicable laws relating to public and worker
health and safety.
(ii) The Company, and each of the Subsidiaries, has all licenses,
permits, authorizations, franchises, and rights ("Licenses") which are
necessary for it to own, lease or operate its properties and assets and to
conduct its business as now conducted. The business of the Company and each
of the Subsidiaries has been and is being conducted in compliance in all
material respects with all such Licenses. All such Licenses are in full
force and effect, and there is no proceeding or investigation pending or,
to the knowledge of the Company, threatened which would reasonably be
expected to lead to the revocation, amendment, failure to renew,
limitation, suspension or restriction of any such License.
SECTION 2.11 Opinion of Financial Advisor. The Company has received the
written opinion of Wasserstein Perella & Co., dated the date of the Board's
approval of this Agreement, to the effect that, as of such date, the Merger
Consideration to be received in the Merger is fair to the Company's stockholders
from a financial point of view.
SECTION 2.12 Brokers. Except for Wasserstein Perella & Co., whose fees will
be paid by the Company pursuant to its amended agreement with the Company (a
copy of which has been or will be furnished to Acquiror), all negotiations
relative to this Agreement and the transactions contemplated hereby have been
carried out by the Company directly with Acquiror, and no person or entity is
entitled to a finder's fee, brokerage commission, or similar payment in
connection with the Merger.
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SECTION 2.13 Environmental. Except as set forth in Section 2.13 of the
Disclosure Schedule:
(i) The operations and properties of the Company and the Subsidiaries
(a) are in compliance in all material respects with all applicable
Environmental Laws (as defined) and (b) have not generated, used, stored,
transported, manufactured, released or disposed of any Hazardous Materials
(as defined) on or off the Company's premises in material violation of
Environmental Laws. No material expenditure will be required to comply with
Environmental Laws in connection with the operation or continued operation
of the business of the Company and the Subsidiaries after the Effective
Date in a manner consistent with the current operation thereof by the
Company and the Subsidiaries. To the knowledge of the Company and the
Subsidiaries, no material expenditure will be required to remediate, clean
up, abate or remove any Hazardous Materials on any of any real property
owned, operated or leased by the Company or the Subsidiaries.
(ii) There are no actions, complaints, citations, investigations or
proceedings pending or, to the knowledge of the Company, threatened against
the Company or the Subsidiaries alleging the violation of or seeking to
impose liability pursuant to any Environmental Law or Environmental Permit
(as defined below);
(iii) The Company has provided or will provide Acquiror with copies of
all environmental audits, assessments, studies, reports, analyses,
investigation results or similar environmentally-related documents of any
real property currently or formerly owned, operated or leased by the
Company or any of its Subsidiaries that are in the possession, custody or
control of the Company or its subsidiaries.
(iv) The Company has provided or will provide Acquiror with copies of
all requests for information (and responses thereto), notices of violation,
complaints, claims or other documents or correspondence related to or
referring to any actual or alleged violations of Environmental Laws,
including but not limited to the Federal Comprehensive Environmental,
Response, Cleanup and Liability Act ("CERCLA") and similar state laws, at
(a) any real property currently or formerly owned, operated or leased by
the Company or any Subsidiaries, including but not limited to facilities
located in Pittsburgh, Pennsylvania, Novi, Michigan and Troy, New York, or
(b) at CERCLA or similar state sites at which the Company or any
Subsidiaries are named as potentially responsible parties, or for which the
Company or any Subsidiaries have received a CERCLA sec. 122(c), sec. 104(e)
or similar notice or request for information.
(v) The Company and Subsidiaries possess, and have maintained in full
force and effect, all Environmental Permits required for the operation of
their respective businesses, and are in compliance with the provisions of
all such Environmental Permits. No modification, revocation, reissuance,
alteration, transfer or amendment of any material Environmental Permit, or
any review by, or approval of, any third party of any Environmental Permit
is required in connection with the execution or delivery of this Agreement
or the consummation of the transactions contemplated hereby.
(vi) The Company and the Subsidiaries have not contractually created
or assumed any liabilities or obligations or indemnifications under any
Environmental Laws at or related to any
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real property currently or formerly owned, operated or leased by the
Company or any Subsidiaries.
(vii) As used in this Section 2.13, each of the following terms shall
have the following meanings: (a) "Environmental Law" means any applicable
federal, state, local, or foreign law, statute, code, ordinance, rule,
regulation or other requirement (including common law) relating to the
environment (including air, soil, surface water, groundwater, drinking
water, plant life and animal life), or public or employee health and
safety; (b) "Environmental Permit" means any permit, consent, approval,
authorization, license, variance, registration, identification number or
permission required under or issued pursuant to any applicable
Environmental Law or order, writ, injunction or decree; and (c) "Hazardous
Materials" means any hazardous, toxic or dangerous substances, materials
and wastes, including but not limited to naturally occurring or man-made
petroleum or other hydrocarbons, flammable explosives, asbestos containing
materials, urea formaldehyde insulation, radioactive materials, radioactive
wastes, by-products and/or ores, polychlorinated biphenyls, pesticides,
herbicides and any other pollutants or contaminants (including materials
with hazardous constituents), sewage, sludge, industrial and/or mining
slag, tailings, solvent and/or any other similar substance, material, or
waste and including any other substances, materials or wastes regulated
under Environmental Law.
SECTION 2.14 Litigation. Except as set forth in the Filed SEC Documents or
in Section 2.14 of the Disclosure Schedule: (i) there are no outstanding orders,
judgments, injunctions, awards or decrees of any Governmental Entity against the
Company or any of its Subsidiaries, any of its or their properties, assets or
business, any Pension Plan or Welfare Plan ("Company Plan") or, to the knowledge
of the Company, any of its or their current or former directors or officers, as
such, that have had or would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect; (ii) there are no actions, suits or
claims or legal, administrative or arbitration proceedings or investigations
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries, any of its or their properties, assets or business, any
Company Plan or, to the knowledge of the Company, any of its or their current or
former directors or officers, as such, that have had or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect;
and (iii) there are no actions, suits or claims or legal, administrative or
arbitration proceedings or investigations pending or, to the knowledge or the
Company, threatened against the Company or any of its Subsidiaries, any of its
or their properties, assets or business, any Company Plan or, to the knowledge
of the Company, any of its or their current or former directors or officers, as
such, relating to the transactions contemplated by this Agreement.
SECTION 2.15 Labor Relations. Except as set forth in Section 2.15 of the
Disclosure Schedule:
(i) Neither the Company nor any Subsidiary is a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or any Subsidiary and there are no known
organizational campaigns, petitions or other unionization activities
seeking recognition of a collective bargaining unit.
(ii) There are no strikes, slowdowns, work stoppages or material labor
relations controversies pending or, to the knowledge of the Company,
threatened between the Company or any
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Subsidiary and any of their respective employees, and neither the Company
nor any Subsidiary has experienced any such strike, slowdown, work stoppage
or material controversy within the past three years.
SECTION 2.16 Contracts. Except as set forth in the Filed SEC Documents or
as set forth in Section 2.16 of the Disclosure Schedule, there are no
agreements, contracts or other instruments to which the Company is a party or by
which the Company or any of its Subsidiaries or any of their assets is bound or
affected that are material to the business, financial condition or results of
operations of the Company or its Subsidiaries taken as a whole ("Company
Agreements"). Neither the Company or any of its Subsidiaries nor, to the
knowledge of the Company, any other party is in breach of or default under any
Company Agreements which are currently in effect, except for such breaches and
defaults which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Except as set forth in the Filed SEC
Documents or as set forth in Section 2.16 of the Disclosure Schedule, neither
the Company nor any of its Subsidiaries is a party to or bound by any
non-competition agreement or any other agreement or obligation which purports to
limit in any material respect the manner in which, or the localities in which,
the Company or any such Subsidiary is entitled to conduct all or any material
portion of the business of the Company or its Subsidiaries.
SECTION 2.17 Intellectual Property. Except as set forth in Section 2.17 of
the Disclosure Schedule:
(i) the Company and each Subsidiary has exclusive ownership of and
title to each issued patent, pending patent application, registered
trademark, registered trade name, registered service mark and registered
copyright owned or used in the business of the Company and its Subsidiaries
taken as a whole (collectively, the "Registered Intellectual Property"),
and to the knowledge of the Company, the Company and each Subsidiary has
ownership of and rights to use each material patent application,
unregistered trademark application, unregistered trade name, unregistered
service mark, unregistered copyright and other trade secret or other
proprietary intellectual property (the "Other Intellectual Property" and
collectively with the Registered Intellectual Property, the "Intellectual
Property") owned or used in the business of the Company and its
Subsidiaries taken as a whole.
(ii) To the Company's knowledge, the use by the Company and each
Subsidiary of such Intellectual Property does not infringe upon the rights
of any other person, and no other person is infringing upon the rights of
the Company or any Subsidiary in any such Intellectual Property, except for
any such infringements, that would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
SECTION 2.18 Real Estate. The Company and its Subsidiaries do not own any
real estate other than the premises identified in the Filed SEC Documents or as
set forth in Section 2.18 of the Disclosure Schedule as being so owned. The
Company and its Subsidiaries do not lease any real estate other than the
premises identified in the Filed SEC Documents or as set forth in Section 2.18
of the Disclosure Schedule as being so leased.
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SECTION 2.19 Voting Requirements. The affirmative vote of the holders of a
majority of the outstanding Common Shares entitled to vote at the Stockholders
Meeting (as defined in Section 4.2) is the only vote of the holders of any class
of the Company's capital stock necessary to approve this Agreement and the
transactions contemplated by this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the Company as follows:
SECTION 3.1 Organization, Standing and Corporate Power. Acquiror is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Acquiror has not engaged in any business since it was
incorporated other than in connection with its organization and the transactions
contemplated by this Agreement.
SECTION 3.2 Authority; Noncontravention. Acquiror has all requisite
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by Acquiror
and the consummation by Acquiror of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Acquiror.
This Agreement has been duly executed and delivered by and, assuming this
Agreement has been duly executed and delivered by the Company, constitutes a
valid and binding obligation of Acquiror, enforceable against it in accordance
with its terms except that the enforcement thereof may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditor's rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity). The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not (i) conflict with or
violate any of the provisions of the Certificate of Incorporation or By-Laws of
Acquiror, (ii) subject to the governmental filings and other matters referred to
in the following sentence, conflict with, result in a breach of or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
material benefit under, or require the consent of any person under, any
indenture, or other agreement, permit, concession, franchise, license or similar
instrument or undertaking to which Acquiror or any of its subsidiaries is a
party or by which Acquiror or any of its subsidiaries or any of their assets is
bound or affected, or (iii) subject to the governmental filings and other
matters referred to in the following sentence, contravene any law, rule or
regulation of any state or of the United States or any political subdivision
thereof or therein, or any order, writ, judgment, injunction, decree,
determination or award currently in effect, subject, in the case of clauses
(ii) and (iii), to those conflicts, breaches, defaults and similar matters,
which, individually or in the aggregate, would not materially and adversely
affect Acquiror's ability to consummate the transactions contemplated hereby. No
consent, approval or authorization of, or declaration or filing with, or notice
to, any Governmental Entity which has not been received or made is required by
or with respect to Acquiror in connection with the execution and delivery of
this Agreement by Acquiror or the consummation by
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Acquiror of any of the transactions contemplated hereby, except for (i) the
filing of premerger notification and report forms under the HSR Act with respect
to the Merger, (ii) the filing of the certificate of merger with the Delaware
Secretary of State, and appropriate documents with the relevant authorities of
the other states in which the Company is qualified to do business, and (iii)
such other consents, approvals, authorizations, filings or notices as are set
forth in Section 2.4 of the Disclosure Schedule.
SECTION 3.3 Financing. Acquiror has delivered to the Company true and
correct copies of letters from PNC Bank and PNC Equity Management Corp
(collectively, the "Lenders"), stating Lenders' interest in providing the debt
financing ("Financing") which, together with equity to be obtained by Acquiror
will be in an amount necessary to pay the Merger Consideration and consummate
the transactions contemplated hereby, subject to the negotiation, preparation
and execution of binding financing commitments with respect to the Financing
("Financing Commitments"), and to the fulfillment of the conditions precedent to
be contained in the Financing Commitments.
SECTION 3.4 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Acquiror directly with
the Company, without the intervention of any person on behalf of Acquiror in
such manner as to give rise to any valid claim by any person against Acquiror,
the Company or any Subsidiary for a finder's fee, brokerage commission, or
similar payment.
ARTICLE 4
ADDITIONAL AGREEMENTS
SECTION 4.1 Preparation of Proxy Statement.
SECTION 4.1.1 Proxy Statement. As soon as practicable following the
date of this Agreement, the Company shall prepare and file with the SEC
the Proxy Statement. The Company will use its reasonable efforts to cause
the Proxy Statement to be mailed to the Company's stockholders as promptly
as practicable. Notwithstanding anything in this Agreement to the
contrary, the Company reserves the right to use an Information Statement
in lieu of the Proxy Statement if it determines to obtain the approval of
this Agreement and the Merger by means of a written consent procedure in
lieu of a vote at the Stockholders Meeting (as defined in Section 4.2).
SECTION 4.1.2 Company Information. The Company agrees that none of the
information supplied or to be supplied by the Company specifically for
inclusion in the Proxy Statement will, at the date it is first mailed to
the Company's stockholders or at the time of the Stockholders Meeting,
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 therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to form in all
material respect with the requirements of the Exchange Act and the rules
and regulations thereunder.
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SECTION 4.1.3 Acquiror Information. Acquiror agrees that none of the
information supplied or to be supplied by Acquiror specifically for
inclusion in the Proxy Statement will, at the date it is first mailed to
the Company's stockholders or at the time of the Stockholders Meeting,
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 therein, in light of the circumstances under which they are
made, not misleading.
SECTION 4.2 Meeting of Stockholders. The Company will take all action
necessary in accordance with applicable law and its Certificate of Incorporation
and By-laws to convene a meeting of its stockholders (the "Stockholders
Meeting") to consider and vote upon the approval of this Agreement and the
Merger. Subject to Section 4.7 hereof, the Company will, through its Board of
Directors, recommend to its stockholders approval of this Agreement and the
Merger. Without limiting the generality of the foregoing, the Company agrees
that, subject to its right to terminate this Agreement pursuant to Section
7.1(vi), its obligations pursuant to the first sentence of this Section 4.2
shall not be affected by (i) the commencement, public proposal, public
disclosure or communication to the Company of any Acquisition Proposal (as
defined in Section 4.6) or (ii) the withdrawal or modification by the Board of
Directors of the Company of its approval or recommendation of this Agreement or
the Merger. The Company will use its reasonable efforts to hold the Stockholders
Meeting as soon as practicable after the date hereof. Notwithstanding anything
in this Agreement to the contrary, the Company reserves the right to obtain the
approval of this Agreement and the Merger by means of a written consent
procedure in lieu of a vote at the Stockholders Meeting.
SECTION 4.3 Access to Information; Confidentiality. Upon reasonable notice,
the Company shall, and shall cause its Subsidiaries to, afford to Acquiror and
to the officers, employees, accountants, counsel, financial advisors, financing
sources and other representatives of Acquiror reasonable access during normal
business hours during the period prior to the Effective Time to all its
properties, books, contracts, commitments, personnel and records. During such
period, the Company shall furnish promptly to, upon request, a copy of (i) each
SEC Document filed by it during such period, and (ii) all correspondence or
written communication with any Governmental Entity which relates to the
transactions contemplated hereby or which is otherwise material to the financial
condition or operations of the Company and its Subsidiaries taken as a whole.
Except as required by law, Acquiror will hold, and will cause its respective
directors, officers, partners, employees, accountants, counsel, financial
advisors and other representatives and affiliates to hold, any nonpublic
information obtained from the Company in confidence to the extent required by,
and in accordance with, the provisions of the letter dated August 18, 1997,
between Acquiror and the Company (the "Confidentiality Agreement").
SECTION 4.4 Reasonable Efforts. Upon the terms and subject to the
conditions and other agreements set forth in this Agreement, each of the parties
agrees to use its reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the Merger and the
other transactions contemplated by this Agreement.
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Notwithstanding any provision in this Agreement to the contrary, in
connection with any filing or submission or other action required to be made or
taken by either Acquiror or the Company to effect the Merger and to consummate
the transactions contemplated hereby, neither Acquiror nor the Company shall,
without the other's prior written consent, commit to any divestiture
transaction, and neither Acquiror, the Company nor any of their affiliates shall
be required to divest or hold separate or otherwise take or commit to take any
action that limits its freedom of action with respect to, or its ability to
retain, the Company and its Subsidiaries or any material portions thereof.
SECTION 4.5 Public Announcements. Acquiror and the Company will consult
with each other before issuing, and shall provide each other a reasonable
opportunity to review and comment upon, any press release or public statement
with respect to this Agreement or the transactions contemplated hereby, except
to the extent disclosure prior to such consultation, review and comment may be
required by applicable law, court process or obligations pursuant to any listing
agreement with any national securities exchange.
SECTION 4.6 Acquisition Proposals. The Company shall not, nor shall it
authorize or permit any officer, director or employee of, or any investment
banker, attorney or other advisor or representative of, the Company or any of
its Subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage
the submission of any Acquisition Proposal (as defined below), (ii) participate
in any discussions or negotiations regarding, or furnish to any person any
non-public information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, an Acquisition
Proposal or (iii) enter into any agreement with respect to an Acquisition
Proposal; provided, however, that nothing contained in this Section 4.6 shall
prohibit the Company or the Board of Directors of the Company from furnishing
non-public information to, or entering into discussions or negotiations with,
any person or entity with respect to an unsolicited Acquisition Proposal if (but
only if), (a) the Board determines reasonably and in good faith, after due
investigation and after consultation with and based upon the advice of its
outside financial advisor, that such Acquisition Proposal is or could reasonably
be expected to lead to a Superior Proposal (as defined below); (b) the Board
determines reasonably and in good faith, after due investigation and after
consultation with and based upon the advice of outside counsel, that the failure
to take such action would cause the Board to violate its fiduciary duties to
stockholders under applicable law and (c) the Company (x) provides at least two
business days' notice to Acquiror to the effect that it is taking such action
and (y) receives from such person or entity an executed confidentiality
agreement substantially similar to the Confidentiality Agreement, except that
such confidentiality agreement need not prohibit such person or entity from
making an unsolicited Acquisition Proposal directly and privately to the Board
of Directors of the Company. In the event that the Company executes such a
confidentiality agreement, the Confidentiality Agreement shall automatically be
amended to provide Acquiror with the right to make an unsolicited Acquisition
Proposal directly and privately to the Board of Directors of the Company.
Notwithstanding anything in this Agreement to the contrary, the Company shall
promptly advise Acquiror orally and in writing of the receipt by it (or by any
of the other entities or persons referred to above) after the date hereof of any
Acquisition Proposal or any inquiry which could reasonably lead to an
Acquisition Proposal, the material terms and conditions of such Acquisition
Proposal or inquiry, and the identity of the person or entity making any such
Acquisition Proposal, provided that the Company shall have no obligation to
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disclose the identity of such person or entity if such disclosure would violate
the terms of any agreement with such person or entity, or the Board of
Directors, after consultation with and based upon the advice of outside counsel,
concludes in good faith that such disclosure would violate its fiduciary duties.
The Company agrees that it will fully enforce (including by way of obtaining an
injunction), and not waive any provision of, any confidentiality agreement to
which it is a party. For purposes of this Agreement, "Acquisition Proposal"
means any bona fide proposal with respect to a merger, consolidation, share
exchange or similar transaction involving the Company or any significant
Subsidiary or any purchase of all or any significant portion of the assets or
capital stock of the Company or any significant Subsidiary or any other business
combination (including without limitation the acquisition of an equity interest
therein) involving the Company other than the transactions contemplated hereby;
and "Superior Proposal" means an Acquisition Proposal which the Board believes
in good faith, after due investigation (taking into account, among other things,
the financing terms and the likelihood of consummation) and based upon the
advice of its outside legal and financial advisors, is more favorable to the
Company's stockholders from a financial point of view than the Merger.
SECTION 4.7 Fiduciary Duties. The Board of Directors of the Company shall
not (i) withdraw or modify the approval or recommendation by such Board of
Directors of this Agreement or the Merger, or (ii) approve or recommend an
Acquisition Proposal, unless the Company receives an unsolicited Acquisition
Proposal in accordance with Section 4.6 and the Board of Directors of the
Company determines in good faith, after due investigation and after consultation
with and based upon the advice of outside counsel, that the failure of the Board
of Directors to withdraw or modify its approval or recommendation of this
Agreement or the Merger, or approve or recommend such Acquisition Proposal would
cause the Board to violate its fiduciary duties to stockholders under applicable
law. Nothing contained in this Section 4.7 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders which, in the good faith judgment of the Board of
Directors of the Company based on advice of outside counsel, is required under
applicable law; provided that the Company does not withdraw or modify its
position with respect to the Merger or approve or recommend an Acquisition
Proposal, except under the circumstances described in the immediately preceding
sentence and on two business days' notice to Acquiror to the effect that it is
taking such action. Notwithstanding anything contained in this Agreement to the
contrary, any action by the Board of Directors permitted by this Section 4.7
shall not constitute a breach of this Agreement by the Company.
SECTION 4.8 Filings; Other Action. As promptly as practicable after the
date of this Agreement, (i) the Company and Acquiror shall make all filings and
submissions under the HSR Act, and (ii) the Company and Acquiror shall cooperate
in all reasonable respects with each other in (a) determining if other filings
are required to be made prior to the Effective Time with, or if other material
consents, approvals, permits, notices or authorizations are required to be
obtained prior to the Effective Time from any Governmental Entity in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and (b) timely making all such filings and
timely seeking all such consents, approvals, permits, notices or authorizations.
In connection with the foregoing, the Company will provide Acquiror, and
Acquiror will provide the Company, with
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copies of correspondence, filings or communications (or memoranda setting forth
the substance thereof) between such party or any of its representatives, on the
one hand, and any Governmental Entity or members of their respective staffs, on
the other hand, with respect to this Agreement and the transactions contemplated
hereby. Each of Acquiror and the Company acknowledge that certain actions may be
necessary with respect to the foregoing in making notifications and obtaining
clearances, consents, approvals, waivers or similar third party actions which
are material to the consummation of the transactions contemplated hereby, and
each of Acquiror and the Company agree to take such action as is reasonably
necessary to complete such notifications and obtain such clearances, approvals,
waivers or third party actions.
SECTION 4.9 Indemnification. (i) From and after the Effective Time, the
Surviving Corporation will indemnify and hold harmless each present and former
director and officer of the Company and its Subsidiaries, determined as of the
Effective Time (the "Indemnified Parties"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent that the
Company or such Subsidiary would have been permitted under applicable law and
the Certificate of Incorporation or By-Laws of the Company or such Subsidiary in
effect on the date hereof to indemnify such person (and the Surviving
Corporation shall also advance expenses as incurred to the fullest extent
permitted under applicable law, provided the person to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such person is not entitled to indemnification).
(ii) For a period of six (6) years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Company (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 in all material respects to the Indemnified Parties) with respect
to claims arising from facts or events which occurred before the Effective Time;
provided, however, that the Surviving Corporation shall not be obligated to make
annual premium payments for such insurance to the extent such premiums exceed
200% of the premiums paid as of the date hereof by the Company for such
insurance.
(iv) The provisions of this Section 4.9 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his heirs and his
personal representatives, and shall be binding on all successors and assigns of
the Surviving Corporation.
SECTION 4.10 Failure to Close. If this Agreement is terminated for any
reason pursuant to Article 7, the parties agree that for a period of two (2)
years from the date of termination, Acquiror and its Subsidiaries will not
solicit for employment any officer or employee of the Company or its
Subsidiaries.
SECTION 4.11 Financing Commitments. Promptly following the date of this
Agreement, Acquiror will use its reasonable efforts to (i) negotiate, execute
and deliver the Financing
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Commitments with the Lenders or such other reputable financing sources
reasonably acceptable to the Company, (ii) satisfy the covenants and the
conditions included in the Financing Commitments and (iii) obtain the proceeds
of the Financing.
ARTICLE 5
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
SECTION 5.1 Conduct of Business by the Company. Except as contemplated by
this Agreement or as set forth in Section 5.1 of the Disclosure Schedule, during
the period from the date of this Agreement to the Effective Time, the Company
shall, and shall cause its Subsidiaries to, act and carry on their respective
businesses in the ordinary course of business and, to the extent consistent
therewith, use reasonable efforts to preserve intact their current business
organizations, keep in full force and effect their Licenses, keep available the
services of their current key officers, employees and agents, and preserve the
goodwill of regulators or those engaged in material business relationships with
them. Without limiting the generality of the foregoing, during the period from
the date of this Agreement to the Effective Time, the Company shall not, and
shall not permit any of the Subsidiaries to, without the prior consent of
Acquiror:
(i) adopt or propose any change to its Certificate of Incorporation or
By-Laws;
(ii) (a) declare, set aside or pay any dividends on, or make any other
distributions with respect to, any of the Company's outstanding capital
stock, other than regular quarterly cash dividends not in excess of $.08
per Common Share so long as the Common Shares remain outstanding, in
accordance with usual record and payment dates and in accordance with the
Company's present dividend policy (except that no dividends shall be
declared, set aside or paid prior to July 31, 1998), (b) split, combine or
reclassify any of its outstanding capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its outstanding capital stock or (c) purchase,
redeem or otherwise acquire any shares of capital stock or other securities
of, or other ownership interests of the Company other than the Stock
Options to be purchased as contemplated by Section 1.11 above and as may be
necessary to fund matching contributions under the Company's 401(k) plan;
(iii) issue, sell, grant, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities other than upon the
exercise of Stock Options outstanding on the date of this Agreement;
(iv) acquire any business or any corporation, partnership, joint
venture, association or other business organization or division or acquire
any material assets or make any investment in any person or enter into any
reorganization;
(v) take any action that, if taken prior to the date of this
Agreement, would have been required to be disclosed in Section 2.6 of the
Disclosure Schedule or that would otherwise cause any of the
representations and warranties contained in Article 2 not to be true and
correct in all material respects at any time;
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(vi) sell, mortgage or otherwise encumber or subject to any lien or
otherwise dispose of any of its properties or assets that are material to
the Company and its Subsidiaries taken as a whole, except in the ordinary
course of business;
(vii) (a) except for the dollar amount required to cancel and cash out
the Stock Options as contemplated by Section 1.11 above, incur any
indebtedness for borrowed money or guarantee or otherwise become
responsible for any such indebtedness of another person, other than
indebtedness owing to or guarantees of indebtedness owing to the Company or
any direct or indirect wholly-owned Subsidiary of the Company or enter into
any agreement for indebtedness or (b) make any loans or advances to any
other person, other than to the Company, or to any direct or indirect
wholly-owned Subsidiary of the Company and other than routine advances in
the ordinary course of business to employees or agents;
(viii) make any tax election or settle or compromise any income tax
liability that would reasonably be expected to be material to the Company
and its Subsidiaries taken as a whole;
(ix) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in accordance
with their terms of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes thereto) of the Company included in the Filed SEC Documents or
incurred since the date of such financial statements in the ordinary course
of business consistent with past practice;
(x) except in the ordinary course of business, modify, amend or
terminate, or waive, release or assign any material rights or claims under
any material agreement, permit, concession, franchise, license or similar
instrument to which the Company or any Subsidiary is a party;
(xi) authorize any of, or commit or agree to take any of the foregoing
actions;
(xii) make any capital expenditures other than as contemplated by the
Company's annual budget;
(xiii) (a) enter into, adopt or amend or increase the amount or
accelerate the payment or vesting of any benefit or amount payable under,
any Benefit Plan, or increase in any manner, the compensation or fringe
benefits, or otherwise extend, expand or enhance the engagement, employment
or any related rights, of any director, officer or other employee of the
Company or any of its Subsidiaries, except for normal increases in the
ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company or any of its Subsidiaries; (b) enter into or amend
any employment, severance or special pay arrangement with respect to the
termination of employment with any director or officer or other employee
other than in the ordinary course of business consistent with past
practice; or (c) deposit into any trust (including any "rabbi trust")
amounts in respect of any employee benefit obligations or obligations to
directors;
(xiv) make any changes in accounting methods, except as required by
law, rule, regulation, the SEC or GAAP; or
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(xv) enter into any agreement or arrangement with any Affiliate (other
than wholly owned Subsidiaries). As used in this Agreement, the term
"Affiliate," shall mean, as to any person, any other person which directly
or indirectly controls, or in under common control with, or is controlled
by, such person. As used in this definition, "control" (including, with its
correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of power to direct or cause
the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise).
SECTION 5.2 Management of the Company and Subsidiaries. The Company shall,
from the date of this Agreement through the Effective Time, cause its management
and that of the Subsidiaries to consult on a regular basis and in good faith
with the employees and representatives of Acquiror concerning the management of
the Company and its Subsidiaries' businesses.
SECTION 5.3 Conduct of Business by Acquiror. Except as contemplated by this
Agreement, during the period from the date of this Agreement to the Effective
Time, Acquiror shall, and shall cause its subsidiaries to, act and carry on
their respective businesses in the ordinary course of business except where the
failure to do so would not adversely affect Acquiror's ability to pay the Merger
Consideration.
SECTION 5.4 Other Actions. The Company and Acquiror shall not, and shall
not permit any of their respective subsidiaries to, take or omit to take any
action that would, or that would reasonably be expected to, result in (i) any of
the representations and warranties of such party set forth in this Agreement
becoming untrue in any material respect at any time or (ii) any of the
conditions of the Merger set forth in Article 6 not being satisfied.
SECTION 5.5 Notification. The Company shall give prompt notice to Acquiror
and Acquiror shall give prompt notice to the Company of (i) the occurrence, or
non-occurrence of any event whose occurrence or non-occurrence would reasonably
be expected to cause (a) any representation or warranty contained in this
Agreement which is qualified as to materiality or Material Adverse Effect to be
untrue or inaccurate at any time from the date hereof to the Effective Time,
(b) any other representation or warranty made contained in this Agreement to be
untrue or inaccurate at any time from the date hereof to the Effective Time, or
(c) any condition set forth in Article 6 to be unsatisfied at any time from the
date hereof to the Effective Time, and (ii) any failure of the Company, or
Acquiror, as the case may be, to comply with or satisfy in any material respect
any material covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.5 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice or the right of such party to
terminate this Agreement.
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ARTICLE 6
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
SECTION 6.1.1 Stockholder Approval. This Agreement and the Merger
shall have been approved and adopted by an affirmative vote of the holders
of the requisite number of shares present, in person or by proxy, and
entitled to vote on the Merger at the Stockholders Meeting.
SECTION 6.1.2 Governmental and Regulatory Consents. The Company and
Acquiror shall have made all such filings, and obtained such
authorizations, consents, or approvals required by any Governmental Entity
to consummate the transactions contemplated hereby; provided, however that
such authorizations, consents or approvals shall impose no conditions that
could reasonably be expected to have a Material Adverse Effect.
SECTION 6.1.3 HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have otherwise expired.
SECTION 6.1.4 No Proceedings. No proceeding shall have been commenced
and be continuing, seeking to restrain or enjoin the consummation of the
Merger.
SECTION 6.1.5 Financing. Acquiror shall have obtained the proceeds of
the Financing contemplated by the Financing Commitments.
SECTION 6.2 Conditions to Obligations of Acquiror. The obligations of
Acquiror to effect the Merger are further subject to the following conditions:
SECTION 6.2.1 Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and
correct on the date hereof and (except to the extent specifically given as
of an earlier date) on and as of the Closing Date as though made on the
Closing Date, and the Company shall have delivered to Acquiror a
certificate dated as of the Closing Date signed by an executive officer to
the effect set forth in this Section 6.2.1.
SECTION 6.2.2 Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the Closing Date,
and the Company shall have delivered to Acquiror a certificate dated as of
the Closing Date signed by an executive officer to the effect set forth in
this Section 6.2.2.
SECTION 6.2.3 Third Party Approvals. All authorizations, consents and
approvals of any third party required to be obtained by the Company which,
if not obtained, would have a Material Adverse Effect, shall have been
obtained and shall be in full force and effect.
SECTION 6.2.4 No Material Adverse Effect. Since the date of this
Agreement, no event, effect or change shall have occurred which has had or
which would reasonably be expected to have a Material Adverse Effect, and
the Acquiror shall have received a certificate signed by the Chief
Executive Officer or Chief Financial Officer of the Company to such effect.
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SECTION 6.3 Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is further subject to the following conditions:
SECTION 6.3.1 Representations and Warranties. The representations and
warranties of Acquiror contained in this Agreement shall be true and
correct on the date hereof and (except to the extent specifically given as
of an earlier date) on and as of the Closing Date as though made on the
Closing Date, and Acquiror shall have delivered to the Company a
certificate dated as of the Closing Date, signed by an executive officer
and to the effect set forth in this Section 6.3.1.
SECTION 6.3.2 Performance of Obligations of Acquiror. Acquiror shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and
Acquiror shall have delivered to the Company a certificate dated as of
the Closing Date, signed by an executive officer and to the effect set
forth in this Section 6.3.2.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated and abandoned at
any time prior to the Effective Time, whether before or after approval of
matters presented in connection with the Merger by the stockholders of the
Company:
(i) by mutual written consent of Acquiror and the Company;
(ii) by either Acquiror or the Company:
(a) if, upon a vote at a duly held Stockholders Meeting, this
Agreement and the Merger shall fail to receive the requisite vote for
approval and adoption by the stockholders of the Company at the
Stockholders Meeting;
(b) if the Merger shall not have been consummated on or before
July 31, 1998; provided, that either party may terminate this Agreement
on or after such earlier date on which it can be reasonably determined
that it will be impossible to consummate the Merger by July 31, 1998;
and provided, further, that the party seeking to terminate this
Agreement pursuant to this Section 7.1(ii)(b) shall not have breached in
any material respect its obligations under this Agreement in any manner
that shall have caused or contributed to the failure to consummate the
Merger by July 31, 1998;
(c) if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action, or there shall be enacted any law
having the effect of, permanently enjoining, restraining or otherwise
prohibiting, or making illegal the Merger and such order, decree, ruling
or other action shall have become final and nonappealable, provided the
party seeking to terminate this Agreement under this clause (c) shall
have used reasonable efforts to remove or overturn such order, decree,
ruling or other action; or
(d) if, on or before April 10, 1998, Acquiror has not delivered to
the Company executed Financing Commitments providing that the Financing
is subject only to conditions
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substantially similar to the conditions set forth in Sections 6.1 and
6.2, and such other commercially reasonable conditions as may be
required by the Lenders or such other reputable financing sources
reasonably acceptable to the Company (which conditions shall be
reasonably acceptable to the Company), and to definitive documentation;
(iii) by the Company, upon a material breach of any representation or
warranty of Acquiror or Acquiror fails to comply in any material respect
with any of its covenants or agreements, or if any representation or
warranty of Acquiror shall be or become untrue in any material respect,
which breach or non-compliance is not curable or, if curable, is not cured
by Acquiror within 30 days after written notice of such breach or
non-compliance from the Company;
(iv) by Acquiror, upon a material breach of any representation, or
warranty of the Company or the Company fails to comply in any material
respect with any of its covenants or agreements, or if any representation
or warranty of the Company shall be or become untrue in any material
respect, which breach or non-compliance is not curable or, if curable, is
not cured by the Company within 30 days after written notice of such breach
or non-compliance from Acquiror;
(v) by Acquiror, at any time before 5:00 p.m. Chicago time on April
10, 1998 if Acquiror shall determine in good faith that it is not satisfied
with the results of its due diligence investigation of the Company;
provided, however, that Acquiror must advise the Company orally and in
writing of any such determination prior to terminating this Agreement
pursuant to this Section 7.1(v);
(vi) by the Company, if the Board determines to enter into and enters
into a definitive agreement providing for a Superior Proposal which was
obtained consistent with Section 4.6; provided, however, that the Company
shall have no right to terminate this Agreement under this Section 7.1(vi)
unless (a) the Company has provided Acquiror with written notice of the
material terms of the Superior Proposal at least two business days prior to
such termination, and (b) the Company simultaneously pays to Acquiror the
Termination Penalty (as defined herein) required under Section 7.2(ii); or
(vii) by Acquiror, if: (a) the Board shall have taken any action
contemplated by Section 4.7, (b) a tender offer or exchange offer for 30%
or more of the Common Shares of the Company is commenced, and the Board
fails to recommend against acceptance of such tender offer or exchange
offer by its stockholder within the time period required by Section 14e-2
of the Exchange Act (the taking of no position by the expiration of such
period with respect to the acceptance of such tender offer or exchange
offer by its stockholders constituting such a failure), (c) the Company
shall have intentionally breached any of its covenants or agreements in
Section 4.6, or (d) after April 10, 1998 there shall be pending any
proceeding seeking material damages on account of the consummation of the
Merger which Acquiror determines in good faith, after due investigation and
consultation with counsel representing the Company in such proceeding,
could reasonably be expected to result in the Company incurring a material
amount of damages or expenses, after taking into account applicable
insurance coverage; provided, however, Acquiror shall not then be in
material breach of its obligations under this Agreement.
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SECTION 7.2 Effect of Termination. (i) In the event of termination of this
Agreement by either the Company or Acquiror as provided in Section 7.1, except
as provided below in Section 7.2(ii), (iii) or (iv), this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of Acquiror or the Company, other than the last sentence of Section 4.3
and Sections 7.2 and 10.2. Nothing contained in this Section shall relieve any
party from any liability resulting from any material breach of the
representations, warranties, covenants or agreements set forth in this
Agreement.
(ii) In the event of termination of this Agreement by the Company pursuant
to Section 7.1(vi) or by Acquiror pursuant to Section 7.1(vii)(a) or (b), the
Company shall (a) pay Acquiror $2,500,000 in cash as liquidated damages and not
as a penalty, immediately upon such termination, in same-day funds (the
"Termination Payment"), by wire transfer to an account designated by Acquiror;
provided however, that the Termination Payment shall be $2,000,000 if such
termination occurs on or before April 10,1998; and (b) reimburse Acquiror for
its out-of-pocket costs and expenses reasonably incurred and due to third
parties in connection with this Agreement and the transactions contemplated
thereby (including fees and disbursements of counsel, accountants, financial
advisors and consultants, commitment fees, due diligence expenses, travel costs,
filing fees and similar fees, all of which shall be conclusively established by
vouchers or other statements therefor) (collectively, "Covered Expenses"), up to
a maximum of $500,000, by wire transfer of same-day funds to an account
designated by Acquiror, immediately following receipt and verification of the
Covered Expenses set forth in such vouchers or other statements.
(iii) The Company shall pay Acquiror the Termination Payment (less the
amount, if any, of Covered Expenses paid under Section 7.2(iv) in excess of
$500,000) if: (x) this Agreement is terminated pursuant to Section 7.1(ii)(a),
and (y) the Company, within twelve (12) months from the date of this Agreement,
enters into a written agreement to effect an Acquisition Proposal with, or an
Acquisition Proposal is made by, a party other than Acquiror or any of its
subsidiaries, and (z) in each such case the Acquisition Proposal is thereafter
consummated within such twelve-month period. The Termination Payment
contemplated by the prior sentence shall be paid in same-day funds by wire
transfer to an account designated by Acquiror on the earlier of the consummation
of such Acquisition Proposal or within sixty (60) days after a meeting at which
the stockholders of the Company approve such Acquisition Proposal.
Notwithstanding anything in this Agreement to the contrary, the Termination
Payment, if payable, shall be paid only once and shall be Acquiror's sole and
exclusive remedy hereunder for the termination of the Agreement under the
circumstances in which the Termination Payment is paid (regardless of any breach
of this Agreement), except for the reimbursement of Acquiror's Covered Expenses,
and upon such delivery of the Termination Payment to Acquiror, no person shall
have any further claim or rights against the Company under this Agreement with
respect thereto; provided, however that this sentence shall not apply to and
shall in no way restrict the right of Acquiror to assert a counterclaim in
response to any action brought by the Company against Acquiror with respect to
such events. The Company shall reimburse Acquiror for all costs incurred in
connection with the collection of the Termination Payment and the Covered
Expenses under this Agreement.
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(iv) In the event of (x) termination of this Agreement pursuant to Section
7.1(ii)(a), or (y) termination of this Agreement pursuant to Section 7.1(iv)
based solely on the Company's intentional breach of a representation or warranty
or intentional non-compliance of a covenant, the Company shall reimburse
Acquiror for its Covered Expenses up to a maximum of $1,100,000, by wire
transfer of same-day funds to an account designated by Acquiror, immediately
following receipt and verification of the Covered Expenses set forth in
Acquiror's vouchers or other statements. In the event of termination of this
Agreement by Acquiror pursuant to Section 7.1 (vii)(d), the Company shall
reimburse Acquiror for one-half of its Covered Expenses up to a maximum
obligation of the Company of $350,000, by wire transfer of same-day funds to an
account designated by Acquiror, immediately following receipt and verification
of the Covered Expenses set forth in Acquiror's vouchers or other statements.
SECTION 7.3 Amendment. Subject to the applicable provisions of the Delaware
Code, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however, that after
approval of the Merger by the stockholders of the Company, no amendment shall be
made which reduces the amount of the Merger Consideration payable in the Merger
or adversely affects the rights of the Company's stockholders hereunder without
the approval of such stockholders. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to
Section 7.3, waive compliance with any of the agreements or conditions of the
other parties contained in this Agreement. Any agreement on the part of a party
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
SECTION 7.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective, require in the case of Acquiror or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors.
ARTICLE 8
SURVIVAL OF PROVISIONS
SECTION 8.1 Survival. The representations and warranties respectively made
by the Company, Acquiror in this Agreement, or in any certificate, respectively,
delivered by the Company, Acquiror pursuant to Section 6.2 or Section 6.3
hereof, will terminate upon the Closing and be of no further force or effect.
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ARTICLE 9
NOTICES
SECTION 9.1 Notices. Any notice or communication given pursuant to this
Agreement must be in writing and will be deemed to have been duly given if
mailed (by registered or certified mail, postage prepaid, return receipt
requested), or, if transmitted by facsimile, or if delivered by courier, as
follows:
If to the Company, to:
Portec, Inc.
M. T. Yonker
Chief Executive Officer and President
100 Field Drive
Lake Forest, Illinois 60045
Telecopy: (847) 735-2828
with a copy to:
Schiff Hardin & Waite
233 South Wacker Drive
Suite 7300
Chicago, Illinois 60606
Attention: Robert J. Regan, Esq.
Telecopy: (312) 258-5600
If to Acquiror, to:
c/o Code Hennessey & Simmons LLC
10 South Wacker Drive
Suite 3175
Chicago, Illinois 60606
Attention: Thomas J. Formolo
Telecopy: (312) 876-3854
with copies to:
Altheimer & Gray
10 South Wacker Drive
Suite 4000
Chicago, Illinois 60606
Attention: Mark T. Kindelin, Esq.
Telecopy: (312) 715-8400
All notices and other communications required or permitted under this agreement
that are addressed as provided in this Section 9.1 will, whether sent by mail,
facsimile, or courier, be deemed given upon the first Business Day after actual
delivery to the addressed destination to which such
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notice or other communication is sent (as evidenced by the return receipt or
shipping invoice signed by a representative of such party or by facsimile
confirmation). Any party from time to time may change its address for the
purpose of notices to that party by giving a similar notice specifying a new
address, but no such notice will be deemed to have been given until it is
actually received by the party sought to be charged with the contents thereof.
For purposes of this Section 9.1, "Business Day" shall mean a day other than
Saturday, Sunday or any day on which the principal commercial banks located in
Chicago, Illinois are authorized or obligated to close under the laws of
Illinois.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 Entire Agreement. This Agreement and the Confidentiality
Agreement constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior communications,
agreements, understandings, representations, and warranties whether oral or
written between the parties hereto. There are no oral or written agreements,
understandings, representations, or warranties between the parties hereto with
respect to the subject hereof other than those set forth in this Agreement and
the Confidentiality Agreement. In the event of any conflict between the terms of
this Agreement and the terms of the Confidentiality Agreement, the terms of this
Agreement shall control.
SECTION 10.2 Expenses. Except as otherwise provided in this Agreement, the
Company and Acquiror each will pay its own costs and expenses incident to
preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby except that the expenses
incurred in connection with the printing, mailing and distribution of the Proxy
Statement (or an Information Statement in lieu thereof) shall be borne equally
by the Company and Acquiror. Notwithstanding anything in this Agreement to the
contrary, the Company covenants and agrees that, assuming the Closing Date
occurs on or before July 31, 1998, the fees and expenses of the Company incurred
in connection with this Agreement and the Merger shall not exceed $1,100,000 in
the aggregate, and all such fees and expenses shall have been accrued or paid as
of the Effective Time.
SECTION 10.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same instrument and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties.
SECTION 10.4 No Third Party Beneficiary. Except as otherwise specifically
provided in Section 4.9, this Agreement is not intended and may not be construed
to create any rights in any parties other than the Company and Acquiror and
their respective successors or assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other person.
SECTION 10.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (without regard
to the principles of conflicts of law) applicable to a contract executed and to
be performed in such State.
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SECTION 10.6 Assignment; Binding Effect. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, such consent not to be
unreasonably withheld and any such assignment that is not consented to shall be
null and void, except that Acquiror shall have the right to assign this
Agreement to affiliate of J. Richard Industries, L.P. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by, the parties and their respective successors and assigns.
SECTION 10.7 Disclosure Schedule. The Company shall have the right to amend
or supplement the Disclosure Schedule at any time prior to April 10, 1998,
provided no such amendment or supplement shall be deemed to cure or otherwise
alter or change any representation or warranty of the Company made as of the
date hereof. If the amended or supplemented disclosure (if originally made at
the closing in the certificate required by Section 6.2.1) would excuse Acquiror
from performing its obligations under this Agreement or otherwise permit
Acquiror to terminate this Agreement, Acquiror may then elect to terminate this
Agreement. If Acquiror does not terminate this Agreement within five (5) days
after receipt of such amended or supplemented disclosure, Acquiror will be
deemed to have waived the right to terminate this Agreement on the basis of such
amended or supplemented disclosure.
SECTION 10.8 Enforcement of this Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the terms or provisions
of this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that each of the parties
hereto shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States of America or any state having jurisdiction, such
remedy being in addition to any other remedy to which any party may be entitled
at law or in equity.
SECTION 10.9 Headings, Gender, etc. The headings used in this Agreement
have been inserted for convenience and do not constitute matter to be construed
or interpreted in connection with this Agreement. Unless the context of this
Agreement otherwise requires, (a) words of any gender are deemed to include each
other gender; (b) words using the singular or plural number also include the
plural or singular number, respectively; (c) the terms "hereof," "herein,"
"hereby," "hereto," and derivative or similar words refer to this entire
Agreement; (d) the terms "Article" or "Section" refer to the specified Article
or Section of this Agreement; (e) all references to "dollars" or "$" refer to
currency of the United States of America; (f) the term "person" shall include
any natural person, corporation, limited liability company, general partnership,
limited partnership, or other entity, enterprise, authority or business
organization; and (g) the term "or" is disjunctive but not necessarily
exclusive.
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<PAGE> 80
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the Company and Acquiror effective as of the
date first written above.
MHD ACQUISITION CORP.
By: /s/ THOMAS J. FORMOLO
-----------------------------------
Name: Thomas J. Formolo
Its: Vice President
PORTEC, INC.
By: /s/ M. T. YONKER
-----------------------------------
Name: M. T. Yonker
Its: Chief Executive Officer and
President
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<PAGE> 81
ANNEX B
SECTION 262 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
SECTION 262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section
228 of this title shall be entitled to an appraisal by the Court of Chancery of
the fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and
the words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions
thereof, solely of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of any class or
series stock of a constituent corporation in a merger or consolidation to
be effected pursuant to Section 251 (other than a merger effected pursuant
to Section 251(g) of this title), Section 252, Section 254, Section 257,
Section 258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation or depository receipts in respect thereof;
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b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the Stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
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(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal
rights are available for any or all shares of such class or series of
stock of such constituent corporation, and shall include in such notice a
copy of this section; provided that, if the notice is given on or after
the effective date of the merger or consolidation, such notice shall be
given by the surviving or resulting corporation to all such holders of any
class or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before
the effective date of the merger or consolidation notifying each of the
holders of any class or series of stock of such constituent corporation
that are entitled to appraisal rights of the effective date of the merger
or consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective dates provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or
of the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of the merger
or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date,
the record date shall be the close of business on the day next preceding
the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the
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merger or resulting from the consolidation a statement setting forth the
aggregate number of shares not voted in favor of the merger or consolidation and
with respect to which demands for appraisal have been received and the aggregate
number of holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after his written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under subsection
(d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing names
and addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by one or more publications at least one week before the day
of the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and into have became entitled
to appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon to the pendency of the appraisal proceedings: and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value in determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
B-4
<PAGE> 85
(i) the Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividend or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the tine
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
B-5
<PAGE> 86
ANNEX C
WASSERSTEIN PERELLA & CO. LETTERHEAD
March 8, 1998
Board of Directors
Portec, Inc.
One Hundred Field Drive
Suite 120
Lake Forest, IL 60045
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the common stock, par value $1.00 per
share (the "Shares"), of Portec, Inc. (the "Company") of the consideration to be
received by such holders pursuant to the terms of the Agreement and Plan of
Merger (the "Merger Agreement"), among the Company, MHD Acquisition Corp., an
affiliate of J Richard Industries, L.P. ("Parent"), and MHD Merger Corp.
("Sub"). The Merger Agreement provides for, among other things, a cash merger
whereby Sub shall merge with and into the Company pursuant to which each
outstanding Share will be converted into the right to receive $16.00 in cash
(the "Merger"). The terms and conditions of the Merger are set forth in more
detail in the Merger Agreement.
In connection with rendering our opinion, we have reviewed a draft of the
Merger Agreement dated March 8, 1998, and for purposes hereof we have assumed
that the final form of the Merger Agreement will not differ in any material
respect from the draft provided to us. We have also reviewed and analyzed
certain publicly available business and financial information relating to the
Company for recent years and interim periods to date, as well as certain
internal financial and operating information, including financial forecasts,
analyses and projections prepared by or on behalf of the Company and provided to
us for purposes of our analysis, and we have met with management of the Company
to review and discuss such information and, among other matters, the Company's
business, operations, assets, financial condition and future prospects.
We have reviewed and considered certain financial and stock market data
relating to the Company, and we have compared that data with similar data for
certain other companies, the securities of which are publicly traded, that we
believe may be relevant or comparable in certain respects to the Company or one
or more of its businesses or assets, and we have reviewed and considered the
financial terms of certain recent acquisitions and business combination
transactions in the materials handling industry specifically, and in other
industries generally, that we believe to be reasonably comparable to the Merger
or otherwise relevant to our inquiry. We have also performed such other studies,
analyses, and investigations and reviewed such other information as we
considered appropriate for purposes of this opinion.
LOGO
C-1
<PAGE> 87
Board of Directors
March 8, 1998
Page 2
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all the financial and other
information provided to or discussed with us or publicly available, and we have
not assumed any responsibility for independent verification of any of such
information. We have also relied upon the reasonableness and accuracy of the
financial projections, forecasts and analyses provided to us and we have
assumed, with your consent, that such projections, forecasts and analyses were
reasonably prepared in good faith and on bases reflecting the best currently
available judgments and estimates of the Company's management, and we express no
opinion with respect to such projections, forecasts and analyses or the
assumptions upon which they are based. In addition, we have not reviewed any of
the books and records of the Company, or assumed any responsibility for
conducting a physical inspection of the properties or facilities of the Company,
or for making or obtaining an independent valuation or appraisal of the assets
or liabilities of the Company, and no such independent valuation or appraisal
was provided to us. We have assumed that the transactions described in the
Merger Agreement will be consummated on the terms set forth therein, without
material waiver or modification. Our opinion is necessarily based on economic
and market conditions and other circumstances as they exist and can be evaluated
by us as of the date hereof.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a major portion of which is
contingent upon the consummation of the Merger. In addition, we have performed
various investment banking services for the Company in the past and have
received customary fees for rendering such services.
In the ordinary course of our business, we may actively trade the debt and
equity securities of the Company for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
Our opinion addresses only the fairness from a financial point of view to
the shareholders of the Company of the consideration to be received by such
shareholders pursuant to the Merger, and we do not express any views on any
other terms of the Merger. Specifically, our opinion does not address the
Company's underlying business decision to effect the transactions contemplated
by the Merger Agreement or the relative merits of the Merger.
It is understood that this letter is for the benefit and use of the Board
of Directors of the Company in its consideration of the Merger, and except for
inclusion in its entirety in a proxy statement relating to the Merger, may not
be quoted, used or reproduced for any other purpose without our prior written
consent. This opinion does not constitute a recommendation to any shareholder
with respect to how such holder should vote with respect to the Merger and
should not be relied upon by any shareholder as such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that, as of the date hereof,
the $16.00 per Share cash consideration to be received by the shareholders of
the Company pursuant to the Merger is fair to such shareholders from a financial
point of view.
Very truly yours,
WASSERSTEIN PERELLA & CO., INC.
C-2
<PAGE> 88
<TABLE>
<S><C>
PORTEC, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
[ ]
For Against Abstain
1. ADOPTION OF MERGER AGREEMENT AND TRANSACTIONS / / / / / / 2. IN THEIR DISCRETION, THE PROXIES ARE
CONTEMPLATED THEREBY: AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENT THEREOF.
Adoption of Agreement and Plan of Merger, dated as of
March 11, 1998, by and between Portec, Inc. and MHD
Acquisition Corp. and the transactions contemplated thereby.
The shareholder hereby acknowledges
receipt of the Notice of the Special
Meeting and the Proxy Statement attached
thereto.
Dated
-----------------------, 1998.
Signature(s)
-----------------------------
-----------------------------------------
Please sign your name(s) exactly as it
appears hereon. If signing as attorney
or for estates, trusts or corporations,
title or capacity should be indicated.
PLEASE RETURN THIS PROXY PROMPTLY.
- -----------------------------------------------------------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
</TABLE>
<PAGE> 89
PROXY PROXY
PORTEC, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, revoking all previous proxies, hereby appoints MICHAEL
T. YONKER and NANCY A. KINDL, and each of them, proxies, with power of
substitution to each, to vote and act at the special meeting of stockholders
of PORTEC, INC. (the "Company") to be held in the Corporate Dining Room (57th
floor) of the First National Bank of Chicago, One First National Plaza,
Chicago, Illinois, on Thursday, May 28, 1998 at 9:30 A.M. and at any
adjournment thereof, on and with respect to the shares of common stock of the
Company of the undersigned, or on and with respect to which the undersigned is
entitled to vote or act.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
THE SPECIFICATIONS MADE HEREON. IF NO SPECIFICATION IS MADE, THIS PROXY WILL
BE VOTED FOR ITEM 1.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
