<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. n/a)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
PORTAGE INDUSTRIES CORPORATION
(Name of Registrant as Specified in its Charter)
PORTAGE INDUSTRIES CORPORATION
(Name of person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock, $.01 par value per share
2) Aggregate number of securities to which transaction applies:
2,269,100 shares outstanding, plus an additional 125,217 option
shares and 137,500 warrant shares
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):
$6.60 per share
<PAGE> 2
4) Proposed maximum aggregate value of transaction:
$15,765,545.08.
5) Total fee paid:
$3,153.11
[ ] 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 date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 3
PORTAGE INDUSTRIES CORPORATION
1325 Adams Street
Portage, WI 53901
(608) 742-7123
Dear Stockholder:
You are cordially invited to attend a Special Meeting of the Stockholders
(the "Special Meeting") of Portage Industries Corporation (the "Company"), to
be held at the Ridge Motor Inn, Portage, Wisconsin on Friday, April 26, 1996 at
10:00 a.m. local time. A notice of the Special Meeting, a proxy statement and
related information about the Company and a proxy card are enclosed. All
holders of the Company's outstanding shares of common stock, par value $.01 per
share ("Common Stock") as of Monday, April 1, 1996 (the "Record Date") will be
entitled to notice of and to vote at the Special Meeting.
At the Special Meeting, you will be asked to consider and to vote upon a
proposal to approve and adopt an Agreement and Plan of Merger (the "Merger
Agreement"), dated as of February 22, 1996, by and among the Company, Spartech
Corporation ("Spartech") and Spartech Plastics, Inc., a wholly-owned subsidiary
of Spartech ("Mergeco") and the transactions contemplated thereby. Pursuant to
the Merger Agreement, Mergeco will be merged with and into the Company and the
Company will be the surviving corporation (the "Merger"). If the Merger
Agreement is approved and the Merger becomes effective, each outstanding share
of Common Stock of the Company (other than dissenting shares and Common Stock
owned by the Company, Mergeco, Spartech or its subsidiaries) will automatically
be converted into the right to receive $6.60 in cash, without interest and each
outstanding share of Mergeco will automatically be converted into and become
one share of the Company. Approval of the Merger requires the affirmative vote
of the holders of a majority of all outstanding shares of Common Stock voting
as a group.
Details of the proposed Merger and other important information are set forth
in the accompanying Notice of Special Meeting and Proxy Statement, each of
which you are urged to read carefully.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND HAS
DETERMINED THAT THE MERGER AGREEMENT IS FAIR TO AND IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS, AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
Your vote is important. 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 prepaid envelope. Failure to return a properly executed
proxy card or to vote at the Special Meeting will have the same effect as a
vote against the Merger. If you attend the Special Meeting, you may revoke
such proxy and vote in person if you wish, even if you have previously returned
your proxy card. PLEASE DO NOT SEND US YOUR STOCK CERTIFICATES AT THIS
<PAGE> 4
TIME. If the merger is consummated, you will receive a transmittal form and
instructions for the surrender of your shares and payment with respect thereto.
Very truly yours,
Anthony J. Lisauskas
President & Chief Executive Officer
<PAGE> 5
PORTAGE INDUSTRIES CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS ON APRIL 26, 1996
To Stockholders of Portage Industries Corporation:
A special meeting of the stockholders of Portage Industries Corporation (the
"Company"), will be held at the Ridge Motor Inn, Portage, Wisconsin on Friday,
April 26, 1996 at 10:00 a.m., local time (the "Special Meeting"), to consider
and act upon the following matters:
1. To consider and vote upon a proposal to approve and adopt an Agreement and
Plan of Merger (the "Merger Agreement"), dated as of February 22, 1996, by and
among the Company, Spartech Corporation ("Spartech") and Spartech Plastics,
Inc., a wholly-owned subsidiary of Spartech ("Mergeco") and the transactions
contemplated by the Merger Agreement. As more fully described in the
accompanying Proxy Statement, the Merger Agreement provides that (i) Mergeco
will be merged with and into the Company (the "Merger"), with the Company
continuing as the surviving corporation; (ii) the Company will therefore become
a wholly-owned subsidiary of Spartech; (iii) each outstanding share of common
stock, par value $.01 per share, of the Company (other than dissenting shares
and shares owned by the Company, Mergeco, Spartech or its subsidiaries), will
be converted into the right to receive $6.60 in cash; and (iv) each outstanding
stock option or warrant to acquire Common Stock will be converted into the
right to receive cash in an amount equal to the difference between $6.60 and
the exercise price of such option or warrant, without interest. A copy of the
Merger Agreement is attached as Exhibit A to the Proxy Statement accompanying
this notice.
2. The transaction of such other business as may properly come before the
Special Meeting or any adjournment or adjournments thereof.
The Merger Agreement and the Merger have been approved and adopted by the
Board of Directors of the Company (the "Board"). The Board has carefully
reviewed and considered the terms and conditions of the proposed Merger and the
Merger Agreement and the Board believes the Merger and the Merger Agreement are
fair to and in the best interests of the Company and its stockholders.
Following the Merger, the former holders of the Common Stock will no longer
have an opportunity to continue their interests in the Company and therefore
will not share in its future earnings and potential growth. THE BOARD
UNANIMOUSLY RECOMMENDS A VOTE FOR THE ADOPTION AND APPROVAL OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
Under the Delaware General Corporation Law (the "DGCL") and the Company's
Certificate of Incorporation and Bylaws, the affirmative vote of the holders of
a majority of the outstanding
<PAGE> 6
shares of Common Stock entitled to vote thereon is required to approve and
adopt the Merger Agreement and the Merger. Pursuant to certain agreements
dated January 26, 1996, between Spartech and Allstate Insurance Company and
Madison Allen Self, respectively, (the "Stock Option Agreements"), stockholders
holding approximately 35% of the outstanding shares of Common Stock have each
granted Spartech an irrevocable option to purchase such shares for 120 days at
a purchase price of $6.60 per share and have each agreed to deliver to Spartech
in connection with any such purchase, at its request, an irrevocable proxy to
vote such shares in its sole discretion at any meeting of the stockholders of
the Company. Copies of the Stock Option Agreements are attached as Exhibits C
& D to the Proxy Statement that accompanies this Notice.
Only stockholders of the Company of record at the close of business on
Monday, April 1, 1996 shall be entitled to notice of and to vote at the Special
Meeting and any adjournment thereof.
If the Merger is consummated, any stockholder of the Company who does not
vote in favor of adoption and approval of the Merger Agreement and the Merger
and who complies with the requirements of Section 262 of the DGCL shall be
entitled to an appraisal of the fair value of their shares of Common Stock.
See "RIGHTS OF DISSENTING STOCKHOLDERS" in the accompanying Proxy Statement for
a statement of the appraisal rights of stockholders and a description of the
procedures required to be followed by them to obtain appraisal of their shares
of Common Stock.
Whether or not you plan to attend the Special Meeting, please read the
attached Proxy Statement carefully. Please complete, sign and mail the
enclosed proxy in the accompanying postage prepaid envelope. If you later
desire to revoke or change your proxy for any reason, you may do so at any time
before the voting by delivering to the Company a written notice of revocation
or a duly executed proxy bearing a later date or by attending the Special
Meeting and voting in person.
PLEASE DO NOT SEND ANY CERTIFICATES FOR YOUR COMMON STOCK AT THIS TIME. You
will receive instructions regarding the surrender of your stock certificate(s)
and receive a payment for your shares of Common Stock after the Merger is
effective.
By Order of the Board of Directors
Mark E. Showers, Secretary
Portage, Wisconsin
________________, 1996
<PAGE> 7
PROXY STATEMENT
PORTAGE INDUSTRIES CORPORATION
1325 Adams Street
Portage, WI 53901
This Proxy Statement is being furnished to the stockholders of Portage
Industries Corporation (the "Company") in connection with the solicitation of
proxies by the Company's Board of Directors (the "Board of Directors") for a
Special Meeting of Stockholders to be held on Friday, April 26, 1996 at 10:00
a.m., local time, at the Ridge Motor Inn, Portage, Wisconsin (the "Special
Meeting"). At the Special Meeting, the stockholders of the Company will
consider and vote upon a proposal to approve and adopt an Agreement and Plan of
Merger dated February 22, 1996, (the "Merger Agreement"), among the Company,
Spartech Corporation ("Spartech") and Spartech Plastics, Inc. ("Mergeco"). If
the Merger is consummated, Mergeco will be merged into the Company, with the
Company being the surviving corporation. Pursuant to the Merger Agreement,
each outstanding share of the Company's common stock, $.01 par value per share
(the "Common Stock"), (other than dissenting shares and shares owned by the
Company, Mergeco, Spartech or its subsidiaries) will be converted into the
right to receive $6.60 per share in cash, without interest. Each outstanding
share of Mergeco common stock will be converted into one share of the Company's
common stock and the Company will become a wholly-owned subsidiary of Spartech.
As a result of the Merger, the Company's stockholders will not have an
opportunity to continue their equity interest in the Company as an ongoing
corporation and, therefore, will not share in the future earnings and potential
growth of the Company, if any.
The consummation of the Merger is subject to approval by the holders of a
majority of the outstanding shares of Common Stock and to certain other
conditions, all as more fully described in this Proxy Statement. See "THE
MERGER" and "THE MERGER AGREEMENT".
The Board of Directors has unanimously approved the Merger Agreement, has
determined that the Merger Agreement is fair to and in the best interests of
the Company and its stockholders and recommends that you vote FOR approval and
adoption of the Merger Agreement.
It is not expected that any matter other than the approval and adoption of
the Merger Agreement will be brought before the Special Meeting. If, however,
any other matters are properly presented at the Special Meeting, the persons
named in the enclosed form of proxy and acting thereunder will have discretion
to vote on such matters in accordance with their best judgment.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT IN
CONNECTION WITH THE SOLICITATION OF PROXIES MADE
<PAGE> 8
HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
This Proxy Statement was first mailed to Stockholders on __, 1996.
2
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY
THE SPECIAL MEETING
Date, Time and Place
Purpose of the Special Meeting
Quorum; Required Vote; Record Date
THE PARTIES
THE MERGER
Certain Effects of the Merger
Background of the Merger
Recommendation of the Board of Directors
Accounting Treatment
THE MERGER AGREEMENT
Effective Time
Procedures for Exchange of Certificates
Conditions to Consummation of the Merger
Termination of the Merger Agreement
Amendments to the Merger Agreement
DISSENTERS' RIGHTS
STOCK OPTION AGREEMENTS
INTERESTS OF CERTAIN PERSONS IN THE MERGER
FEDERAL INCOME TAX CONSEQUENCES
COMPARATIVE MARKET PRICE DATA
SELECTED FINANCIAL DATA OF THE COMPANY
INTRODUCTION
General
Proposal to be Considered at Special Meeting
Voting Rights; Vote Required for Approval
Proxies
THE MERGER
General
Effects of the Merger
Background; Reasons for the Merger; Recommendation of the
Board of Directors
Accounting Treatment
Source and Amount of Funds
THE MERGER AGREEMENT
General
Effective Time
Consideration to be Received by Stockholders
Representations and Warranties
Covenants
Conditions to Consummation of the Merger
Termination
Termination Fee
Amendments and Waivers
Expenses
RIGHTS OF DISSENTING STOCKHOLDERS
REGULATORY APPROVALS
</TABLE>
3
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<TABLE>
<CAPTION>
<S> <C>
STOCK OPTION AGREEMENTS
INTERESTS OF CERTAIN PERSONS IN THE MERGER
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY'S
STOCKHOLDERS
OTHER MATTERS
PROPOSALS BY HOLDERS OF COMMON STOCK
EXPENSES OF SOLICITATION
AVAILABLE INFORMATION
INFORMATION INCORPORATED BY REFERENCE
</TABLE>
4
<PAGE> 11
SUMMARY
The following is a summary of certain information contained elsewhere
in this Proxy Statement. The following summary is not intended to be complete
and is qualified in its entirety by reference to the more detailed information
contained in this Proxy Statement, in the materials accompanying this Proxy
Statement and in the Exhibits hereto. Stockholders are urged to review the
entire Proxy Statement and accompanying materials carefully and in their
entirety.
THE SPECIAL MEETING
Date, Time and Place. The Special Meeting will be held on Friday, April 26,
1996 at 10:00 a.m., local time, at the Ridge Motor Inn, Portage, Wisconsin.
Purpose of the Special Meeting. At the Special Meeting, stockholders will
consider and vote upon a proposal to approve and adopt the Merger Agreement, a
copy of which is attached as Exhibit A to this Proxy Statement. The Merger
Agreement provides for the merger of Mergeco into the Company (the "Merger"),
such that the Company, as the surviving corporation (the "Surviving
Corporation"), would become a wholly-owned subsidiary of Spartech Corporation.
The Company's stockholders will also consider any other business that may
properly come before the Special Meeting. See "INTRODUCTION -- Proposal to be
Considered at Special Meeting".
Quorum; Required Vote; Record Date. The presence, in person or by proxy, of
the holders of a majority of the outstanding shares of Common Stock at the
Special Meeting is necessary to constitute a quorum at the Special Meeting.
Pursuant to the Delaware General Corporation Law ("DGCL") and the Company's
By-laws, approval of the Merger Agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock. The close of
business on Monday, April 1, 1996 (the "Record Date") has been fixed as the
record date for determining holders of shares entitled to vote at the Special
Meeting. Only holders of Common Stock on the Record Date will be entitled to
notice of and to vote at the Special Meeting. On the Record Date, there were
2,269,100 outstanding shares of Common Stock, with each share entitled to cast
one vote at the Special Meeting. See "INTRODUCTION -- Voting Rights; Vote
Required for Approval".
THE PARTIES
SPARTECH CORPORATION. Spartech Corporation, a Delaware corporation
("Spartech"), which pursuant to the Merger will become the parent of the
Company, is engaged primarily in two lines of the plastics processing business:
(i) the sale of extruded sheet and rollstock to various manufacturers which use
the plastic components in a variety of products such as vehicle interiors,
signs, spas and
5
<PAGE> 12
showers, food packaging, burial vault liners, boats and private watercraft, and
refrigerators; and (ii) the sale of specialty alloys, compounds and color
concentrates principally to manufacturers of specialized footwear, shutters,
loose-leaf binders, cosmetic packaging products, and numerous other custom
plastic applications. For the fiscal year ended October 28, 1995, Spartech had
net sales of $352.3 million and total net earnings of $14.5 million.
Spartech's common stock is traded on the New York Stock Exchange under the
symbol "SEH". The principal executive offices of Spartech are located at 7733
Forsyth, Suite 1450, Clayton, Missouri, 63105-1817 and its telephone number is
(314) 721-4242. All information contained in this Proxy Statement with respect
to Spartech and its subsidiaries, including Mergeco, has been supplied by
Spartech for inclusion herein and has not been independently verified by the
Company.
SPARTECH PLASTICS, INC. Spartech Plastics, Inc., a Delaware corporation
("Mergeco") is a wholly-owned subsidiary of Spartech, formed solely for the
purpose of the Merger. Mergeco has not engaged in any business activity
unrelated to the Merger. The principal executive offices of Mergeco are
located at the offices of Spartech and the telephone number is the same.
PORTAGE INDUSTRIES CORPORATION. Portage Industries Corporation, a Delaware
Corporation (the "Company") is engaged in the business of manufacturing and
marketing extruded and barrier coextruded plastic sheet/rollstock which is sold
to customers for use in the manufacture of a wide range of products, including
packaging for food and dairy products, parts for automotive and recreational
vehicles, farm equipment components, environmental products, lawn and garden
products, agricultural products, home improvement products and medical devices
and pharmaceuticals. The Common Stock is traded on the American Stock Exchange
under the symbol "PTG". The principal executive offices of the Company are
located at 1325 Adams Street, Portage, Wisconsin, 53901, and the telephone
number is (608) 742-7123.
THE MERGER
Upon the terms and subject to the conditions of the Merger Agreement,
Mergeco will merge with and into the Company, with the Company being the
Surviving Corporation. Mergeco will cease to exist and the Surviving
Corporation will become a wholly-owned subsidiary of Spartech. If the Merger
is consummated, each outstanding share of Common Stock other than shares
(collectively, "Excluded Shares") (i) owned directly or indirectly by Spartech,
Mergeco or any direct or indirect wholly-owned subsidiary of Spartech; (ii)
held by the Company as treasury shares; and (iii) held by stockholders who
comply with the provisions of the DGCL regarding the right of stockholders to
dissent from the Merger ("Dissenting Shares") will be converted into the right
to receive from Spartech $6.60 in cash, without interest (the "Merger
6
<PAGE> 13
Consideration"). Spartech intends to fund payment of the Merger Consideration
through borrowings from Spartech's existing bank facility. All Excluded Shares
other than Dissenting Shares will be canceled without consideration. Each
outstanding share of Mergeco's common stock will be converted into one share of
common stock of the Surviving Corporation. See "INTRODUCTION -- Proposal to be
Considered at Special Meeting" and "THE MERGER -- Effects of the Merger".
Holders of Dissenting Shares will be entitled to receive from the Surviving
Corporation a cash payment in the amount of the "fair value", of such shares,
determined in the manner provided in Section 262 of the DGCL. See "RIGHTS OF
DISSENTING STOCKHOLDERS".
Certain Effects of the Merger
As a result of the Merger, Spartech will acquire the entire equity
interest in the Company. Therefore, following the Merger the present holders
of the Common Stock will no longer have an equity interest in the Company and
will no longer share in future earnings and growth of the Company, if any, the
risks associated with achieving such earnings and growth, or the potential to
realize greater value for their Common Stock through divestitures, strategic
acquisitions or other corporate opportunities that may be pursued by the
Company in the future. Instead, each holder of Common Stock (other than
holders of Excluded Shares) at the Effective Time (as hereinafter defined) will
have the right to receive the Merger Consideration, and each holder of
Dissenting Shares will have the right to receive the statutorily determined
"fair value" for each Common Stock. The Common Stock will no longer be listed
or traded on the American Stock Exchange and the registration of the Common
Stock under the Securities Exchange Act of 1934 (the "Exchange Act") will be
terminated. See "THE MERGER -- Effects of the Merger".
Background of the Merger
For a discussion of events leading to the execution of the Merger
Agreement, see "THE MERGER -- Background; Reasons for the Merger;
Recommendation of the Board of Directors".
Recommendation of the Board of Directors
The Board of Directors has determined that the Merger and the Merger
Consideration are fair to, and in the best interests of, the Company's
stockholders. The Board of Directors has approved the Merger Agreement and
recommends that stockholders vote FOR the proposal to approve and adopt the
Merger Agreement. See "THE MERGER -- Background; Reasons for the Merger;
Recommendation of the Board of Directors".
Accounting Treatment
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<PAGE> 14
The Merger will be accounted for under the purchase method of
accounting by Spartech. See "THE MERGER -- Accounting Treatment".
THE MERGER AGREEMENT
Effective Time
The Merger will become effective upon the filing of a Certificate of
Merger with the Secretary of State of Delaware or at such later date specified
in the Certificate of Merger. (the Effective Time") The filing will occur as
promptly as practicable (but not later than the first business day) after all
conditions to the Merger contained in the Merger Agreement have been satisfied
or waived. The Company, Spartech and Mergeco anticipate that the Merger will
be consummated promptly following the Special Meeting. See "THE MERGER
AGREEMENT -- General" AND "-- Effective Time".
Procedures for Exchange of Certificates
As soon as reasonably practicable after the Effective Time, a letter
of transmittal and instructions for surrendering stock certificates evidencing
shares of Common Stock (other than Excluded Shares) will be mailed to each
holder of Common Stock for use in exchanging such holder's stock certificates
for the Merger Consideration to which such holder is entitled as a result of
the Merger. STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS. See "THE MERGER AGREEMENT -- Consideration to be Received by
Stockholders".
Conditions to Consummation of the Merger
The respective obligations of the Company, Spartech and Mergeco to
effect the Merger are subject to the satisfaction or waiver at or prior to the
Effective Time of various closing conditions. Such conditions include, among
others, the approval and adoption of the Merger Agreement by the holders of a
majority of the outstanding shares of Common Stock, the receipt of all
necessary government approvals and the correctness in all material respects of
each of the representations and warranties of the parties to the Merger
Agreement. In addition, Spartech is not obligated to consummate the Merger if
the Stock Option Agreements (as hereinafter defined) do not remain in full
force and effect through the Effective Time. See "THE MERGER AGREEMENT --
Conditions to Consummation of the Merger".
Termination of the Merger Agreement
The Merger Agreement may, under specified circumstances, be terminated
and the Merger abandoned at any time prior to the Effective Time,
notwithstanding approval of the Merger Agreement by the stockholders of the
Company. Subject to certain limited exceptions, the Merger Agreement requires
the Company to pay
8
<PAGE> 15
Spartech a termination fee of $250,000 if the Merger Agreement is terminated
after an alternative proposal by a third party to acquire the Company. See
"THE MERGER AGREEMENT -- Termination" and "-- Termination Fee".
Amendments to the Merger Agreement
The Merger Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties. After approval of the Merger
Agreement by the stockholders of the Company and without the further approval
of such stockholders, no amendment will be approved by the Company which by law
requires the approval of stockholders. See "THE MERGER AGREEMENT -- Amendments
and Waivers".
DISSENTERS' RIGHTS
Under certain conditions and by complying with the specific procedures
required by Section 262 of the DGCL, a copy of which has been attached hereto
as Exhibit B, the Company's stockholders will have the right to dissent from
the Merger, in which event they may be entitled to receive in cash the
judicially determined "fair value" of their shares of Common Stock in lieu of
the Merger Consideration. See "RIGHTS OF DISSENTING STOCKHOLDERS".
STOCK OPTION AGREEMENTS
Each of Allstate Insurance Company and Madison Allen Self, the owners
of approximately 20.3% and 14.3%, respectively, of the outstanding shares of
Common Stock, have each granted Spartech an irrevocable option to purchase such
shares for 120 days at a purchase price of $6.60 per share and have each agreed
to deliver to Spartech in connection with any such purchase, at its request, an
irrevocable proxy to vote such shares in its sole discretion at any meeting of
the stockholders of the Company. Copies of the Stock Option Agreements are
attached as Exhibits C and D hereto and are incorporated herein by reference.
See "STOCK OPTION AGREEMENTS".
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors with
respect to the Merger Agreement and the transactions contemplated thereby,
stockholders should be aware that certain members of management of the Company
and the Board of Directors have certain interests in the Merger that are in
addition to the interests of stockholders of the Company generally. See
"INTERESTS OF CERTAIN PERSONS IN THE MERGER".
FEDERAL INCOME TAX CONSEQUENCES
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<PAGE> 16
The receipt of $6.60 in cash for each outstanding share of Common
Stock (other than Excluded Shares) pursuant to the Merger will be a taxable
transaction for federal income tax purposes under the Internal Revenue Code of
1986, as amended, and also may be a taxable transaction under applicable state,
local, foreign and other tax laws. For federal income tax purposes, a
stockholder of the Company will realize taxable gain or loss as a result of the
Merger measured by the difference, if any, between the per share tax basis of
such stockholder's Common Stock and $6.60. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES TO THE COMPANY'S STOCKHOLDERS".
COMPARATIVE MARKET PRICE DATA
The Common Stock is traded on the American Stock Exchange under the
symbol "PTG". The following table sets forth the high and low sales price per
share of the Common Stock on the American Stock Exchange for the periods
indicated.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1993
First Quarter 1-7/8 1-1/2
Second Quarter 1-7/8 1-1/2
Third Quarter 2-5/8 1-3/4
Fourth Quarter 4-1/8 2
1994
First Quarter 4-3/4 3-3/8
Second Quarter 4-1/8 3-3/8
Third Quarter 3-7/16 2-7/8
Fourth Quarter 2-13/16 2-5/16
1995
First Quarter 3-1/4 2-9/16
Second Quarter 3 2-5/8
Third Quarter 2-5/16 2-11/16
Fourth Quarter 4-1/4 2-1/4
1996
First Quarter (through February 15, 1996) 6-1/4 3-9/16
</TABLE>
On January 22, 1996, the last full day of trading prior to the
announcement by the Company and Spartech of the Merger, the reported high and
low sales prices per share of Common Stock were $4.625 and $4.25, respectively.
On ____________, 1996, the last full day of trading prior to the printing of
this Proxy Statement, the only reported trades were at $______.
No dividends have been declared or paid on the Common Stock in 1996, and
no dividends were declared or paid on the Common Stock in 1993, 1994 or 1995.
SELECTED FINANCIAL DATA OF THE COMPANY
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<PAGE> 17
Set forth below is a summary of certain selected financial data with
respect to the Company excerpted or derived from the information contained in
the Company's Annual Reports on Form 10-K for the fiscal years ended December
31, 1995, 1994 and 1993. More comprehensive financial information is included
in such reports and other documents filed by the Company with the Securities
and Exchange Commission (the "Commission"), and the following summary is
qualified in its entirety by reference to such reports and other documents and
all of the financial information (including any related notes) contained
therein. Such reports and other documents may be inspected and copies may be
obtained from the offices of the Commission. See "AVAILABLE INFORMATION". In
addition, certain detailed financial information concerning the Company is
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, a copy of which accompanies each copy of this Proxy
Statement being provided to stockholders.
SELECTED FINANCIAL DATA OF THE COMPANY
(In thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-----------------------------------------
1995 1994 1993 1992 1991
STATEMENT OF OPERATIONS DATA ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net sales $35,569 $31,973 $30,617 $24,623 $24,059
Cost of sales 31,525 27,770 26,840 22,901 21,586
Gross profit 4,044 4,203 3,777 1,722 2,473
Selling and administrative expenses 2,979 2,613 2,543 2,337 2,619
Interest Expense - net 220 287 492 573 680
Other (Income) Expense - net 24 190 (225) 42 15
Income before income taxes 821 1,113 967 (1,230) (841)
Income tax provision 340 449 406 (396) (229)
Cumulative effect of change in
accounting principle --- --- --- 514 ---
Net income (loss) 481 664 561 (320) (612)
Net income per common share .21 .29 .25 (.14) (.27)
Weighted average shares outstanding 2,269 2,267 2,261 2,250 2,247
SUMMARY BALANCE SHEET DATA
ASSETS 1995 1994
- ------ ---- ----
Current assets Cash and cash equivalents $ 186 $ 137
Accounts receivable, net 3,065 3,026
</TABLE>
11
<PAGE> 18
<TABLE>
<S> <C> <C>
Inventories 3,456 3,359
Other current assets 329 282
Total current assets 7,036 6,804
Property, plant and equipment 13,186 12,352
Less accumulated depreciation 7,897 6,793
Net property, plant and equipment 5,289 5,559
Goodwill 4,134 4,134
Less accumulated amortization 1,309 1,205
Net goodwill 2,825 2,929
Other assets 86 109
Total assets 15,236 15,401
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities Notes payable 500 800
Current portion of long-term debt 550 550
Accounts payable 4,221 3,906
Accrued expenses: Compensation 181 304
Other 222 161
Deferred Income Taxes 158 203
Total current liabilities 5,832 5,924
Long-term debt 1,700 2,250
Deferred income taxes 206 215
Total liabilities 7,738 8,389
Stockholders' Equity
- --------------------
Preferred stock, $.25 par value,
1,000,000 shares authorized, none
issued Common stock, $.01 par value,
10,000,000 shares authorized;
2,269,100 and 2,266,725 issued and
outstanding for 1995 and 1994, respectively 23 23
Additional paid-in capital 7,894 7,889
Accumulated deficit (419) (900)
Total stockholders' equity 7,498 7,012
Total liabilities and stockholders' equity 15,236 15,401
Book Value per Common Share 3.30 3.09
</TABLE>
12
<PAGE> 19
INTRODUCTION
General
This Proxy Statement is furnished to the holders of outstanding shares
of Common Stock in connection with the solicitation of proxies by the Board of
Directors of the Company for the Special Meeting to be held on Friday, April
26, 1996 at 10:00 a.m. local time at the Ridge Motor Inn, Portage, Wisconsin.
Shares of Common Stock represented by properly executed proxies received by the
Company will be voted at the Special Meeting or any adjournment thereof in
accordance with the terms of such proxies, unless revoked. Proxies may be
revoked at any time prior to the voting thereof by delivering to the Company a
written notice of revocation or a duly executed proxy bearing a later date or
by attending the Special Meeting and voting in person.
Proposal to be Considered at the Special Meeting
At the Special Meeting, the stockholders of the Company will consider
and vote upon a proposal to approve and adopt the Merger Agreement.
The Merger Agreement provides for the merger (the "Merger") of Mergeco
into the Company, with the Company being the surviving corporation (the
"Surviving Corporation"). Mergeco will then cease to exist and the Surviving
Corporation will become a wholly-owned subsidiary of Spartech. If the Merger
is consummated, (i) each outstanding share of Common Stock other than Excluded
Shares will be converted into the right to receive from Spartech $6.60 in cash,
without interest (the "Merger Consideration"); (ii) all Common Stock held by
the Company as treasury shares and all Common Stock owned by Mergeco and
Spartech or its subsidiaries will be canceled without consideration; (iii) each
outstanding stock option or warrant to acquire Common Stock will be converted
into the right to receive cash in an amount equal to the difference between
$6.60 and the exercise price of such option or warrant, without interest; and
(iv) each outstanding share of Mergeco common stock will be converted into one
share of common stock of the Surviving Corporation. Holders of Dissenting
Shares will be entitled to receive from the Surviving Corporation in lieu of
the Merger Consideration a cash payment in the amount of the "fair value" of
such shares, determined in the manner provided in Section 262 of the DGCL, but
after the Effective Time (as hereinafter defined) such shares will not
represent any interest in the Surviving Corporation other than the right to
receive such cash payment. See "RIGHTS OF DISSENTING STOCKHOLDERS".
A copy of the complete text of the Merger Agreement is attached as
Exhibit A to this Proxy Statement and is incorporated herein by reference. For
a description of the terms of the Merger Agreement, see "THE MERGER AGREEMENT".
13
<PAGE> 20
Voting Rights; Vote Required for Approval
The close of business on Monday, April 1, 1996 (the "Record Date") has
been fixed as the record date for determining holders of shares entitled to
vote at the Special Meeting. Only holders of Common Stock on the Record Date
will be entitled to notice of and to vote at the Special Meeting. On the
Record Date, there were 2,269,100 outstanding shares of Common Stock, with each
share entitled to cast one vote at the Special Meeting. Each share of Common
Stock entitles its holder to one vote concerning all matters properly coming
before the Special Meeting. Any stockholder entitled to vote may vote either
in person or by duly authorized proxy. A majority of the shares entitled to
vote, represented in person or by proxy, will constitute a quorum. Abstentions
and broker non-votes (i.e., shares held by brokers in street name, voting on
certain matters due to discretionary authority or instructions from the
beneficial owner but not voting on other matters due to lack of authority to
vote on such matters without instructions from the beneficial owner) are
counted for the purpose of establishing a quorum. Under the DGCL and the
Company's By-laws, the Merger Agreement must be approved by the holders of at
least a majority of the outstanding shares of Common Stock. Abstentions and
broker non-votes have the same effect as a vote "AGAINST" the approval of the
Merger. Votes will be tabulated by the Company's transfer agent, Firstar Trust
Company.
To the Company's knowledge after reasonable inquiry, each of the
Company's executive officers and directors, holding in the aggregate 33,786
shares of Common Stock (approximately 1.5% of the outstanding shares of Common
Stock), currently intends to vote all shares of Common Stock held of record or
beneficially owned by such person for approval and adoption of the Merger
Agreement. See "STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS".
In addition, both Allstate Insurance Company and Madison Allen Self, the owners
of approximately 20.3% and 14.3%, respectively, of the outstanding shares of
Common Stock, have approved the terms of the Merger and have each granted
Spartech an irrevocable option to purchase such shares for 120 days at a
purchase price of $6.60 per share and have each agreed to deliver to Spartech
in connection with any such purchase, at its request, an irrevocable proxy to
vote such shares in its sole discretion at any meeting of the stockholders of
the Company. See "STOCK OPTION AGREEMENTS". Except for the recommendation of
the Board of Directors contained in this Proxy Statement, to the Company's
knowledge after reasonable inquiry, no executive officer or director of the
Company has made a recommendation to stockholders of the Company in support of
or in opposition to the approval and adoption of the Merger Agreement.
Proxies
14
<PAGE> 21
All Common Stock represented by properly executed proxies received
prior to or at the Special Meeting and not revoked will be voted in accordance
with the instructions indicated in such proxies. IF NO INSTRUCTIONS ARE
INDICATED, SUCH PROXIES WILL BE VOTED FOR THE PROPOSAL TO APPROVE AND ADOPT THE
MERGER AGREEMENT AND, IN THE DISCRETION OF THE PERSONS NAMED IN THE PROXY, ON
SUCH OTHER MATTERS AS MAY PROPERLY BE PRESENTED AT THE SPECIAL MEETING.
A stockholder may revoke his or her proxy at any time prior to its use
by delivering to the Secretary of the Company a signed notice of revocation or
a later dated and signed proxy or by attending the Special Meeting and voting
in person. Attendance at the Special Meeting will not in itself constitute the
revocation of a proxy. Common Stock represented by a properly completed,
signed, dated and returned proxy will be treated as present at the meeting for
purposes of determining a quorum, without regard to whether the proxy is marked
as casting a vote or abstaining. ANY PROPERLY EXECUTED PROXY MARKED "ABSTAIN"
OR ANY ABSTENTION FROM THE SPECIAL MEETING WILL HAVE THE PRACTICAL EFFECT OF A
VOTE AGAINST APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
IF THE MERGER AGREEMENT IS APPROVED AND ADOPTED, DETAILED INSTRUCTIONS
WITH REGARD TO THE SURRENDER OF CERTIFICATES, TOGETHER WITH A LETTER OF
TRANSMITTAL, WILL BE FORWARDED TO FORMER STOCKHOLDERS OF THE COMPANY BY FIRSTAR
TRUST COMPANY (THE "PAYING AGENT") PROMPTLY FOLLOWING THE EFFECTIVE TIME.
STOCKHOLDERS SHOULD NOT SUBMIT THEIR CERTIFICATES TO THE PAYING AGENT UNTIL
THEY HAVE RECEIVED THESE MATERIALS. PAYMENT OF THE MERGER CONSIDERATION WILL
BE MADE TO THE FORMER STOCKHOLDERS OF THE COMPANY ENTITLED THERETO AS PROMPTLY
AS PRACTICABLE FOLLOWING RECEIPT BY THE PAYING AGENT OF THEIR CERTIFICATES AND
OTHER REQUIRED DOCUMENTS.
It is not expected that any matter other than the approval and
adoption of the Merger Agreement will be brought before the Special Meeting.
If, however, any other matters are properly presented at the Special Meeting,
including, among other things, consideration of a motion to adjourn the Special
Meeting to another time or place, the persons named in the enclosed form of
proxy and acting thereunder will have discretion to vote on such matters in
accordance with their best judgment.
Proxies are being solicited by and on behalf of the Board of
Directors. Expenses in connection with the solicitation of proxies will be
borne by the Company. Upon request, the Company will reimburse brokers,
dealers and banks, or their nominees, for reasonable expenses incurred in
forwarding copies of the proxy material to the beneficial owners of Common
Stock which such persons hold of record. Solicitation of proxies will be made
principally by mail. Proxies may also be solicited in person, or by telephone
or telegraph, by directors, officers and regular employees of the Company.
15
<PAGE> 22
This proxy material is first being mailed to stockholders on or about
___________, 1996.
THE MERGER
General
The following information describes certain material aspects of the
Merger. This description does not purport to be complete and is qualified in
its entirety by reference to the exhibits hereto, including the Merger
Agreement, which is attached to this Proxy Statement as Exhibit A and is
incorporated herein by reference. All stockholders are urged to read Exhibit A
in its entirety. See also "THE MERGER AGREEMENT".
Effects of the Merger
Upon consummation of the Merger, (i) Mergeco will merge with and into
the Company, Mergeco will cease to exist and the Company will be the Surviving
Corporation; (ii) the Company will become a wholly-owned subsidiary of
Spartech; (iii) each share of Common Stock outstanding immediately prior to the
Effective Time (other than Excluded Shares) will be converted, in a taxable
transaction, into the right to receive $6.60 in cash, without interest; and
(iv) each outstanding stock option or warrant to acquire Common Stock will be
converted into the right to receive cash in an amount equal to the difference
between $6.60 and the exercise price of such option or warrant, without
interest. Therefore, following the Merger the present holders of the Common
Stock will no longer have an equity interest in the Company and will no longer
share in future earnings and growth of the Company, if any, the risks
associated with achieving such earnings and growth, or the potential to realize
greater value for their Common Stock through divestitures, strategic
acquisitions or other corporate opportunities that may be pursued by the
Company in the future.
As of the Record Date, there were 2,269,100 outstanding shares of
Common Stock, 125,217 currently outstanding options to purchase Common Stock
and one outstanding warrant to purchase 137,500 shares of Common Stock.
Assuming that no additional Common Stock, stock options or warrants are
outstanding at the Effective Time, then, upon consummation of the Merger,
holders of Common Stock, stock options and warrants would be entitled to
receive, in the aggregate, approximately $15.8 million.
Each certificate previously representing Common Stock (other than
Excluded Shares) will thereafter represent only the right to receive the Merger
Consideration (in the case of Dissenting Shares, the certificate will represent
only the right to receive the statutorily determined "fair value" of such
shares). Certificates previously representing Common Stock may be exchanged
for the Merger Consideration as provided below, without interest. All
16
<PAGE> 23
Excluded Shares (other than Dissenting Shares) will be canceled and no payment
will be made with respect thereto.
The "fair value" of Dissenting Shares will be determined and paid as
described in "RIGHTS OF DISSENTING STOCKHOLDERS".
As soon as practicable after the Effective Time, the Common Stock will
be delisted, and will no longer be traded on, the American Stock Exchange and
the registration of the Common Stock under the Exchange Act will be terminated.
For a description of the procedures for exchanging certificates
representing shares of Common Stock, see "THE MERGER AGREEMENT -- Consideration
to be Received by Stockholders".
Background; Reasons for the Merger; Recommendation of the Board of Directors
For the past several years the Board of Directors has from time to
time considered the Company's various strategic alternatives as part of its
ongoing effort to enhance shareholder value. Among the alternatives explored
were (i) continuing to operate the Company, with ongoing efforts to improve
operating performance; (ii) growth of the Company's existing business or change
in the mix of the Company's core business, either through internal growth
and/or acquisition; and (iii) merging with a strategic or financial buyer.
As part of the Company's exploration of strategies to maximize
shareholder value, directors of the Company have had discussions from time to
time with other companies believed to be potentially interested in a business
combination or similar transaction with the Company, although in the two years
prior to 1995, no such discussions advanced beyond the preliminary stage.
In late 1994, Spartech contacted the Company and proposed a meeting
between the two companies to discuss the possibility of a business combination
or other transaction. The parties ultimately decided not to proceed at that
time and no meeting was held.
In March 1995 a potential acquiror contacted the Company and asked to
meet with the Board of Directors regarding a possible acquisition or business
combination. On April 1, 1995 the Board of Directors met with the potential
acquiror who presented to the Board an outline of terms regarding a potential
transaction, whereby the outstanding stock of the Company would be acquired for
cash. The discussions continued for a few hours, and the potential acquiror
then left the meeting. The Board of Directors discussed the terms that had
been presented and unanimously agreed that the price range that was proposed
was inadequate and that the terms that had been proposed did not constitute a
formal offer and,
17
<PAGE> 24
accordingly, determined not to proceed further with the potential acquiror.
Within the next few weeks, representatives of the potential acquiror
contacted representatives of the Company to determine whether the Company had
an interest in further discussions. The Company responded that, among other
things, the price proposed was too low and, absent a significant increase in
the price being offered, the Company had no interest in pursuing further
discussions. The potential acquiror did not increase the price for the
proposed acquisition and, although subsequent telephone conversations occurred
between representatives of the two companies, no further formal discussions
were held between the two companies until December 1995.
In May 1995 members of the Board of Directors had preliminary
discussions with two financial advisors for the purpose of considering
alternatives for maximizing shareholder value and to obtain the informal
opinions of such financial advisors as to the value of the Company.
In preparation for those meetings, each financial advisor conducted a
preliminary analysis of the Company and its operations, including some
preliminary conclusions regarding valuation of the Company. Neither of the
financial advisors was retained by the Company.
Also in May 1995, the Company contacted Spartech to discuss the
possibility of a merger or other business combination between the two
companies. Representatives of the Company met with a representative of
Spartech, but no agreements were reached and no further discussions were held
until December 1995.
In September 1995, the Board of Directors determined that a financial
advisor should be retained to assist in the review of strategic alternatives.
The Board considered a number of candidates and in October 1995, the
Company retained Mesirow Financial, Inc. ("Mesirow") as its financial advisor
to assist the Company in exploring alternatives to maximize shareholder value.
Mesirow prepared a strategic alternative analysis report (the "Report") which
was presented to the Board of Directors on December 1, 1995. The Report
recommended that, based on a strategic and financial analysis of the Company's
current operations, the Board of Directors should solicit offers for the sale
of the Company. The Report noted, among other things, that the Company
competes primarily in a commodity business under severe price pressure in which
competitors are able to produce product at a lower cost through greater
economies of scale. The capital expenditure level required to remain
competitive in the Company's business is significant, and the Company's
competitors have superior financial
18
<PAGE> 25
resources. Based upon the Report, the Board of Directors decided to follow
Mesirow's recommendation and actively solicit offers for purchase of the
Company.
During December 1995 Mesirow identified and contacted several
potential acquirors, three of which executed confidentiality agreements with
the Company and thereafter were provided with certain public information about
the Company and its operations. In addition to the potential purchasers
identified by Mesirow, three other potential acquirors, including Spartech, and
the potential acquiror that had met with the Board in April 1995 contacted the
Company in December 1995. Each of these potential acquirors also executed a
confidentiality agreement with the Company and received certain public
information about the Company and its operations.
On December 20, 1995, Spartech management visited the Company's
facilities in Portage and met with management to discuss preliminarily the
terms of an offer by Spartech to acquire the Company.
On January 12, 1996, Spartech management met again with Company
representatives at the Company's facilities and discussed further terms of an
offer by Spartech to acquire the Company.
The Company advised each potential acquiror that had executed a
confidentiality agreement that all bids must be submitted on or before January
22, 1996. On January 19, 1996 the Board of Directors met to discuss, among
other things, the status of the bidding process. During that meeting, Spartech
delivered to the Board a draft letter of intent for the acquisition by Spartech
of all of the issued and outstanding Company Stock for a price of $6.60 per
share (the "Spartech Offer"). The Board discussed the Spartech Offer at length
and approved in principle its terms, subject to review of the Offer by Company
counsel.
On January 19, 1996 the Board also received an offer to purchase
substantially all of the Company's machinery and equipment. After review of
the terms and conditions of that offer, the Board concluded that the value to
shareholders was substantially less than the Spartech Offer and informed the
potential purchaser that the Company was not interested in further
negotiations. During the time Company counsel was reviewing the Spartech
Offer, the Company received another offer to purchase all of the outstanding
Common Stock at a price range below the Spartech Offer. The Board considered
the proposal and concluded that it was less favorable than the Spartech Offer
and further negotiations were not warranted. Following review of the Spartech
Offer by Company counsel and consideration of the other offers mentioned above,
the Company executed a revised letter of intent with Spartech on January 22,
1996 providing for the acquisition by
19
<PAGE> 26
Spartech through a newly formed subsidiary of all of the issued and
outstanding Common Stock for $6.60 per share in cash. Thereafter
representatives of the Company, along with Mesirow and the Company's legal
advisers, proceeded to negotiate with Spartech a definitive merger agreement.
On January 26, 1996, Allstate Insurance Corporation and Madison
Allen Self, the owners of approximately 20.3% and 14.3%, respectively, of the
outstanding shares of Common Stock, each granted Spartech an irrevocable
option to purchase such shares for 120 days at a purchase price of $6.60 per
share and each agreed to deliver to Spartech in connection with any such
purchase, at its request, an irrevocable proxy to vote such shares in its sole
discretion at any meeting of the stockholders of the Company. On February 22,
1996, the Board of Directors unanimously approved the Merger Agreement and it
was executed by the Company and Spartech on that date.
The Board of Directors has unanimously determined that the Merger is
in the best interests of the Company's stockholders, unanimously approved the
Merger Agreement and the transactions contemplated thereby and recommends that
the Company's stockholders vote for the adoption of the Merger Agreement.
In reaching its conclusion to enter into the Merger Agreement and
recommend adoption of the Merger Agreement by the Company's stockholders, the
Board of Directors considered a number of factors, including, without
limitation, the following:
(i) The consideration to be received by the stockholders in the Merger,
including the facts (a) that the Merger Consideration involves all
cash consideration without financing contingencies, (b) that the
Merger Consideration represents a substantial premium over the market
price of the Common Stock preceding announcement of the proposed
Merger, and (c) the relationship between the Merger Consideration and
the Company's reported earnings and certain other measures;
(ii) Current market conditions and historical market prices, volatility and
trading information with respect to the Common Stock;
(iii) Knowledge of the business, operations, properties, assets, financial
condition and operating results of the Company, as well as the
condition, prospects and strategic direction of the Company's
business;
(iv) The fact that the Company, through its financial adviser, Mesirow,
contacted several prospective purchasers none of which prospective
purchasers offered an aggregate purchase price competitive to the
Spartech offer; and
(v) The terms and conditions of the Merger and the Merger Agreement,
including the amount and form of the consideration, as well as the
parties' mutual representations, warranties and covenants, and the
conditions to their respective obligations.
The foregoing discussion of the information and factors considered by
the Board of Directors is not meant to be exhaustive
20
<PAGE> 27
but is believed to include the material factors considered by the Board. In
view of the wide variety of factors considered in connection with its
evaluation of the terms of the Merger, the Board of Directors 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 conclusions. Based
on the factors described above, the Board of Directors determined that the
Merger is in the best interests of the Company's stockholders and preferable to
the other alternatives considered, approved the Merger Agreement and the
transactions contemplated by the Merger Agreement and certain related
agreements and recommends that the stockholders of the Company vote for
adoption of the Merger Agreement. Accordingly, THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
Accounting Treatment
The Merger will be accounted for under the purchase method of
accounting under which the total consideration paid in the Merger will be
allocated among the Surviving Corporation's assets and liabilities based on the
fair values of the assets acquired and liabilities assumed. At the Effective
Time, the Company will become a wholly-owned subsidiary of Spartech.
Source and Amount of Funds
Spartech intends to fund payment of the Merger Consideration through
use of borrowings from Spartech's existing bank facility. The aggregate cost
to Spartech of acquiring all of the Common Stock in the Merger, making required
payments to holders of stock options (see "INTERESTS OF CERTAIN PERSONS IN THE
MERGER") and payment of its fees and expenses will be approximately $16.0
million.
THE MERGER AGREEMENT
The following discussion of the Merger Agreement is qualified in its
entirety by reference to the complete text of the Merger Agreement, which is
included in this Proxy Statement as Exhibit A (exclusive of all exhibits and
schedules) and is incorporated herein by reference.
General
The Merger Agreement provides for the merger of Mergeco into the
Company. The Company will be the Surviving Corporation of the Merger, and, as
a result of the Merger, Spartech will own all of the Surviving Corporation's
common stock. In the Merger, holders of Common Stock other than Excluded
Shares will receive the Merger Consideration described below. The Company,
Spartech & Mergeco anticipate that the Merger will be consummated as soon as
practicable after the Special Meeting.
21
<PAGE> 28
Effective Time
If the Merger Agreement is adopted by the requisite vote of the
Company's stockholders and the other conditions to the Merger are satisfied (or
waived to the extent permitted), the Merger will be consummated and become
effective upon the filing of the Certificate of Merger with the Secretary of
State of Delaware or at such later date as is specified in the Certificate of
Merger (the "Effective Time"). It is anticipated that such Certificate of
Merger will be filed as soon as reasonably practicable (but not later than the
first business day) after the satisfaction of waiver of the conditions to the
Merger contained in the Merger Agreement.
Consideration to be Received by Stockholders
In connection with the Merger, each outstanding share of Common Stock
at the Effective Time (other than Excluded Shares) will be converted into the
right to receive $6.60 in cash, without interest. All Excluded Shares other
than Dissenting Shares will be canceled without consideration. Dissenting
Shares will be converted to cash in the manner described in "RIGHTS OF
DISSENTING STOCKHOLDERS".
As soon as reasonably practicable after the Effective Time, Spartech
will instruct the Paying Agent to mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Common Stock other than Excluded Shares (the
"Certificates") (i) a letter of transmittal in customary form (which will
specify that delivery will be effected, and risk of loss and title to the
Certificates will pass, only upon proper delivery of the Certificates to the
Paying Agent); and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent together with a letter of
transmittal, duly executed, and any other documents as may be required pursuant
to such instructions, the holder of a Certificate will be entitled to receive
in exchange therefor the Merger Consideration and the Paying Agent will, as
soon as practicable, pay the Merger Consideration to such stockholder by check
or draft. In the event of a transfer of ownership of Common Stock which is not
registered in the stock transfer records of the Company, it shall be a
condition to such exchange that a Certificate representing the proper number of
shares of Common Stock be presented by a transferee to the Paying Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon surrender the Merger
Consideration.
22
<PAGE> 29
The Company, Spartech and Mergeco will not be liable to any holder of
Common Stock for Merger Consideration delivered to a public official pursuant
to any abandoned property, escheat or similar law.
At the Effective Time each of the outstanding shares of Mergeco will
automatically be converted into one share of common stock, par value $.01 per
share, of the Surviving Corporation.
STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES FOR COMMON STOCK
WITH THE ENCLOSED PROXY CARD AND SHOULD NOT FORWARD THEIR STOCK CERTIFICATES TO
THE PAYING AGENT WITHOUT A LETTER OF TRANSMITTAL.
After the Effective Time, the holder of a certificate formerly
representing Common Stock will cease to have any rights as a stockholder of the
Company, and such stockholder's sole right will be to receive the Merger
Consideration with respect to such shares (or, in the case of Dissenting
Shares, the statutorily determined "fair value"). If payment is to be made to
a person other than the person in whose name the surrendered certificate is
registered, it will be a condition of payment that the certificates so
surrendered be properly endorsed or otherwise in proper form for transfer and
that the person requesting such payment shall pay any transfer or other taxes
required by reason of such payment or establish to the satisfaction of the
Surviving Corporation that such taxes have been paid or are not applicable. No
transfer of shares outstanding immediately prior to the Effective Time will be
made on the stock transfer books of the Surviving Corporation after the
Effective Time. Certificates formerly representing Common Stock presented to
the Surviving Corporation after the Effective Time will be canceled in exchange
for the Merger Consideration.
In no event will holders of Common Stock be entitled to receive
payment of any interest on the Merger Consideration to be distributed to them
in connection with the Merger.
Representations and Warranties
The Merger Agreement contains various representations and warranties
of the Company relating to, among other things, (a) corporate organization,
existence, good standing and the power and authority of the Company to own and
operate its properties and carry on its business; (b) the capital structure of
the Company; (c) corporate power and authority to enter into, and the due,
valid and binding execution and delivery of, the Merger Agreement; (d) consents
and approvals of public bodies; (e) the proper filing by the Company with the
Commission of all required documents and the accuracy of the information
contained in such documents; (f) the absence of certain changes concerning the
Company; (g) the absence of litigation concerning the Company; (h) the employee
relations and employee benefits of the Company; (i) the condition of the
23
<PAGE> 30
Company's assets; and (j) certain matters pertaining to federal, state and
local taxes.
Covenants
Pursuant to the Merger Agreement, the Company has agreed that, except
as expressly contemplated by the Merger Agreement or consented to in writing by
Spartech, from the date of the Merger Agreement until the Effective Time, the
Company shall (among other things):
(a) not solicit or initiate or encourage any inquiries, proposals or
offers from or participate in any discussions or negotiations with, or furnish
any information to any potential buyer (other than Spartech) relating to the
sale of the assets or securities of the Company; provided however, in certain
circumstances, the Board of Directors may furnish information or enter into
discussions or negotiations with any person or entity which makes an
unsolicited bona fide "Alternative Proposal" (as hereinafter defined) or
delivers an unsolicited, bona fide written expression of interest that could
reasonably be expected to lead to an Alternative Proposal;
(b) conduct its operations in the ordinary course of business and use
reasonable efforts to preserve goodwill, keep available its employees and
maintain satisfactory relationships with those persons having business
relationships with it;
(c) not effect any change in its capitalization, issue any stock,
options, warrants or rights, purchase any outstanding stock, declare or pay any
dividend or other distribution, or increase certain compensation or adopt any
new employee benefit plan;
(d) not dispose of any of its assets outside the ordinary course of
business and not subject any of its assets to any lien or encumbrance; or
(e) not make certain accounting changes, tax elections or compromise
any material tax liability.
The Company has also agreed to take all necessary action to convene a
meeting of its stockholders to consider and vote upon the Merger Agreement and
to make to use its best efforts to take all such action as may be necessary or
appropriate to effectuate the Merger, including cooperation in the preparation
and filing of this Proxy Statement, expiration or termination of governmental
filings and waiting period requirements, and execution of any additional
instruments reasonably necessary to effect the transactions contemplated by the
Merger Agreement.
Conditions to Consummation of the Merger
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<PAGE> 31
The obligations of the parties to effect the Merger are subject to the
satisfaction or waiver at or prior to the Effective Time of a number of
conditions typical in acquisition transactions, including accuracy of
representations and warranties; performance of all covenants; receipt of all
necessary legal approvals, consents and clearances; and approval by holders of
the necessary majority of the Company's outstanding shares. In addition,
Spartech's obligation to close is conditioned upon:
(a) the absence of any material adverse change in the condition of the
Company;
(b) the Stock Option Agreements remaining in full force and effect
through the Effective Time;
(c) certain employees of the Company entering into employment
agreements with the Company; and
(d) receipt by Spartech of a "comfort letter" from Coopers & Lybrand,
the Company's independent accounting firm, in form and substance satisfactory
to Spartech.
Termination
The Merger Agreement may be terminated by either party, and the Merger
abandoned at any time before the Effective Time, notwithstanding approval of
the Merger Agreement by the stockholders of the Company: in the event that (i)
the Merger is not consummated by June 30, 1996; (ii) the approval of the
Company's stockholders is not obtained; (iii) any order, decree or ruling is
issued by any court of competent jurisdiction which prohibits the transactions
actions contemplated by the Merger Agreement.
The Merger Agreement may be terminated by the parties indicated below,
and the Merger abandoned at any time before the Effective Time, notwithstanding
approval of the Merger Agreement by the stockholders of the Company:
(a) by mutual consent of the Company and Spartech;
(b) by the Company, in the event that the Company receives an
alternative proposal, not subject to any financing restrictions, which the
Board of Directors (in the exercise of its fiduciary duties) determines to
represent a financially superior transaction for the stockholders of the
Company as compared to the Merger ("Alternative Proposal"), or in the event of
certain non-performance or breach by Spartech; or
(c) by Spartech, in the event that the Board of Directors withdraws or
modifies its recommendation to stockholders regarding the Merger or accepts an
Alternative Proposal, or in the event of
25
<PAGE> 32
a non-performance or breach by the Company of its obligations contained in the
Merger Agreement.
Termination Fee
In the event that the Company receives an Alternative Proposal and (i)
the Merger Agreement is terminated pursuant to paragraph (b) or (c) above, or
(ii) the Merger Agreement is terminated for any other reason (other than a
breach of the Merger Agreement by Spartech) and the transaction contemplated by
such Alternative Proposal is consummated on or before July 20, 1996, the Merger
Agreement requires the Company to pay Spartech a termination fee of $250,000
(the "Termination Fee"). The Termination Fee, together with the reimbursement
by the Company of 50% of the filing fees required under the HSR Act (as
hereinafter defined) is the sole and exclusive remedy of Spartech upon any such
termination of the Merger Agreement.
Amendments and Waivers
The Merger Agreement may not be amended except by an instrument in
writing signed on behalf of the Company and Spartech. At any time prior to the
Effective Time, any party to the Merger Agreement may (a) extend the time for
performance of any of the obligations or other acts of the other parties
thereto, (b) waive inaccuracies in representations and warranties made to such
party, or (c) waive compliance with covenants and agreements for the benefit of
such party. After approval of the Merger Agreement by the stockholders of the
Company, the Board of Directors will not, without first obtaining the further
approval of the stockholders, approve any amendment which would require the
approval of the Company's stockholders.
Expenses
The Merger Agreement provides that, whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby shall be paid by the party
incurring such expenses; except that all fees in connection with filings
required under the HSR Act (as hereinafter defined) shall be borne by Spartech
(with half of such fees to be reimbursed by the Company if the Merger Agreement
is terminated for any reason).
RIGHTS OF DISSENTING STOCKHOLDERS
If the Merger is consummated, holders of shares are entitled to
appraisal rights under Section 262 of the DGCL, provided that they comply with
the conditions established by Section 262.
SECTION 262 OF THE DGCL IS REPRINTED IN ITS ENTIRETY AS EXHIBIT B TO
THIS PROXY STATEMENT. THE FOLLOWING DISCUSSION IS NOT
26
<PAGE> 33
A COMPLETE STATEMENT OF THE LAW RELATING TO APPRAISAL RIGHTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SECTION 262 OF THE DGCL ATTACHED AS EXHIBIT B.
THIS DISCUSSION AND EXHIBIT 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, AS FAILURE TO COMPLY WITH THE PROCEDURES SET FORTH HEREIN OR
THEREIN WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS.
A record holder of Common Stock who makes the demand described below
with respect to such Common Stock, who continuously is the record holder of
such Common Stock through the Effective Time, who otherwise complies with the
statutory requirements of Section 262 and who neither votes in favor of the
approval and adoption of the Merger Agreement nor consents thereto in writing
will be entitled to receive from the Company the fair value of such holder's
Common Stock as determined in an appraisal proceeding conducted by the Delaware
Court of Chancery (the "Delaware Court"). Except as set forth herein,
stockholders of the Company will not be entitled to appraisal rights in
connection with the Merger.
Under Section 262, if a merger is to be submitted for approval at a
meeting of stockholders, as in the Special Meeting, 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. This
Proxy Statement constitutes such notice to the record holders of the Common
Stock.
Holders of Common Stock who desire to exercise appraisal rights must
not vote in favor of approval and adoption of the Merger Agreement and must
deliver a separate written demand for appraisal to the Company BEFORE the vote
by the stockholders of the Company on the Merger Agreement. A stockholder who
signs and returns a proxy without expressly directing by checking the
applicable boxes on the reverse side of the proxy card enclosed herewith that
his or her Common Stock be voted against the proposal or that an abstention be
registered with respect to his or her Common Stock in connection with the
proposal will have thereby effectively waived his or her appraisal rights
because, in the absence of express contrary instructions, such Common Stock
will be voted in favor of the proposal. Accordingly, a stockholder who desires
to perfect appraisal rights must either (i) refrain from executing and
returning the enclosed proxy card and from voting in person in favor of the
proposal to approve the Merger Agreement or (ii) check either the "Against" or
the "Abstain" box next to the proposal on such card or attend the Special
Meeting and either affirmatively vote in person against the proposal or abstain
from voting thereon. A demand for appraisal must be executed by or on behalf
of the stockholder of record and must reasonably inform the Company of the
identity of the stockholder of record and that such record stockholder intends
thereby to demand appraisal of the Common Stock. A person having a beneficial
interest in Common
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<PAGE> 34
Stock that is held of record in the name of another person, such as a broker,
fiduciary or other nominee, must act promptly to cause the record holder to
follow the steps summarized herein properly and in a timely manner to perfect
whatever appraisal rights are available. If the Common Stock is owned of
record by a person other than the beneficial owner, including a broker,
fiduciary (such as a trustee, guardian or custodian) or other nominee, such
demand must be executed by or for the record owner. If the 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 or for all joint owners. An authorized agent,
including an agent for two or more joint owners, may execute the demand for
appraisal for the stockholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in exercising the demand,
such person is acting as agent for the record owner.
A record owner, such as a broker, fiduciary or other nominee, who
holds Common Stock as a nominee for others, may exercise appraisal rights with
respect to the Common Stock held for all or less than all beneficial owners of
shares as to which such person is the record owner. In such case, the written
demand must set forth the number of shares of Common Stock covered by such
demand. Where the number of shares of Common Stock is not expressly stated,
the demand will be presumed to cover all shares outstanding in the name of such
record owner.
A stockholder who elects to exercise appraisal rights should mail or
deliver his or her written demand to Portage Industries Corporation, 1325 Adams
Street, Portage, Wisconsin, 53901, Attention: Mark E. Showers,
Secretary/Treasurer.
The written demand for appraisal should specify the stockholder's name
and mailing address, the number of shares of Common Stock owned, and that the
stockholder is thereby demanding appraisal of his or her Common Stock. A proxy
or vote against the approval and adoption of the Merger Agreement will not by
itself constitute such a demand. Within ten days after the Effective Time, the
Surviving Corporation must provide notice of the Effective Time to all
stockholders who have complied with Section 262.
Within 120 days after the Effective Time, either the Surviving
Corporation or any stockholder who has complied with the required conditions of
Section 262 may file a petition in the Delaware Court, with a copy served on
the Surviving Corporation in the case of a petition filed by a stockholder,
demanding a determination of the fair value of the Common Stock of all
dissenting stockholders. There is no present intent on the part of the
Surviving Corporation to file an appraisal petition and stockholders seeking to
exercise appraisal rights should not assume that the Surviving Corporation will
file such a petition or that the Surviving Corporation will initiate any
petitions with respect to the fair value of such
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<PAGE> 35
Common Stock. Accordingly, stockholders who desire to have their Common Stock
appraised should initiate any petitions necessary for the perfection of their
appraisal rights within the time periods and in the manner prescribed in
Section 262. Within 120 days after the Effective Time, any stockholder who has
theretofore complied with the applicable provisions of Section 262 will be
entitled, upon written request, to receive from the Surviving Corporation a
statement setting forth the aggregate number of shares of Common Stock not
voted in favor of the approval and adoption of the Merger Agreement and with
respect to which demands for appraisal were received by the Company and the
number of holders of such Common Stock. Such statement must be mailed within
10 days after the written request therefor has been received by the Surviving
Corporation.
If a petition for an appraisal is timely filed, at the hearing on such
petition the Delaware Court will determine which stockholders are entitled to
appraisal rights. The Delaware Court may require the stockholders who have
demanded an appraisal for their Common Stock and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings; if any
stockholder fails to comply with such direction, the Delaware Court may dismiss
the proceedings as to such stockholder. Where proceedings are not dismissed,
the Delaware Court will appraise the Common Stock owned by such stockholders,
determining the fair value of such Common Stock exclusive of any element of
value arising from the accomplishment or expectation of the Merger, together
with a fair rate of interest, if any, to be paid upon the amount determined to
be the fair value. In determining fair value, under current case law, the
Delaware Court is required to take into account all relevant factors. In
WEINBERGER V. UOP INC., the Delaware Supreme Court discussed the factors that
could be considered in determining fair value in an appraisal proceeding,
stating that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered, and that "fair price obviously requires
consideration of all relevant factors involving the value of a company". The
Delaware Supreme Court stated that in making this determination of fair value,
the court must consider market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts which would be
ascertained as of the date of the merger which throw light on future prospects
of the merged corporation. In WEINBERGER, the Delaware Supreme Court stated
that "elements of future value, including the nature of the enterprise, which
are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered". Section 262, however, provides
that fair value is to be "exclusive of any element of value arising from the
accomplishment or expectation of the merger".
29
<PAGE> 36
Holders of Common Stock considering seeking appraisal should recognize
that the fair value of their Common Stock determined under Section 262 could be
more than, the same as or less than the consideration they are entitled to
receive pursuant to the Merger Agreement if they do not seek appraisal of their
Common Stock. The cost of the appraisal proceeding may be determined by the
Delaware Court and charged against the parties as the Delaware Court deems
equitable in the circumstances. Upon application of a dissenting stockholder
of the Company, the Delaware Court may order that all or a portion of the
expenses incurred by any dissenting stockholder in connection with the
appraisal proceeding, including without limitation, reasonable attorneys' fees
and the fees and expenses of experts, be charged pro rata against the value of
all Common Stock entitled to appraisal.
Any holder of Common Stock who has duly demanded appraisal in
compliance with Section 262 will not, after the Effective Time, be entitled to
vote for any purpose any Common Stock subject to such demand or to receive
payment of dividends or other distributions on such Common Stock, except for
dividends or distributions payable to stockholders of record at a date prior to
the Effective Time.
At any time within 60 days after the Effective Time, any stockholder
electing to demand an appraisal of his Common Stock under Section 262 of the
DGCL will have the right to withdraw such demand for appraisal and to accept
the terms offered in the Merger; after this period, the stockholder may
withdraw such demand for appraisal only with the consent of the Surviving
Corporation. If no petition for appraisal is filed with the Delaware Court
within 120 days after the Effective Time, stockholders' rights to appraisal
will cease, and all holders of Common Stock will be entitled to receive the
consideration offered pursuant to the Merger Agreement. Inasmuch as the
Surviving Corporation has no obligation and no present intention to file such a
petition, any holder of Common Stock who desires such a petition to be filed is
advised to file it on a timely basis. Any stockholder may withdraw such
stockholder's demand for appraisal and accept the Merger Consideration, except
that (i) any such attempt to withdraw made more than 60 days after the
Effective Time will require written approval of the Surviving Corporation and
(ii) no appraisal proceeding in the Delaware Court will be dismissed as to any
stockholder without the approval of the Delaware Court, and such approval may
be conditioned upon such terms as the Delaware Court deems just.
REGULATORY APPROVALS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act") and the rules promulgated thereunder by the Federal Trade Commission
(the "FTC"), certain acquisition transactions may not be consummated unless
notice has been given and certain information has been furnished to the
Antitrust Division of the
30
<PAGE> 37
United States Department of Justice (the "Antitrust Division") and the FTC and
certain waiting period requirements have been satisfied. The Merger is subject
to these requirements.
The Company and Spartech each filed with the Antitrust Division and
the FTC a Notification and Report Form with respect to the Merger on
___________, 1996. Under the HSR Act, the Merger may not be consummated until
the expiration of a waiting period of at least 30 days following the receipt of
each filing, unless the waiting period is earlier terminated by the FTC and the
Antitrust Division or unless the waiting period is extended by a request for
additional information. On __________, 1996, the FTC notified the parties that
early termination of the waiting period was granted as of that date. State
Attorneys General and private parties also may bring legal actions under the
federal or state antitrust laws under certain circumstances. There can be no
assurance that a challenge to the proposed Merger on antitrust grounds will not
be made or of the result if such a challenge is made.
THE STOCK OPTION AGREEMENTS
On January 26, 1996, Spartech and Allstate Insurance Company
("Allstate") and Madison Allen Self ("MAS"), respectively, entered into
Shareholder Option Agreements (the "Stock Option Agreements"). Under the terms
of the Stock Option Agreements, Allstate and MAS have each agreed:
(a) to grant Spartech an irrevocable option for 120 days to
purchase shares owned by Allstate and MAS at a purchase price
of $6.60 per share;
(b) to not sell, transfer, pledge, assign, grant any proxy or
otherwise dispose of their respective shares or enter into any
agreement or understanding regarding any of the foregoing; and
(c) to not solicit or encourage any party other than Spartech to
acquire or offer to acquire Portage, its stock or any material
portion of its business.
Performance by Allstate and MAS of all of their respective obligations
under the Stock Option Agreements are each conditions to Spartech's obligation
to consummate the Merger. In addition, Allstate (which owns approximately
459,660 (or 20.3%) of the Common Stock) and MAS (who owns approximately 324,500
(of 14.3%) of the Common Stock) each agreed to deliver to Spartech in
connection with any purchase of any such shares by Spartech, at its request, an
irrevocable proxy to vote their shares of common stock of the Company at any
meeting of stockholders of the Company. The Stock Option Agreements are
attached hereto as Exhibits C and D and are incorporated by reference herein.
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<PAGE> 38
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors with
respect to the Merger Agreement and the transactions contemplated thereby,
stockholders should be aware that certain executive officers and certain
members of the Board of Directors have certain interests in the Merger in
addition to the interests of stockholders of the Company generally.
Stock Options
Pursuant to the Merger Agreement, each of the outstanding stock
options of the Company issued to certain directors, executive officers and key
employees of the Company under the Company's 1986 and 1990 Corporate Stock
Option Plans and pursuant to discretionary grants of options by the Board of
Directors will be converted into the right to receive a cash payment equal in
amount to the difference between $6.60 and the exercise price of such option
(the "Spread"). At the date of this Proxy Statement, stock options covering a
total of 125,217 shares of Common Stock with exercise prices ranging from
$1.875 to $3.75 per share were outstanding. The aggregate Spread on all stock
options payable pursuant to the Merger is $500,735.08. The Company and
Spartech have agreed that, with respect to all stock options outstanding at the
Closing, the Surviving Corporation will pay out within 30 days after the
Effective Time the Spread on each stock option outstanding at the Closing. See
"STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS".
Employment Agreements
It is currently anticipated that the Spartech and Anthony J.
Lisauskas, President and Chief Operating Officer of the Company, will enter
into a two-year employment agreement as of the Effective Time, with salary and
other benefits similar to Mr. Lisauskas' current Employment Agreement with the
Company. During the fiscal years ended 1995, 1994 and 1993, Mr. Lisauskas
received salary of $151,923, $145,000 and $145,000, respectively, and other
compensation (including annuity payments and other bonuses) of $12,500, $43,500
and $41,250, respectively.
Change of Control Payments
The Company will pay, in the aggregate, $499,050 in discretionary
bonuses to certain outside directors, executive officers and key employees of
the Company in connection with services performed by such persons on behalf of
the Company in connection with the Merger. All such bonuses will be paid by
the Surviving Corporation after the Effective Time.
Insurance and Indemnification
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<PAGE> 39
Spartech has agreed that, from the Effective Time and for a period of
two years thereafter, Spartech will indemnify and defend each person insured
under the Company's directors' and officers' liability insurance policy as in
effect at the Effective Time as if such policy had remained in effect after the
Effective Time.
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information, as of January 31, 1996,
regarding beneficial ownership of Common Stock by each Director and the Chief
Executive Officer (no other Executive Officer had compensation in 1995 which
exceeded $100,000), all of the Directors and Executive Officers as a group and
each person known to be the beneficial owner of 5% or more of the outstanding
Common Stock. Except as otherwise indicated in the footnotes, all of the
persons listed below have sole voting and investment power over the shares of
Common Stock identified as beneficially owned.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
OF CURRENT
BENEFICIAL PERCENT OF
OWNERSHIP SHARES
NAME OF BENEFICIAL OWNER (1) OUTSTANDING
- ------------------------ ---------- -----------
<S> <C> <C>
Robert L. Lestina, Jr. 8,000 *
Robert C. Hazzard 18,667 *
Anthony J. Lisauskas 65,000 2.8%
Paul N. Erickson 9,000
- ------------------------
All Officers and
Directors as a Group 127,828 5.6%
Allstate Insurance Company 459,660 20.26%
Madison Allen Self 324,500 14.3%
</TABLE>
- ----------
* Less than one percent.
(1) Includes shares subject to exercisable stock options as follows: Robert L.
Lestina, Jr., 8,000; Robert C. Hazzard, 18,667; Anthony S. Lisauskas, 50,000;
and Paul N. Erickson, 7,000.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER TO THE COMPANY'S STOCKHOLDERS
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<PAGE> 40
Set forth below is a description of certain federal income tax aspects
of the Merger to holders of Common Stock disposed of in the Merger under
current law and regulations. The discussion is based on the Internal Revenue
Code of 1986, as amended. The Company will not seek any rulings from the
Internal Revenue Service ("IRS") or an opinion of counsel with respect to the
transactions contemplated hereby.
The following discussion is limited to the material federal income tax
aspects of the Merger for a holder of Common Stock who is a citizen or resident
of the United States, and who, on the date of disposition of such holder's
Common Stock, holds such shares as capital assets. All holders are urged to
consult their own tax advisors regarding the federal, foreign, state and local
tax consequences of the disposition of Common Stock in the Merger. The
following discussion does not address potential foreign, state, local and other
tax consequences, nor does it address taxpayers subject to special treatment
under the federal income tax laws, such as life insurance companies, tax-exempt
organizations, "S" corporations and taxpayers subject to the alternative
minimum tax.
A holder of Common Stock will realize gain or loss upon the surrender
of such holder's Common Stock pursuant to the Merger in an amount equal to the
difference, if any, between the amount of cash received and such holder's
aggregate adjusted tax basis in the Common Stock surrendered therefor.
In general, any gain or loss recognized by a stockholder in the Merger
will be eligible for capital gain or loss treatment. Any capital gain or loss
recognized by stockholders will be long-term capital gain or loss if the Common
Stock giving rise to such recognized gain or loss have been held for more than
one year; otherwise such capital gain or loss will be short term. An
individual's long-term capital gain is subject to federal income tax at a
maximum rate of 28% while any capital loss can be offset only against other
capital gains plus $3,000 of other income in any tax year. Any unutilized
capital loss will carry over as a capital loss to succeeding years for an
unlimited time until the loss is exhausted.
For corporations, a capital gain is subject to federal income tax at a
maximum rate of 35% while any capital loss can be offset only against other
capital gains. Any unutilized capital loss can be carried back three years and
forward five years to be offset against net capital gains generated in such
years.
Under the federal income tax backup withholding rules, unless an
exemption applies, the Paying Agent will be required to withhold, and will
withhold, 31% of all cash payments to which a holder of Common Stock or other
payee is entitled pursuant to the Merger Agreement, unless the stockholder or
other payee provides a tax identification number (social security number, in
the case of
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<PAGE> 41
an individual, or employer identification number, in the case of other Company
stockholders) and certifies that such number is correct. Each Company
stockholder, and, if applicable, each other payee, should complete and sign the
Substitute Form W-9 included as part of the letter of transmittal to be
returned to the Paying Agent in order to provide the information and
certification necessary to avoid backup withholding, unless an applicable
exemption exists and is proved in a manner satisfactory to the Paying Agent.
Legislative proposals have been under consideration that would reduce
the rate of federal income taxation of certain capital gains. Such
legislation, if enacted, might apply only to gain realized on sales occurring
after a date specified in the legislation. It cannot be predicted whether any
such legislation ultimately will be enacted and, if enacted, what its effective
date will be.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE FOR GENERAL
INFORMATION ONLY. EACH HOLDER OF COMMON STOCK IS URGED TO CONSULT HIS OR HER
OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH
STOCKHOLDER OF THE MERGER (INCLUDING THE APPLICABILITY AND EFFECT OF FOREIGN,
STATE, LOCAL AND OTHER TAX LAWS).
OTHER MATTERS
The Board of Directors is not aware of any matters to be presented for
action at the Special Meeting other than those described herein and does not
intend to bring any other matters before the Special Meeting. However, if
other matters should come before the Special Meeting, it is intended that the
holders of proxies solicited hereby will vote thereon in their discretion,
unless such authority is withheld.
PROPOSALS BY HOLDERS OF COMMON STOCK
As described in the Company's Proxy Statement relating to its 1995
Annual Meeting, proposals of stockholders intended to be presented at the 1996
annual meeting of stockholders must have been received by the Company at its
principal executive offices not later than January 8, 1996, for inclusion in
the Company's Proxy Statement and form of proxy relating to that meeting. In
the event the Merger is not consummated for any reason, Stockholders may submit
proposals, in the manner described in the Company's Proxy Statement relating to
its 1996 Annual Meeting, for consideration at the Company's 1997 annual
meeting. In addition, a stockholder who intends to present business at any
annual meeting must comply with the notice requirements set forth in the
Company's By-laws. Stockholders should mail any proposals by certified
mail-return receipt requested.
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<PAGE> 42
EXPENSES OF SOLICITATION
The expenses in connection with solicitation of the enclosed form of
proxy will be paid by the Company. In addition to solicitation by mail,
officers or regular employees of the Company, who will receive no compensation
for such services other than their regular salaries, may solicit proxies
personally or by telephone or facsimile. Arrangements will be made with
brokerage houses, nominees, participants in central certificate depository
systems and other custodians and fiduciaries to supply them with solicitation
material for forwarding to their principals, and arrangements may be made with
such persons to obtain authority to sign proxies. The Company may reimburse
such persons for reasonable out-of-pocket expenses incurred by them in
connection therewith.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements of the Company as of December 31, 1995 and
1994, incorporated by reference herein, have been audited by Coopers & Lybrand,
independent public accountants, as stated in their report.
A representative of Coopers & Lybrand will be at the Special Meeting
to answer questions by stockholders and will have the opportunity to make a
statement if so desired.
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of
the Exchange Act and, in accordance therewith, files reports, proxy statements
and other information with the Commission. Such reports, proxy statements and
other information can be inspected and copies made at the Public Reference Room
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and the
Commission's regional offices at 7 World Trade Center, New York, New York 10048
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can also be obtained from the Public
Reference Section of Commission at its Washington address at prescribed rates.
INFORMATION INCORPORATED BY REFERENCE
The following document filed by the Company with the Commission
(Commission File No. I-9403) is included herewith and hereby incorporated by
reference into this Proxy Statement:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
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<PAGE> 43
All documents filed by the Company pursuant to sections 13(a), 13(c),
14 or 15(d) or 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. Copies of the documents (without exhibits) incorporated by
reference in this Proxy Statement are available without charge upon written or
oral request from Mark E. Showers, Secretary/Treasurer, Portage Industries
Corporation, 1325 Adams Street, Portage, Wisconsin 53901, telephone (608)
742-7123.
By order of the Board of Directors
Mark E. Showers
Secretary/Treasurer
Portage, Wisconsin
____________, 1996
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<PAGE> 44
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February
22, 1996, between SPARTECH CORPORATION, a Delaware corporation (the
"Purchaser"), SPARTECH PLASTICS, INC., a Delaware corporation formed as a
wholly-owned subsidiary of the Purchaser to effect the Merger (as later
defined) ("Mergeco"), and PORTAGE INDUSTRIES CORPORATION, a Delaware
corporation (the "Company").
RECITALS
A. The Boards of Directors of the Purchaser and the Company have
approved, and deem it advisable and in the best interests of their respective
companies and stockholders to consummate, the acquisition of the Company by the
Purchaser by means of a merger (the "Merger") of Mergeco, with and into the
Company, wherein each issued and outstanding share of Common Stock, par value
$0.01 per share, of the Company (the "Common Stock") not owned directly or
indirectly by Purchaser, Mergeco, the Company or any direct or indirect
wholly-owned subsidiary of Purchaser, except shares of Common Stock held by
holders who comply with the provisions of Delaware law regarding the right of
stockholders to dissent from the Merger and require appraisal of their shares
of Common Stock, will be converted into the right to receive $6.60 per share,
in cash, without interest.
B. Prior to the execution hereof, in order to induce the Purchaser to
enter into this Agreement, the Purchaser has entered into Shareholder Option
Agreements (the "Stock Option Agreements") with certain holders of Common Stock
providing for an option of Purchaser to acquire in certain circumstances, and
certain voting and other restrictions with respect to, the shares of Common
Stock owned beneficially or of record by such holders, upon the terms and
conditions specified therein.
C. The Purchaser, Mergeco and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
The Merger
1.1 The Merger. Upon the terms and subject to the conditions hereof,
and in accordance with the General Corporation Law of the State of Delaware, as
amended (the "DGCL"), Mergeco shall be merged with and into the Company at the
Effective Time (as hereinafter defined). Following the Merger, the separate
corporate existence of Mergeco shall cease and the Company shall continue as
the surviving corporation (the "Surviving Corporation") and shall succeed to
and assume all the rights and obligations of Mergeco in
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accordance with the DGCL.
1.2 Effective Time. The Merger shall become effective when a
certificate of merger (the "Certificate of Merger"), executed in accordance
with the relevant provisions of the DGCL, is accepted for filing by the
Secretary of State of the State of Delaware (the "Secretary of State"). When
used in this Agreement, the term "Effective Time" shall mean the later of the
date and time at which the Certificate of Merger is accepted for filing by the
Secretary of State or such later time established by the Certificate of Merger.
The filing of the Certificate of Merger shall be made as soon as reasonably
practicable (but not later than the first business day) after the satisfaction
or waiver of the conditions to the Merger set forth herein.
1.3 Effects of the Merger. The Merger shall have the effects set forth
in the DGCL.
1.4 Certificate of Incorporation and Bylaws; Directors and Officers.
1.4.1 The Certificate of Incorporation and Bylaws of Mergeco, as
in effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation and the Bylaws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
1.4.2 The directors of Mergeco at the Effective Time shall, from
and after the Effective Time, be the initial directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal, in accordance
with the Surviving Corporation's Certificate of Incorporation and Bylaws.
1.4.3 The officers of Mergeco at the Effective Time and such
other persons as designated by Purchaser shall, from and after the Effective
Time, be the initial officers of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal, in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws.
1.5 The Closing. Subject to the terms and conditions of this
Agreement, the closing of the transactions contemplated by this Agreement (the
"Closing") shall take place (a) at the offices of Armstrong, Teasdale, Schlafly
& Davis, St. Louis, Missouri, at 10:00 a.m., local time, on the first business
day following the day on which the last to be fulfilled or waived of the
conditions set forth in ARTICLE 6 shall be fulfilled or waived in accordance
herewith or (b) at such other time, date or place as the Purchaser and the
Company may agree. The date on which the Closing occurs is hereinafter referred
to as the "Closing Date."
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ARTICLE 2
Effect of the Merger on Securities
of the Company and Mergeco
2.1 Mergeco Stock. At the Effective Time, each share of the common
stock of Mergeco outstanding immediately prior to the Effective Time shall be
converted into and become one share of common stock, par value $.01 per share,
of the Surviving Corporation, and each certificate theretofore representing any
such shares shall, without any action on the part of the holder thereof, be
deemed to represent the same number of shares of the Surviving Corporation.
2.2 Conversion of Common Stock.
2.2.1 Subject to SECTIONS 2.2.2 and 2.2.3, at the Effective Time,
each issued and outstanding share of Common Stock shall be converted into the
right to receive $6.60, in cash, without interest (the "Merger Consideration").
All such shares of Common Stock, when so converted, shall cease to be
outstanding and shall be canceled and retired and shall cease to exist, and
each holder of a certificate or certificates (the "Certificates") representing
any such shares of Common Stock shall thereafter cease to have any rights with
respect thereto, except the right to receive the Merger Consideration.
2.2.2 Notwithstanding anything contained in this SECTION 2.2 to
the contrary, each share of Common Stock held of record by the Purchaser,
Mergeco or any direct or indirect wholly-owned Subsidiary (as defined in
SECTION 3.1) of the Purchaser and each share of Common Stock issued and held in
the Company's treasury immediately prior to the Effective Time shall, by virtue
of the Merger, cease to be outstanding and shall be canceled and retired
without payment of any consideration therefor.
2.2.3 Notwithstanding any provision of this Agreement to the
contrary, if required by the DGCL, but only to the extent required thereby,
shares of Common Stock which are issued and outstanding immediately prior to
the Effective Time and which are held by holders of such shares of Common Stock
who have properly exercised appraisal rights with respect thereto in accordance
with Section 262 of the DGCL (the "Dissenting Shares") will not be exchangeable
for the right to receive the Merger Consideration, and holders of such shares
of Common Stock will be entitled to receive payment of the appraised value of
such shares of Common Stock in accordance with the provisions of such Section
262 unless and until such holders shall fail to perfect or shall effectively
withdraw or shall have lost their rights to appraisal and payment under the
DGCL. If, after the Effective Time, any such holder fails to perfect or
effectively withdraws or loses such right, such shares of Common Stock will
thereupon be treated as if they had been converted into and have become
exchangeable for, at the Effective Time, the right to receive the Merger
Consideration, without any interest thereon. The Company will give the
Purchaser prompt notice of any demands received by the Company for appraisals
of shares of Common Stock. The Company shall not, except with the
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prior written consent of Purchaser, make any payment with respect to any
demands for appraisal or offer to settle or settle any such demands.
1.2.4 At or prior to the Effective Time, the Company shall have
made arrangements, the effect of which shall be that no shares of Common Stock
or other capital stock of the Surviving Corporation shall be issuable pursuant
to options or warrants to purchase shares, or securities convertible into
shares, of Common Stock ("Company Options"). The Company shall (i) cause each
Stock Plan (as defined in SECTION 3.2) to terminate as of the Effective Time
and (ii) grant no additional Company Options after the date of this Agreement.
The Company shall take all such actions under the Stock Plans necessary so that
each holder of a Company Option shall be entitled to receive immediately after
the Effective Time, in cancellation and settlement of such Company Option, for
each share of Common Stock subject to such Company Option an amount in cash
equal to the Merger Consideration minus the per share exercise, purchase or
conversion price of such Company Option as of the date hereof (the "Option
Consideration"). Payment of the Option Consideration with respect to each
Company Option shall be contingent upon consummation of the Merger and shall be
subject to applicable withholding of income and other taxes. Payment of the
Option Consideration shall be made by the Surviving Corporation to the holders
of the Company Options at or as promptly as practicable (but in no event later
than 30 days) after the Effective Time, without interest. Prior to consummation
of the Merger and as a condition thereof, the Company shall furnish Purchaser
evidence satisfactory to Purchaser of the Company's compliance with its
obligations under this SECTION 2.2.4.
1.3 Exchange of Certificates.
1.3.1 Prior to the Effective Time, Purchaser shall appoint a bank
or trust company to act as paying agent hereunder, which shall be FIRSTAR TRUST
CO., MILWAUKEE, WISCONSIN, or such other entity as Purchaser and the Company
may mutually select (the "Paying Agent") for the payment of the Merger
Consideration upon surrender of Certificates. All of the fees and expenses of
the Paying Agent shall be borne by Purchaser.
1.3.2 Purchaser shall cause the Surviving Corporation to provide
the Paying Agent with cash in amounts necessary to pay the Merger
Consideration, when and as such amounts are needed by the Paying Agent.
1.3.3 As soon as reasonably practicable after the Effective Time,
the Paying Agent shall mail to each holder of record of Common Stock
immediately prior to the Effective Time (excluding any shares of Common Stock
which will be canceled pursuant to SECTION 2.2.2 and any Dissenting Shares) (i)
a letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery
of such Certificates to the Paying Agent and shall be in such form and have
such other provisions as Purchaser shall specify) and (ii) instructions for the
use thereof in effecting the surrender of the Certificates in exchange for the
Merger Consideration. Upon surrender of a Certificate for cancellation to the
Paying Agent or to such other agent or agents as may be appointed by the
Surviving Corporation, together with such letter of transmittal, duly executed,
and such other
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documents as may reasonably be required by the Paying Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor a bank check in
the amount of cash into which the shares of Common Stock theretofore
represented by such Certificate shall have been converted pursuant to SECTION
2.2, and the Certificates so surrendered shall forthwith be canceled. No
interest will be paid or will accrue on the cash payable upon the surrender of
any Certificate. If payment is to be made to a person other than the person in
whose name the Certificate so surrendered is registered, it shall be a
condition of payment that such Certificate shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other taxes required by reason of the
transfer of such Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
as contemplated by this SECTION 2.3, each Certificate (other than Certificates
representing Dissenting Shares and Certificates representing any shares of
Common Stock to be canceled as set forth in SECTION 2.2.2) shall be deemed at
any time after the Effective Time to represent only the right to receive upon
such surrender the amount of cash, without interest, into which the shares of
Common Stock theretofore represented by such Certificate shall have been
converted pursuant to SECTION 2.2.
2.3.4 Purchaser shall have the right to make additional rules,
not inconsistent with the terms of this Agreement, governing the payment of
cash for shares of Common Stock converted into the right to receive the Merger
Consideration.
2.3.5 None of the Purchaser, the Company, Mergeco, the Surviving
Corporation, the Paying Agent or any other person shall be liable to any former
holder of shares of Common Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
2.3.6 In the event that any Certificate shall have 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
the Purchaser, the posting by such person of a bond in such reasonable amount
as the Purchaser 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, deliverable in respect thereof pursuant to this Agreement.
2.4 Closing of Transfer Books. At or after the Effective Time, there
shall be no transfers on the stock transfer books of the Company of the shares
of Common Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for the consideration
deliverable in respect thereof pursuant to this Agreement in accordance with
the procedures set forth in this ARTICLE 2.
2.5 No Further Ownership Rights in Common Stock. From and after the
Effective Time, the holders of shares of Common Stock which were outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Common Stock except as otherwise provided in this
Agreement or by applicable law. All cash paid upon the
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surrender of Certificates in accordance with the terms hereof shall be deemed
to have been issued in full satisfaction of all rights pertaining to the shares
of Common Stock.
ARTICLE 3
Representations and Warranties of the Company
The Company represents and warrants to Purchaser that, except as set
forth in schedules hereto specifically referring to the Sections hereof
intended to be so qualified (the "Schedules"):
3.1 Organization, Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated 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, in each jurisdiction
where the character of its properties owned or held under lease or the nature
of its activities makes such qualification necessary, except where the failure
to be so qualified and in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. For purposes of this
Agreement, (a) "Material Adverse Change" or "Material Adverse Effect" means,
when used with respect to Purchaser or the Company, as the case may be, any
change or effect, either individually or in the aggregate, that is materially
adverse to the business, assets, financial condition or results of operations
of Purchaser and its Subsidiaries taken as a whole, or the Company taken as a
whole, as the case may be, and (b) "Subsidiary" means any corporation,
partnership, joint venture or other legal entity of which Purchaser or the
Company (either alone or through or together with any other Subsidiary), owns,
directly or indirectly, 50% or more of the stock or other equity interests, the
holders of which are generally entitled to vote for the election of the board
of directors or other governing body of such corporation or other legal entity.
3.2 Capital Structure. The authorized capital stock of the Company
consists of 10,000,000 shares of Common Stock and 1,000,000 shares of Preferred
Stock, par value $.25 per share ("Preferred Stock"). At the close of business
on February 22, 1996, there were (i) 2,269,100 shares of Common Stock issued
and outstanding, (ii) Company Options outstanding under the 1986 and 1990
Portage Industries Corporate Stock Option Plans and Company Options granted to
directors, officers and key employees to acquire 125,217 shares of Company
Common Stock, (iii) a warrant exercisable for a total of 137,500 shares of
Company Common Stock, and (iv) no shares of Common Stock held by the Company in
its treasury. The foregoing stock option plans of the Company are herein called
the "Stock Plans." As of the date hereof there are no shares of Preferred
Stock outstanding. All outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except for such Company Options, there are no options, warrants,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company is a party or by which it is bound obligating the Company to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company. SCHEDULE
3.2 sets forth the name of each holder of a Company Option, the number
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of shares of Common Stock for which such Company Option is exercisable and the
exercise price per share of Common Stock subject to such Company Option. Since
February 22, 1996, no shares of the Company's capital stock have been issued
other than pursuant to the exercise of Company Options already in existence on
such date and the Company has not granted any stock options for any capital
stock or other voting securities of the Company.
3.3 Subsidiaries. There are no Subsidiaries of the Company.
3.4 Other Interests. The Company does not own, directly or indirectly,
any equity interest or equity investment in, nor is the Company subject to any
obligation or requirement to provide for or to make any equity investment in,
any corporation, limited liability company, partnership, joint venture,
business, trust or entity.
3.5 Authority; Non-Contravention.
3.5.1 The Board of Directors of the Company has approved this
Agreement and determined that the Merger is fair and in the best interests of
the Company and its stockholders, and the Company has all requisite corporate
power and authority to enter into this Agreement and, subject to approval of
the Merger by the stockholders of the Company, to consummate the transactions
contemplated hereby. 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 to such approval of the Merger by the stockholders of
the Company. This Agreement has been duly executed and delivered by the Company
and (assuming the valid authorization, execution and delivery of this Agreement
by the Purchaser) constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. Except as
otherwise disclosed in SCHEDULE 3.5, the execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not, conflict with, or result in
any violation 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, contractually require any offer to purchase or any prepayment
of any debt, contractually require the payment of (or result in the vesting of)
any severance, golden parachute, change of control or similar type of payment,
or give rise to the loss of a material benefit under, or result in the creation
of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company under any provision of:
(i) the Certificate of Incorporation or Bylaws of the Company (true and
complete copies of which as of the date hereof have been delivered to
Purchaser),
(ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, concession, franchise or license
(any of the foregoing, an "Instrument") applicable to the Company (other
than Instruments involving aggregate payments by or to the Company of
$100,000 or less), or
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(iii) subject to the governmental filings and other matters referred to
in SECTION 3.5.2 and approval of this Agreement by the Company's
stockholders, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to, or Company Permit (as defined in
SECTION 3.9) of, or relating to, the Company or any of its properties
or assets.
SCHEDULE 3.5 lists the amounts payable or that will or may become payable to
directors, officers or employees or former directors, officers or employees of
the Company as a result of the execution and delivery by the Company of this
Agreement or the consummation of the transactions contemplated hereby.
3.5.2 No filing or registration with, or authorization, consent
or approval of, any domestic (federal and state), foreign or supranational
court, commission, governmental body, regulatory or administrative agency,
authority or tribunal (a "Governmental Entity") is required by or with respect
to the Company 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) in connection or in compliance with the
provisions of the Securities Exchange Act of 1934, as amended (including the
rules and regulations promulgated thereunder, the "Exchange Act"), (ii) 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, (iii) such filings and approvals as
may be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and (iv) such filings and approvals as may be
required by any applicable state securities or "blue sky" laws or state
takeover laws.
3.6 SEC Documents.
3.6.1 Since December 31, 1992, the Company has filed all
documents with the Securities and Exchange Commission ("SEC") required to be
filed under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended (such documents filed with the SEC on or before
February 22, 1996 being the "Company SEC Documents"). As of their respective
dates, (i) the Company SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
(ii) none of the Company SEC Documents 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 Company has
delivered to the Purchaser its audited consolidated balance sheets and
statements of income, changes in stockholders' equity and cash flow, and notes
thereto as of and for the year ended December 31, 1995 (the "1995 Year End
Financial Statements"). The financial statements of the Company included in the
Company SEC Documents and the 1995 Year End Financial Statements 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 (except,
in the case of unaudited statements contained in Quarterly Reports on Form 10-Q
of the Company, as permitted by the Exchange Act) applied on a consistent basis
during the periods involved (except as may be indicated therein or in the notes
thereto) and fairly present
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the consolidated financial position of the Company as at the dates thereof and
the consolidated results of its operations and changes in stockholders' equity
and cash flow for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments and to any other adjustments
described therein). The Form 10-K of the Company as of and for the year ended
December 31, 1995 to be filed by the Company with the SEC will comply with (ii)
above and the financial statements therein will be consistent with, and not
show results or financial condition differing in such a way as to constitute a
Material Adverse Change from, the 1995 Year End Financial Statements.
3.6.2 Except as set forth in (a) the Company SEC Documents, (b)
the 1995 Year End Financial Statements, or (c) SCHEDULE 3.6.2, the Company does
not have any liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise) which would be required to be reflected on a balance
sheet, or in the notes thereto, prepared in accordance with generally accepted
accounting principles, except for liabilities and obligations incurred in the
ordinary course of business consistent with past practice since December 31,
1995 which would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
3.6.3 To the extent there are such, the Company has heretofore
made available to Purchaser a complete and correct copy of any amendments or
modifications which have not yet been filed with the SEC to agreements,
documents or other instruments which previously have been filed with the SEC
pursuant to the Exchange Act.
3.7 Absence of Certain Events. Since December 31, 1994, the Company
has operated its business only in the ordinary course consistent with past
practice and, except as contemplated by this Agreement or disclosed in the
Company SEC Documents or the 1995 Year End Financial Statements, there has not
occurred (i) any Material Adverse Change in the Company; (ii) any change by the
Company in its accounting methods, principles or practices; (iii) any
amendments or changes in the Certificate of Incorporation or Bylaws of the
Company; (iv) any revaluation by the Company of any of its assets, including,
without limitation, write-offs of accounts receivable or write-offs or
write-downs of inventory, other than in the ordinary course of the Company's
business consistent with past practices; (v) any damage, destruction or loss
with respect to property or assets of the Company having a book value,
individually or in the aggregate, of in excess of $100,000; (vi) any
declaration, setting aside or payment of any dividend or other distribution
with respect to any shares of capital stock of the Company, or any repurchase,
redemption or other acquisition by the Company of any outstanding shares of
capital stock or other securities of, or other ownership interests in, the
Company; (vii) any grant of any severance or termination pay to any director,
officer or key employee of the Company, except as required under any
change-in-control and other severance agreements disclosed in SCHEDULE 3.5;
(viii) any entry into any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any director,
officer or key employee of the Company; (ix) any increase in benefits payable
under any existing severance or termination pay policies or employment
agreements with any director, officer or key employee of the Company except in
the ordinary course of business consistent with past practice; or (x) any
increase in compensation, bonus or other
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benefits payable to directors, officers or key employees of the Company except
in the ordinary course of business consistent with past practice and except
those director option grants disclosed in SCHEDULE 3.5.
3.8 Litigation. Except as set forth in the Company SEC Documents or
the 1995 Year End Financial Statements, there are no actions, suits,
proceedings, investigations or reviews pending against the Company or, to the
knowledge of the Company, threatened against the Company, at law or in equity,
or before or by any federal or state commission, board, bureau, agency,
regulatory or administrative instrumentality or other Governmental Entity or
any arbitrator or arbitration tribunal.
3.9 Compliance with Applicable Law. The Company holds all permits,
licenses, variances, exceptions, orders and approvals of all Governmental
Entities necessary for the lawful conduct of its business (the "Company
Permits"), except where the failure to hold any such Company Permit does not
materially affect the lawful conduct of the Company's business. The Company is
conducting its business in compliance with the terms of the Company Permits.
The business of the Company is not, and has not been, conducted in violation in
any material respect of any law (including without limitation laws relating to
advertising and promotional activities by the Company), Company Permit,
ordinance or regulation of any Governmental Entity.
3.10 Employee Plans.
3.10.1 SCHEDULE 3.10.1 to this Agreement sets forth a list
of each of the Company Benefit Plans (as defined below). The Company and each
ERISA Affiliate (as defined below) has complied with and performed in all
material respects all contractual obligations and all obligations under
applicable federal, state and local laws, rules and regulations required to be
performed by it under or with respect to any of the Company Benefit Plans or
any related trust agreement or insurance contract. All contributions and other
payments required to be made by the Company and each ERISA Affiliate to any
Company Benefit Plan prior to the date hereof have been made, all accruals
required to be made under any Company Benefit Plan have been made, and there
are no unfunded benefit obligations with respect to any Company Benefit Plan
which have not been accounted for by reserves or otherwise properly footnoted
in accordance with generally accepted accounting principles in the 1995 Year
End Financial Statements and the financial statements included in the Company
SEC Documents. There is no claim, dispute, grievance, charge, complaint,
restraining or injunctive order, litigation or proceeding pending, or, to the
best knowledge of the Company and each ERISA Affiliate, threatened or
anticipated (other than routine claims for benefits) against or relating to any
Company Benefit Plan or against the assets of any Company Benefit Plan. The
Company and each ERISA Affiliate has not communicated generally to employees or
specifically to any employee regarding any future increase of benefit levels
(or future creations of new benefits) with respect to any Company Benefit Plan
beyond those reflected in the Company Benefit Plans.
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3.10.2 With respect to each Company Benefit Plan subject to
Title IV of ERISA, (i) no termination of any Company Benefit Plan has occurred
pursuant to which all liabilities have not been satisfied in full, and no event
has occurred and no condition exists that could reasonably be expected to
result in the Company or an ERISA Affiliate incurring a liability under Title
IV of ERISA or which could constitute grounds for terminating any pension plan
of the Company or an ERISA Affiliate ("Pension Plan"); (ii) each such Company
Benefit Plan which is subject to Part 3 of Subtitle B of Title I of ERISA or
Section 412 of the Internal Revenue Code of 1986, as amended (the "Code") has
been maintained in compliance with the minimum funding standards of ERISA and
the Code and no such Company Benefit Plan has incurred any "accumulated funding
deficiency," as defined in Section 412 of the Code and Section 302 of Title I
of ERISA, whether or not waived; (iii) neither the Company nor an ERISA
Affiliate has sought or received a waiver of its funding requirements with
respect to any Company Benefit Plan and all contributions payable with respect
to each Plan have been timely made; (iv) no reportable event, within the
meaning of Section 4043 of Title IV of ERISA, and no event described in Section
4062 or 4063 of Title IV of ERISA, has occurred with respect to any Company
Benefit Plan; and (v) the aggregate of accumulated benefit obligations of each
Company Benefit Plan subject to Title IV of ERISA (as of the date of the most
recent actuarial valuation prepared for such Company Benefit Plan) does not
exceed the fair market value of the assets of such Company Benefit Plan (as of
the date of such valuation).
3.10.3 Neither the Company nor an ERISA Affiliate has
incurred, nor has any event occurred which has imposed or is reasonably likely
to impose upon the Company or any ERISA Affiliate, any withdrawal liability
(complete or partial within the meanings of sections 4203 or 4205 of Title IV
of ERISA, respectively) in respect of any multiemployer plan (within the
meaning of sections 3(37) or 4001(a)(3) of Title IV of ERISA) (a "Multiemployer
Plan"), which withdrawal liability has not been satisfied or discharged in
full. Neither the Company nor an ERISA Affiliate has received notice to the
effect that any Multiemployer Plan has any unfunded vested benefits within the
meaning of Section 4213(c) of Title IV of ERISA. Neither the Company nor an
ERISA Affiliate has been notified of any reorganization or insolvency under and
within the meaning of sections 4241 or 4245 of Title IV of ERISA. There are no
Multiemployer Plans to which the Company or an ERISA Affiliate has ever had an
obligation to contribute.
3.10.4 The execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby will not
result in the imposition of any federal excise tax under section 4975 of the
Code with respect to any Company Benefit Plan.
3.10.5 Neither the Company nor an ERISA Affiliate maintains
or contributes to (or has maintained or contributed to) any Company Benefit
Plan which provides, or has a liability to provide, life insurance, medical,
severance, or other employee welfare benefit to any employee upon his
retirement or termination of employment, except as may be required by Section
4980B of the Code. No Company Benefit Plan is or has been a "Multiple Employer
Welfare Plan" as defined in Section 3(40)(A) of Title I of ERISA.
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3.10.6 There are no Company Benefit Plans with respect to
which benefits will be accelerated, vested, increased or paid as a result of
the transactions contemplated by this Agreement.
3.10.7 The Company Benefit Plans which are Plans described
in section 3(2) of Title I of ERISA and which are qualified under section
401(a) of the Code comply in all material respects with the applicable
requirements of ERISA, meet the requirements of "qualified plans" under section
401(a) of the Code and each such Plan has received a favorable determination
letter from the Internal Revenue Service to this effect. Such Plans have been
timely amended and filed with the Internal Revenue Service with respect to
changes required by the Tax Reform Act of 1986, as amended. All required
reports and descriptions (including Form 5500 Annual Reports, summary annual
reports and summary plan descriptions) have been appropriately and timely filed
and distributed with respect to the Company Benefit Plans. The Company and
each ERISA Affiliate have complied with all the requirements of Part 6 of
Subtitle B of Title I of ERISA and section 4980B of the Code, and any proposed
or final regulations promulgated thereunder, with respect to Company Benefit
Plans. No Company Benefit Plan can give rise to a payment which is not
deductible under Section 280G. There have been no prohibited transactions as
defined in 406 of Title I of ERISA or section 4975 of the Code with respect to
the Company Benefit Plans. Neither the Company nor an ERISA Affiliate nor any
of their officers, employees or any other "fiduciary", as such term is defined
in Section 3(21) of ERISA, has any liability for failure to comply with ERISA,
the Code or any other law for any action or failure to act in connection with
the administration or investment of any Company Benefit Plan. Each Company
Benefit Plan which is a welfare plan as described in 3(1) of Title I of ERISA
may be terminated after closing of this Agreement to eliminate the liability
for claims incurred after such closing. Any contribution made or accrued with
respect to any Company Benefit Plan is fully deductible for Federal income tax
purposes. No employee of the Company or an ERISA Affiliate will be entitled to
any retirement, severance or similar benefit or enhanced benefit solely as a
result of the transaction contemplated herein
3.10.8 With respect to each Company Benefit Plan, the
Company has furnished to the Purchaser true and complete copies of (i) the Plan
documents, (ii) the most recent determination letters received from the
Internal Revenue Service, (iii) Form 5500 Annual Reports (including all
schedules) for the three most recent plan years, (iv) the actuarial and audited
financial reports for the three most recent plan years, (v) all related trust
agreements, insurance contracts or other funding agreements and (vi) a copy of
each and any general explanation or communication which was required or
otherwise provided to participants in such Plan which describes all or any
relevant aspect of each Plan, including any summary plan description, summary
annual report and/or summary of material modifications, (vii) a description of
any unwritten Plan as maintained by the Company or an ERISA Affiliate to the
closing or to which the Company or an ERISA Affiliate contributes, including a
description of eligibility or other relevant aspects of the obligation, and
(viii) a copy of any and all rulings or notices, other than Internal Revenue
Service determination letters, issued by any government agency with respect to
the Plans.
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3.10.9 Except as disclosed on SCHEDULE 3.10.9, no amendment
or modification will be made to any Company Benefit Plan during the period
commencing on the date of this Agreement and ending on the closing date and no
new Company Benefit Plan will be adopted during such period.
3.10.10 (i) "Plan" means any bonus, incentive compensation,
deferred compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom stock, leave
of absence, layoff, vacation, day or dependent care, legal services, cafeteria,
life, health, accident, disability, workers' compensation, scholarship, company
car, sick pay, tuition reimbursement, relocation, fringe benefit or other
insurance, severance, separation or other employee benefit plan, practice,
policy or arrangement of any kind, including, but not limited to, any "employee
benefit plan" within the meaning of section 3(3) of Title I of ERISA and (ii)
"Company Benefit Plan" means any employee pension benefit plan and any Plan,
other than a Multiemployer Plan, established by the Company or an ERISA
Affiliate or to which the Company or an ERISA Affiliate contributes or has
contributed or has or may have liability (including any such Plans not now
maintained by the Company or an ERISA Affiliate or to which the Company or an
ERISA Affiliate does not now contribute, but with respect to which the Company
or ERISA Affiliate has or may have any liability). "ERISA Affiliate" means any
corporation, entity or individual which has ever been: (i) a member of the same
controlled group (within the meaning of sections 414(b) or 4001 of Title IV of
ERISA) as the Company, (ii) under common control (within the meaning of
sections 414(c) with the Company, (iii) a member of an affiliated service group
(within the meaning of section 414(m) of the Code with the Company, or (iv)
required to be aggregated with the Company pursuant to section 414(o) of the
Code or regulations promulgated thereunder.
3.11 Employment Relations and Agreements.
3.11.1 (i) The Company is in compliance with all federal,
state or other applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours; (ii) there is no labor
strike, dispute, slowdown or stoppage pending or, to the best knowledge of the
Company, threatened against or involving the Company; (iii) the Company is not
a party to any collective bargaining agreement, and no collective bargaining
agreement is being negotiated as of the date of this Agreement by the Company;
and (iv) except as disclosed on SCHEDULE 3.11.1, the Company has not
experienced any material labor difficulty during the last three years.
3.11.2 All written, and to the knowledge of the Company, all
binding oral, employment, bonus, severance, "change of control", collective
bargaining or similar agreements ("Employment Agreements") are listed on
SCHEDULE 3.11.2 and copies of all Employment Agreements and all amendments
thereto have been previously furnished to the Purchaser.
3.11.3 The insurance policies maintained by the Company with
respect to workers compensation and medical claims are described in SCHEDULE
3.11.3. All such
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insurance policies are in full force and effect; all premiums due and payable
thereunder have been paid and the Company is otherwise in full compliance with
the terms thereof; the Company does not know of any threatened termination of,
or any proposed material premium increase with respect to any such policy; no
claim or claims by the Company in an aggregate amount greater than $100,000
have been questioned, denied or disputed by the underwriter of such policy; and
the reserves maintained by the Company for the uninsured portion of such claims
are sufficient to cover the full liability of the Company for all claims that
have been incurred and are not covered (in whole or in part, including the
deductible thereon) by insurance.
3.12 Limitation on Business Conduct. Except as disclosed on SCHEDULE
3.12, the Company is not a party to, and has no obligation under, any contract
or agreement, written or oral, which contains any covenants currently or
prospectively limiting the freedom of the Company to engage in any line of
business or to compete with any entity.
3.13 Title to, and Sufficiency and Condition of, Assets.
3.13.1 The Company has good and marketable title, or a valid
leasehold interest in, all of its assets and properties, whether real or
personal, tangible or intangible, and including without limitation all assets
and properties reflected on the balance sheet and the notes thereto (other than
as covered by SECTION 3.15 hereof), included in the 1995 Year End Financial
Statements and the notes thereto (the "Balance Sheet") or acquired after the
date of the Balance Sheet (except for assets and properties sold since such
date in the ordinary course of business), free and clear of any Liens except:
3.13.1.1 Liens disclosed in the Balance Sheet;
3.13.1.2 Liens for taxes not yet due or being contested
in good faith (and for which adequate reserves
are reflected on the Balance Sheet);
3.13.1.3 Liens arising under financing agreements of
the Company identified in the Balance Sheet;
3.13.1.4 Statutory or common law Liens relating to
obligations of the Company that are not
delinquent or are being contested in good
faith;
3.13.1.5 Purchase money Liens of the Company that are
not delinquent for the purchase of goods in
the ordinary course of business consistent
with past practice; or
3.13.1.6 Liens which do not materially detract from the
value of such property or assets as now used,
or materially interfere with any present or
intended use of such property or assets.
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The assets so owned or leased by the Company constitute all of the material
assets, properties and rights of any type used in or necessary for the conduct
of its business.
3.13.2 The plants, structures, facilities, machinery,
equipment, automobiles, trucks, tools and other properties and assets owned or
leased by the Company which are material to the business of the Company are in
good operating condition and repair, subject to normal wear and use, and
useable in a manner consistent with their current use. All improvements on real
property owned or leased by the Company conform in all material respects to
applicable state and local zoning and other land use ordinances and building
codes.
3.14 Environmental Laws and Regulations.
3.14.1 To the best knowledge of the Company, its officers
and directors, the Company is and has at all times been in compliance with all
applicable Environmental Laws. The term "Environmental Laws" means any federal,
state, local or foreign statute, ordinance, rule, regulation, policy, permit,
consent, approval, license, judgment, order, decree, injunction or other
authorization, relating to: (i) pollution or protection of human health or
safety, health or safety of employees, sanitation, or the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), (ii) Releases (as defined in 42 U.S.C. Section
9601(22)) or threatened Releases of Hazardous Material (as hereinafter defined)
into the environment or (iii) the generation, treatment, storage, disposal,
use, handling, manufacturing, transportation or shipment of Hazardous Material.
3.14.2 To the best knowledge of the Company, its officers
and directors, during the period of ownership or operation by the Company of
any of its current or previously owned or leased properties, there have been no
Releases of Hazardous Material in, on, under or affecting such properties or
any surrounding site, and the Company has not disposed of any Hazardous
Material or any other substance in a manner that has led, or could reasonably
be anticipated to lead, to a Release. The Company has not received any notice
or claim that it is a "potentially responsible party" under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section
9601, et seq., as amended, or similar, applicable state or local laws. To the
best knowledge of the Company, its officers and directors, there is not
currently pending any notice, summons, complaint, lawsuit, citation, directive,
order, notice letter, or legal or administrative action from any party or
Governmental Entity with respect to alleged liabilities arising under
Environmental Laws. The term "Hazardous Material" means any pollutants,
contaminants, hazardous substances, hazardous chemicals, toxic substances,
hazardous wastes, infectious and medical wastes, radioactive materials,
petroleum (including crude oil or any fraction thereof), natural gas, synthetic
gas and mixtures thereof, PCBs or materials containing PCBs, asbestos and/or
asbestos-containing materials or solid wastes, including but not limited to
those defined in any Environmental Law and all regulations promulgated under
each and all amendments thereto, or any other federal, state or local
environmental law, ordinance, regulations, rule or order.
3.14.3 To the best knowledge of the Company, its officers
and directors, there are no underground storage tanks in or on the owned or
leased properties of the Company.
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3.14.4 To the best knowledge of the Company, its officers
and directors, there is no friable asbestos or asbestos-containing materials
at, on, or in the owned or leased properties of the Company, except that which
has been encapsulated or otherwise managed in place and in good repair. The
Company has made available to the Purchaser records concerning the presence,
location and quantity of asbestos-containing materials and presumed-asbestos
containing materials in such properties to the extent called for in 29 CFR
Section 1910.1001(j).
3.15 Patents, Trademarks, Copyrights. The Company owns or possesses
adequate licenses or other valid rights to use all material patents, patent
rights, trademarks, trademark rights, trade names, trade name rights,
copyrights, know-how and other proprietary information used or held for use in
connection with the business of the Company as currently being conducted and,
to the knowledge of the Company, there are no assertions or claims challenging
the validity of any of the foregoing.
3.16 Takeover Statutes. The Board of Directors of the Company has taken
all appropriate action so that neither Purchaser nor Mergeco will be an
"interested stockholder" within the meaning of Section 203 of the DGCL by
virtue of Purchaser's entry into this Agreement, the entry into the Stock
Option Agreement by the parties thereto and the consummation of the
transactions contemplated hereunder and thereunder.
3.17 Taxes. (i) The Company has filed all material Tax Returns required
to have been filed on or before the date hereof, which returns are true and
complete in all material respects and all Taxes shown due thereon have been
paid; (ii) no issues that have been raised by the relevant taxing authority in
connection with the examination of the Tax Returns referred to in clause (i)
are currently pending; (iii) all deficiencies asserted or assessments made as a
result of any examination of the Tax Returns referred to in clause (i) by a
taxing authority have been paid in full or are being contested in good faith by
the Company; and (iv) a reserve which the Company reasonably believes to be
adequate has been set up for the payment of all such Taxes anticipated to be
payable in respect of periods through the date hereof. The Company has
disclosed on its federal income Tax returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within
the meaning of Code Sec. 6662. The Company is not a party to any Tax allocation
or sharing agreement. The Company (a) has not been a member of an affiliated
group filing a consolidated federal income Tax return (other than a group the
common parent of which was the Company or a Subsidiary of the Company) or (B)
has no liability for the Taxes of any person (other than the Company) under
Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise. The
Company will not be obligated to make a payment to an individual that would be
a "parachute payment" to a "disqualified individual," as those terms are
defined in Section 280G of the Code, without regard to whether such payment is
to be made in the future. For purposes of this Agreement, (a) "Tax" (and, with
correlative meaning, "Taxes" and "Taxable") means any federal, state, local or
foreign income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, premium, withholding, alternative or added
minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind
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whatsoever, together with any interest or penalty, imposed by any governmental
authority, and (b) "Tax Return" means any return, report or similar statement
required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
3.18 Brokers. No broker, investment banker or other person, other than
MESIROW FINANCIAL, the fees and expenses of which will be paid by the Company,
is entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. A copy of the engagement
letter between MESIROW FINANCIAL and the Company setting forth the fees and
expenses to be paid by the Company in connection with the transactions
contemplated by this Agreement has been provided to Purchaser.
ARTICLE 4
Representations and Warranties of the Purchaser and Mergeco
The Purchaser and Mergeco jointly and severally represent and warrant to
the Company as follows:
4.1 Organization, Standing and Power. Each of Mergeco and the
Purchaser 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.
4.2 Authority; Non-Contravention.
4.2.1 Each of Mergeco and the Purchaser has all requisite
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Mergeco and the Purchaser and the consummation by them of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on their part. This Agreement has been duly executed and
delivered by Mergeco and the Purchaser and (assuming the valid authorization,
execution and delivery of this Agreement by the Company) constitutes a valid
and binding obligation of Mergeco and the Purchaser enforceable against the
Purchaser in accordance with its terms. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not, conflict with, or result in
any violation 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 to the loss of a material benefit under, or result in the
creation of any Lien upon any of the properties or assets of the Purchaser
under any provision of:
4.2.1.1 the Certificate of Incorporation or Bylaws of
the Purchaser,
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4.2.1.2 any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or
license applicable to the Purchaser or
4.2.1.3 subject to the governmental filings and other
matters referred to in the following
sentence, any judgment, order, decree,
statute, law, ordinance, rule or
regulation applicable to the Purchaser or any
of its properties or assets, other than, in
the case of SECTIONS 4.2.1.2 or 4.2.1.3, any
such conflicts, violations, defaults, rights,
offers, prepayments, payments, losses or
Liens, that, individually or in the
aggregate, would not have a Material Adverse
Effect on either of the Purchaser or Mergeco,
materially impair the ability of the
Purchaser or Mergeco to perform its
obligations hereunder or prevent the
consummation of any of the transactions
contemplated hereby.
4.2.2 No filing or registration with, or authorization, consent
or approval of, any Governmental Entity is required by or with respect to the
Purchaser in connection with the execution and delivery of this Agreement by
the Purchaser or Mergeco or the consummation by the Purchaser or Mergeco of the
transactions contemplated hereby, except for (i) compliance with the provisions
of the Exchange Act, (ii) 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 Purchaser or Mergeco is qualified to
do business, (iii) such filings and approvals as may be required under the HSR
Act, (iv) such filings and approvals as may be required by any applicable state
securities or "blue sky" laws or state takeover laws, and (v) such other
consents, orders, authorizations, registrations, approvals, declarations and
filings the failure of which to be obtained or made would not, individually or
in the aggregate, have a Material Adverse Effect on the Purchaser, materially
impair the ability of Purchaser or Mergeco to perform its obligations hereunder
or prevent the consummation of any of the transactions contemplated hereby.
4.3 Brokers. No broker, investment banker or other person, other than
FIRST ANALYSIS SECURITIES CORPORATION, the fees and expenses of which will be
paid by the Purchaser, is entitled to any broker's, finder's or other similar
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Purchaser or
Mergeco.
ARTICLE 5
Covenants
5.1 Alternative Proposals. Prior to the Effective Time, the Company
agrees that it will not, directly or indirectly, through any officer, director,
agent or otherwise, (i) solicit or initiate, directly or indirectly, or
encourage submission of inquiries, proposals or offers from any potential buyer
(other than the Purchaser) relating to the disposition of the assets or
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securities of the Company, or any part thereof (other than sales of inventory
in the ordinary course) or (ii) participate in any discussions or negotiations
regarding, or furnish any person with information with respect to, the
disposition of the assets or any securities of the Company or any part thereof
(any such proposal or offer being hereinafter referred to as an "Alternative
Proposal"); provided, however, that nothing contained in this SECTION 5.1 shall
prohibit the Board of Directors of the Company from (i) furnishing information
to or entering into discussions or negotiations with, any person or entity that
makes an unsolicited, bona fide Alternative Proposal or delivers an
unsolicited, bona fide, written expression of interest that could reasonably be
expected to lead to an Alternative Proposal, which is not subject to the
arrangement of financing (other than securities of an acquiror to be issued to
holders of shares of Common Stock in an acquisition thereof by merger or
consolidation) and that the Board of Directors of the Company in good faith
determines (in consultation with its financial advisors) represents a
financially superior transaction for the stockholders of the Company as
compared to the Merger, if, and only to the extent that, (A) the Board of
Directors of the Company, based upon the advice of outside counsel, determines
in good faith that such action is required for the Board of Directors to comply
with its fiduciary duties to stockholders imposed by law, (B) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person or entity, the Company provides written notice to the
Purchaser to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such person or entity, and (C) subject to the
same fiduciary standards as in the preceding clause (A), the Company keeps the
Purchaser informed of the status and all material information with respect to
any such discussions or negotiations; and (ii) to the extent applicable,
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Alternative Proposal. Nothing in this SECTION 5.1 shall (A) permit the Company
to terminate this Agreement (except as specifically provided in ARTICLE 7
hereof), (B) permit the Company to enter into any agreement with respect to an
Alternative Proposal for as long as this Agreement remains in effect (it being
agreed that for as long as this Agreement remains in effect, the Company shall
not enter into any agreement with any person that provides for, or in any way
facilitates, an Alternative Proposal (other than a confidentiality agreement in
customary form)), or (C) affect any other obligation of the Company under this
Agreement.
5.2 Interim Operations of the Company. (a) From and after the date of
this Agreement until the Effective Time, except as set forth in SCHEDULE 5.2 to
this Agreement or as contemplated by any other provision of this Agreement,
unless the Purchaser has consented in writing thereto, the Company:
5.2.1 Shall conduct its operations according to its usual,
regular and ordinary course in substantially the same manner as
heretofore conducted;
5.2.2 Shall use its reasonable efforts to preserve intact its
respective business organizations and goodwill, keep available the
services of their respective officers and employees and maintain
satisfactory relationships with those persons having business
relationships with it;
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5.2.3 Shall not amend its Certificate of Incorporation or Bylaws
or comparable governing instruments;
5.2.4 Shall promptly notify the Purchaser of any breach of any
representation or warranty contained herein or any Material Adverse
Effect with respect to the Company;
5.2.5 Shall promptly deliver to the Purchaser true and correct
copies of any report, statement or schedule filed with the SEC
subsequent to the date of this Agreement;
5.2.6 (A) Shall not, except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights existing on the
date hereof and disclosed pursuant to this Agreement, issue any shares
of its capital stock, effect any stock split or otherwise change its
capitalization as it existed on the date hereof and (B) shall not (x)
grant, confer or award any option, warrant, conversion right or other
right not existing on the date hereof to acquire any shares of its
capital stock or grant, confer or award any bonuses or other forms of
cash incentives to any officer, director or key employee, (y) increase
any compensation with any present or future officers, directors or key
employees, grant any severance or termination pay to, or enter into any
employment or severance agreement with any officer, director or key
employee or amend any such existing agreement in any material respect,
or (z) adopt any new employee benefit plan (including any stock option,
stock benefit or stock purchase plan) or amend any existing employee
benefit plan in any material respect;
5.2.7 Shall not (i) declare, set aside or pay any dividend or
make any other distribution or payment with respect to any shares of its
capital stock or other ownership interests or (ii) directly or
indirectly redeem, purchase or otherwise acquire any shares of its
capital stock, or make any commitment for any such action;
5.2.8 Shall not sell, lease, abandon or otherwise dispose of any
of its assets or acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of or equity in, or by
any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire any assets, except for purchases and sales of
inventory in the ordinary course of business consistent with past
practice;
5.2.9 Shall not incur or guarantee any indebtedness for borrowed
money or make any loans, advances or capital contributions to, or
investments in, any other person, or issue or sell any debt securities,
other than to the Company and other than borrowings under existing lines
of credit in the ordinary course of business and other borrowings not
exceeding $100,000 in the aggregate;
5.2.10 Shall not mortgage or otherwise encumber or subject to any
lien any of its properties or assets;
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5.2.11 Shall not make any change to its accounting
(including tax accounting) methods, principles or practices, except as
may be required by generally accepted accounting principles and except,
in the case of tax accounting methods, principles or practices, in the
ordinary course of business of the Company;
5.2.12 Shall not make any commitment or enter into any
contract or agreement or make any capital expenditure except for (x)
customer purchase orders and purchases of raw materials used in the
business of the Company agreed to or made in the ordinary course of
business consistent with past practice, (y) any other commitment,
contract and agreement involving aggregate payments to or by the Company
not in excess of $100,000, providing for termination without notice by
the Company on 90 or fewer days' notice, and made by the Company in the
ordinary course of business consistent with past practice or (z) capital
expenditures that individually or in the aggregate do not exceed
$100,000;
5.2.13 Shall not alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate
structure or ownership of the Company;
5.2.14 Shall not revalue any of its assets, including,
without limitation, writing down the value of its inventory or writing
off notes or accounts receivable, other than in the ordinary course of
business;
5.2.15 Shall not make any tax election or settle or
compromise any material income tax liability;
5.2.16 Shall not settle or compromise any pending or
threatened suit, action or claim relating to the transactions
contemplated hereby;
5.2.17 Shall not pay, discharge 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 of liabilities reflected
or reserved against in, or contemplated by, the 1995 Year End Financial
Statements (or the notes thereto) of the Company or incurred in the
ordinary course of business consistent with past practice;
5.2.18 Shall not, except in connection with the exercise of
its fiduciary duties by the Board of Directors of the Company as set
forth in SECTION 5.1, waive, amend or allow to lapse any term or
condition of any confidentiality or "standstill" agreement to which the
Company is a party;
5.2.19 Shall not extend or renew its directors' and
officers' liability insurance policy past the schedule expiration date
of April 1, 1996, or purchase any new directors' and officers' liability
insurance;
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5.2.20 Shall not extend credit at any time to ARISTECH
CHEMICAL CORP. (a) on terms of more than thirty (30) days or (b) of more
than two hundred twenty five thousand dollars ($225,000.00) in the
aggregate in excess of the dollar value of work in progress as of the
date of this Agreement, which amount is set forth in SCHEDULE 5.2.20 to
this Agreement;
5.2.21 Shall not expend or commit to expend any Company
funds to purchase a fairness opinion with respect to the consideration
to be paid in the Merger; and
5.2.22 Shall not agree or otherwise commit to take any of
the foregoing actions or take, or agree to take, any action which would
result in a failure of the condition to Closing set forth in SECTION
6.3.1.
5.3 Meeting of the Company's Stockholders. The Company will take all
action necessary in accordance with applicable law and its Certificate of
Incorporation and Bylaws to convene a meeting of its stockholders as promptly
as practicable to consider and vote upon the approval of this Agreement and the
Merger. The Board of Directors of the Company shall recommend such approval and
the Purchaser and the Company shall each take all lawful action to solicit such
approval, including, without limitation, timely mailing the Proxy Statement (as
defined in SECTION 5.7); provided, however, that such recommendation or
solicitation is subject to any action (including any withdrawal or change of
its recommendation) taken by, or upon authority of, the Board of Directors of
the Company in the exercise of its good faith judgment based upon the advice of
outside counsel as to its fiduciary duties to its stockholders imposed by law.
5.4 Filings, Other Action. Subject to the terms and conditions herein
provided, the Company and the Purchaser shall: (a) promptly make their
respective filings and thereafter make any other required submissions under the
HSR Act; (b) use all reasonable efforts to cooperate with one another in (i)
determining which filings are required to be made prior to the Effective Time
with, and which consents, approvals, permits or authorizations are required to
be obtained prior to the Effective Time from, governmental or regulatory
authorities of the United States, the several states and foreign jurisdictions
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and (ii) timely making all
such filings and timely seeking all such consents, approvals, permits or
authorizations; and (c) use all reasonable efforts to take, or cause to be
taken, all other action and do, or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purpose of this Agreement, the proper officers and directors of the Purchaser
and the Company shall take all such necessary action.
5.5 Inspection of Records. From the date hereof to the Effective Time,
the Company shall (i) allow all designated officers, attorneys, accountants and
other representatives of the Purchaser reasonable access at all reasonable
times to the offices, records and files, correspondence, audits and properties,
as well as to all information relating to commitments,
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contracts, titles and financial position, or otherwise pertaining to the
business and affairs, of the Company, (ii) furnish to the Purchaser's counsel,
financial advisors, auditors and other authorized representatives such
financial and operating data and other information as such persons may
reasonably request, (iii) instruct its employees, counsel and financial
advisors to cooperate with the Purchaser in the Purchaser's investigation of
the business of the Company, and (iv) make its management personnel available
for discussions with representatives of the Purchaser.
5.6 Publicity. The initial press release relating to this Agreement
shall be a joint press release and thereafter the Company and the Purchaser
shall not, subject to their respective legal obligations (including
requirements of stock exchanges and other similar regulatory bodies), issue any
press release or otherwise make any public statement with respect to the
transactions contemplated hereby without the advance approval of the other
party as to substance and timing. The parties will cooperate with each other
to coordinate all such public statements and releases either party may make
with respect to the transactions contemplated hereby.
5.7 Proxy Statement.
5.7.1 The Company shall prepare and file with the SEC as soon as
practicable a preliminary form of the proxy statement (the "Proxy Statement")
to be mailed to the holders of Common Stock in connection with the meeting of
such holders in connection with the Merger. The Company will cause the Proxy
Statement to comply as to form in all material respects with the applicable
provisions of the Exchange Act. The Company will use its reasonable best
efforts to respond to any comments of the SEC or its staff and to cause the
Proxy Statement to be cleared by the SEC. The Company will notify the Purchaser
of the receipt of any comments from the SEC or its staff and of any request by
the SEC or its staff for amendments or supplements to the Proxy Statement or
for additional information and will supply the Purchaser with copies of all
correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement prior to its being filed with the SEC and shall give the Purchaser
and its counsel the opportunity to review all amendments and supplement to the
Proxy Statement and all responses to requests for additional information and
replies to comments prior to their being filed with, or sent to, the SEC. Each
of the Company and the Purchaser agrees to use its reasonable best efforts,
after consultation with the other parties hereto, to respond promptly to all
such comments of and requests by the SEC. As promptly as practicable after the
Proxy Statement has been cleared by the SEC, the Company shall mail the Proxy
Statement to the stockholders of the Company. If at any time prior to the
approval of this Agreement by the Company's stockholders there shall occur any
event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company will prepare and mail to its stockholders such an
amendment or supplement.
5.7.2 The Company agrees that the Proxy Statement and each
amendment or supplement thereto at the time of mailing thereof and at the time
of the meeting of stockholders of the Company will not include an untrue
statement of a material fact or omit to
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state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to state a
material fact was made by the Company in reliance upon and in conformity with
written information concerning the Purchaser furnished to the Company by the
Purchaser specifically for use in the Proxy Statement. The Purchaser agrees
that the information concerning the Purchaser provided by it in writing for
inclusion in the Proxy Statement and each amendment or supplement thereto, at
the time of mailing thereof and at the time of the meeting of stockholders of
the Company will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
5.8 Further Action. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effect the Merger.
5.9 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses except
as expressly provided herein.
5.10 Takeover Statute. If any "fair price", "moratorium", "control
share acquisition" or other form of antitakeover statute or regulation shall
become applicable to the transactions contemplated hereby or the transactions
contemplated by the Stock Option Agreements, the Company and the members of the
Board of Directors of the Company shall grant such approvals and take such
actions as are reasonably necessary so that the transactions contemplated
hereby and the transactions contemplated by the Stock Option Agreement may be
consummated as promptly as practicable on the terms contemplated hereby and
thereby and otherwise act to eliminate or minimize the effects of such statute
or regulation on the transactions contemplated hereby and thereby.
5.11 Conduct of Business by Mergeco Pending the Merger. Prior to the
Effective Time and subject to any applicable regulatory approvals, the
Purchaser shall cause Mergeco to (a) perform its respective obligations under
this Agreement in accordance with the terms hereof and thereof and take all
other actions necessary or appropriate for the consummation of the transactions
contemplated hereby and (b) not engage directly or indirectly in any business
or activities of any type or kind whatsoever and not enter into any agreements
or arrangements with any person or entity, or be subject to or be bound by any
obligation or undertaking which is not contemplated by this Agreement.
5.12 Conveyance Taxes. The Company and the Purchaser shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees, and any similar taxes
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which become payable in connection with the transactions contemplated by this
Agreement that are required or permitted to be filed on or before the Effective
Time.
5.13 Directors' and Officers' Liability Coverage. For a period of two
(2) years from and after the Effective Time, the Purchaser shall indemnify and
defend each person insured under the Company's directors' and officers'
liability insurance policy as in effect on the date hereof in such
circumstances and in such manner as is provided by such directors' and
officers' liability insurance policy, as if such policy had remained in effect
up to, and for a period of two years after, the Effective Time.
ARTICLE 6
Conditions to Merger
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
6.1.1 This Agreement and the transactions contemplated hereby
shall have been approved, in the manner required by applicable law or by the
applicable regulations of any stock exchange or other regulatory body, as the
case may be, by the holders of the issued and outstanding shares of capital
stock of the Company.
6.1.2 The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
6.1.3 Neither of the parties hereto shall be subject to any order
or injunction of a court of competent jurisdiction which prohibits the
consummation of the transactions contemplated by this Agreement. In the event
any such order or injunction shall have been issued, each party agrees to use
its reasonable efforts to have any such injunction lifted.
6.1.4 All consents, authorizations, orders and approvals of (or
filings or registrations with) any Governmental Entity required in connection
with the execution, delivery and performance of this Agreement shall have been
obtained or made, except for filings in connection with the Merger and any
other documents required to be filed after the Effective Time and except where
the failure to have obtained or made any such consent, authorization, order,
approval, filing or registration would not have a Material Adverse Effect on
the Purchaser or the Company following the Effective Time.
6.2 Conditions to Obligation of Company to Effect the Merger. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the conditions that:
6.2.1 There shall have been no intentional or willful
non-performance, in any material respect, by the Purchaser of its agreements
contained in this Agreement required to be
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performed on or prior to the Closing Date nor shall there have been, in any
material respect, any willfully or intentionally untrue representation or
warranty of the Purchaser contained in this Agreement or in any document
delivered in connection herewith.
6.2.2 The Purchaser shall have performed its agreements contained
in this Agreement required to be performed on or prior to the Closing Date, and
the representations and warranties of the Purchaser contained in this Agreement
and in any document delivered in connection herewith shall be true and correct
as of the Closing Date, except (i) for changes specifically permitted by this
Agreement (ii) for non-performance or breaches which, separately or in the
aggregate, would not have a Material Adverse Effect on the Company or on the
ability of the parties to consummate the transactions contemplated by this
Agreement and (iii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct, in all
material respects, as of such date, and
6.2.3 The Company shall have received a certificate of the
President or a Vice President of the Purchaser, dated the Closing Date,
certifying to the effect of the preceding SECTIONS 6.2.1 and 6.2.2.
6.3 Conditions to Obligation of Purchaser to Effect the Merger. The
obligation of the Purchaser to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
6.3.1 (i) There shall have been no intentional or willful
non-performance, in any material respect, by the Company of its agreements
contained in this Agreement required to be performed on or prior to the Closing
Date nor shall there have been any willfully or intentionally untrue
representation or warranty of the Company contained in this Agreement or in any
document delivered in connection herewith, (ii) the Company shall have
performed its agreements contained in this Agreement required to be performed
on or prior to the Closing Date, and the representations and warranties of the
Company contained in this Agreement and in any document delivered in connection
herewith shall be true and correct as of the Closing Date, except (A) for
changes specifically permitted by this Agreement, (B) for non-performance or
breaches which, separately or in the aggregate, would not have a Material
Adverse Effect on the Company or the Purchaser or on the ability of the parties
to consummate the transactions contemplated by this Agreement and (C) that
those representations and warranties which address matters only as of a
particular date shall remain true and correct, in all material respects, as of
such date, and (iii) the Purchaser shall have received a certificate of the
President or a Vice President of the Company, dated the Closing Date,
certifying to the effect of the preceding clauses (i) and (ii).
6.3.2 From the date of this Agreement through the Effective Time,
there shall not have occurred any Material Adverse Change with respect to the
Company, provided, however, that the loss of ARISTECH CHEMICAL CORP. as a
customer of the Company as a result of the enforcement of restrictions
contained in SECTION 5.2.20 shall not constitute a Material Adverse Change with
respect to the Company.
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6.3.3 The Stock Option Agreements shall have remained in full
force and effect through the Effective Time.
6.3.4 After the Effective Time, no person shall have any right
under any Company Option, or any Stock Plan or other plan, program or
arrangement to acquire any equity securities of the Company.
6.3.5 There shall not have been any action taken, or any statute,
rule, regulation, order, judgment or decree proposed, enacted, promulgated,
entered, issued, or enforced by any foreign or United States federal, state or
local Governmental Entity, and there shall be no action, suit or proceeding
pending which (i) makes this Agreement, the Merger, or any of the other
transactions contemplated by this Agreement illegal or imposes or may impose
material damages or penalties in connection therewith, (ii) requires the
divestiture of a material portion of the business of the Purchaser and its
Subsidiaries taken as a whole, or of the Company taken as a whole or of the
Surviving Corporation and its Subsidiaries taken as a whole, (iii) imposes
material limitations on the ability of the Purchaser effectively to exercise
full rights of ownership of shares of capital stock of the Surviving
Corporation (including the right to vote such shares on all matters properly
presented to the stockholders of the Surviving Corporation) or makes the
holding by the Purchaser of any such shares illegal or subject to any
materially burdensome requirement or condition, (iv) requires the Purchaser,
the Company, the Surviving Corporation or any of their respective material
Subsidiaries or affiliates to cease or refrain from engaging in any material
business, or (v) otherwise prohibits, restricts, or delays consummation of the
Merger or any of the other transactions contemplated by this Agreement in any
material respect or increases or may increase in any material respect the
liabilities or obligations of the Purchaser or the Surviving Corporation
arising out of this Agreement, the Merger, or any of the other transactions
contemplated by this Agreement.
6.3.6 The Company shall (i) have received the consents and
approvals listed in SCHEDULE 6.3.6.1 in form and substance satisfactory to
Purchaser and duly executed by the person or entity granting such consent or
approval and (ii) have terminated on terms satisfactory to Purchaser the
contracts, agreements and other arrangements set forth on SCHEDULE 6.3.6.2.
6.3.7 The Company shall have provided the Purchaser with comfort
letters from the Company's independent accountants, dated the mailing date of
the Proxy Statement and the Effective Time of the Merger, in form and
substances satisfactory to Purchaser.
6.3.8 The Company shall have entered into employment and
non-competition contracts with such key employees of the Company, in such
durations and in such compensatory amounts as are shown on SCHEDULE 6.3.8, in
form and substance satisfactory to Purchaser.
6.3.9 The Company shall have provided the Purchaser with such
certificates of the secretary of the Company, certified copies of notices of
meetings and resolutions
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authorizing the Merger, bylaws and incumbency certificates as the Purchaser
shall reasonably require.
6.3.10 The Purchaser shall have obtained the consent to the
Merger from Bank of America National Trust and Savings Association ("Bank of
America") pursuant to that Credit Agreement by and among Spartech Corporation,
Bank of America and the other financial institutions named therein dated as of
August 15, 1995.
6.3.11 The Purchaser shall be satisfied, in its sole and
absolute discretion, with the results of its investigation and/or review of (a)
the compliance by the Company with all applicable Environmental Laws, (b) any
Releases of Hazardous Materials on owned or leased properties of the Company or
in, on or affecting such properties or any surrounding site, and any notices or
claims received by the Company under any Environmental Laws, (c) underground
storage tanks located on any owned or leased properties of the Company, and (d)
friable asbestos or asbestos-containing materials at, on or in the owned or
leased properties of the Company.
ARTICLE 7
Termination
7.1 Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval of this Agreement by the stockholders of the Company, by
the mutual consent of the Purchaser and the Company.
7.2 Termination by Either Purchaser or Company. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of either the Purchaser or the Company if (a) the Merger shall not have been
consummated by June 30, 1996, (b) the approval of the Company's stockholders
required by SECTION 6.1.1 shall not have been obtained at a meeting duly
convened therefor or at any adjournment thereof, or (c) a United States federal
or state court of competent jurisdiction or United States federal or state
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
by this Agreement and such order, decree, ruling or other action shall have
become final and non-appealable; provided, that the party seeking to terminate
this Agreement pursuant to this clause (c) shall have used all reasonable
efforts to remove such injunction, order or decree; and provided, in the case
of a termination pursuant to clause (a) above, that the terminating party shall
not have breached in any material respect its obligations under this Agreement
in any manner that shall have proximately contributed to the failure to
consummate the Merger by June 30, 1996.
7.3 Termination by Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the adoption and approval by the stockholders of the Company referred to
in SECTION 6.1.1, by action of the
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Board of Directors of the Company, if (a) there is an Alternative Proposal
which is not subject to the arrangement of financing (other than securities of
an acquiror to be issued to holders of shares of Common Stock in an acquisition
thereof by merger or consolidation) and that the Board of Directors of the
Company in good faith determines (in consultation with its financial advisors)
represents a financially superior transaction for the stockholders of the
Company as compared to the Merger and in the exercise of its good faith
judgment as to its fiduciary duties to its stockholders imposed by law, as
advised by outside counsel, the Board of Directors of the Company determines
that such termination is required by reason of such Alternative Proposal being
made; provided that the Company shall notify the Purchaser promptly of its
intention to terminate this Agreement or enter into a definitive agreement with
respect to any Alternative Proposal (which notice shall describe the material
terms of such definitive agreement), but in no event shall such notice be given
less than 48 hours prior to the public announcement of the Company's
termination of this Agreement; and provided further that the right to terminate
this Agreement pursuant to this clause shall not be available if there has been
a non-performance or breach by the Company which has or would reasonably be
expected to have resulted in a failure of condition under SECTION 6.3.1 hereof,
or (b) there has been a non-performance or breach by the Purchaser which has or
would reasonably be expected to have resulted in a failure of condition under
SECTION 6.2. Notwithstanding the foregoing, the Company's ability to terminate
this Agreement pursuant to SECTION 7.2 or this SECTION 7.3 is conditioned upon
the prior payment by the Company of any amounts owed by it pursuant to SECTIONS
7.5.1 AND 7.6 to the extent owed thereunder.
7.4 Termination by Purchaser. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by the stockholders of the Company referred to in SECTION
6.1.1, by action of the Board of Directors of the Purchaser, if (a) the Board
of Directors of the Company shall have withdrawn or modified in a manner
materially adverse to the Purchaser its approval or recommendation of this
Agreement or the Merger or shall have recommended an Alternative Proposal to
the Company's stockholders, (b) there has been a non-performance or breach by
the Company which has or would reasonably be expected to have resulted in a
failure of condition under SECTION 6.3.
7.5 Effect of Termination and Abandonment.
7.5.1 In the event that any person shall have made an Alternative
Proposal for the Company and (i) thereafter this Agreement is terminated
pursuant to SECTION 7.3 or SECTION 7.4 or (ii) this Agreement is terminated for
any other reason (other than the breach of this Agreement by the Purchaser)
and, in the case of this clause (ii) only, a transaction contemplated by such
Alternative Proposal is consummated on or before July 20, 1996 (either of the
foregoing events being called a "Payment Event"), then the Company shall pay
the Purchaser a fee of $250,000, which amount shall be payable by wire transfer
of same day funds either on the date contemplated in the last sentence of
SECTION 7.2 if applicable or, otherwise, within two business days after such
amount becomes due. The Company acknowledges that the agreements contained in
this SECTION 7.5.1 AND 7.6 are an integral part of the transactions
contemplated in this Agreement, and that, without these agreements, the
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Purchaser would not enter into this Agreement. If the Company fails to promptly
pay the amount due pursuant to this SECTION 7.5.1 AND 7.6, and, in order to
obtain such payment, the Purchaser commences a suit which results in a judgment
against the Company for the fees set forth in this SECTION 7.5.1 AND 7.6, the
Company shall pay to the Purchaser its costs and expenses (including attorneys'
fees) in connection with such suit, together with interest on the amount of the
fee at the rate of 12% per annum.
7.5.2 In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this ARTICLE 7, all obligations of the
parties hereto shall terminate, except the obligations of the parties pursuant
to this SECTION 7.5 AND 7.6 and except for the provisions of SECTIONS 5.9, 8.3,
8.4, 8.6, 8.8, 8.9, 8.10, 8.12 and 8.13. Moreover, in the event of termination
of this Agreement pursuant to SECTIONS 7.2, 7.3 or 7.4 (other than any
termination in which a fee is paid by the Company to the Purchaser in
accordance with SECTION 7.5.1, in which case the termination fee provided
therein and the reimbursement required under SECTION 7.6 shall be the
Purchaser's sole and exclusive remedy), nothing herein shall prejudice the
ability of the non-breaching party from seeking damages from any other party
for any willful breach of any material provision of this Agreement, including
without limitation, attorneys' fees and the right to pursue any remedy at law
or in equity.
7.6 Purchaser shall pay all filing fees in connection with the filing
required under the HSR Act, provided, however, that if this Agreement is
terminated for any reason, the Company will reimburse Purchaser for 50% of such
fees.
7.7 Extension, Waiver. At any time prior to the Effective Time, any
party hereto, by action taken by its Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions for the benefit of such party
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE 8
General Provisions
8.1 Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to the extent
expressly provided herein to be conditions to the Merger and shall not survive
the Merger, provided, however, that the agreements contained in ARTICLE 2 and
this ARTICLE 8 shall survive the Merger and SECTIONS 7.5 AND 7.6 shall survive
termination.
8.2 Notices. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand
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delivery or certified or registered mail (return receipt requested and
first-class postage prepaid), addressed as follows:
If to the Purchaser: If to the Company:
Spartech Corporation Portage Industries Corporation
7733 Forsyth, Suite 1450 1325 Adams Street
Clayton, Missouri 63105 Portage, Wisconsin 53901
Attn: David B. Mueller Attn: Anthony J. Lisauskas
Facsimile: 314-721-1447 Facsimile: 608-742-5707
With copies to: With copies to:
Armstrong, Teasdale, Schlafly & Davis Michael Best & Friedrich
One Metropolitan Square, Suite 2600 100 East Wisconsin Avenue
St. Louis, Missouri 63102 Milwaukee, Wisconsin 53202
Attn: Albert F. Bender, III Attn: Jerome H. Kringel
Facsimile: 314-621-5065 Facsimile: 414-277-0656
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
8.3 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the
parties hereto or their respective heirs, successors, executors, administrators
and assigns any rights, remedies, obligations or liabilities under or by reason
of this Agreement.
8.4 Entire Agreement. This Agreement, the Exhibits, the Schedules, the
letter agreement dated December 14, 1995, between the Purchaser and Mesirow
Financial, and any documents delivered by the parties in connection herewith
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision
of this Agreement shall be binding upon any party hereto unless made in writing
and signed by all parties hereto.
8.5 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
stockholders of the Company, but after any such stockholder approval, no
amendment shall be made which by law requires the further
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approval of stockholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
8.6 Governing Law. Except to the extent that Delaware law is
mandatorily applicable to the Merger and the rights of the stockholders of the
Company and the Purchaser, this Agreement shall be governed by, and construed
in accordance with the laws of the State of Missouri applicable to contracts
executed and to be performed entirely within that state without regard to the
conflicts of laws principles thereof.
8.7 Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
8.8 Headings. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
8.9 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
8.10 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties,
covenants or agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or be construed
as a waiver of any prior or subsequent breach of the same or any other
provision hereunder.
8.11 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules attached hereto and referred to herein are hereby incorporated herein
and made a part hereof for all purposes as if fully set forth herein.
8.12 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
8.13 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance
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with its specific terms or was otherwise breached. It is accordingly agreed
that the parties shall be entitled to obtain an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof. The parties hereto irrevocably consent to service of process
in the manner described in SECTION 8.2 hereof, AND EACH PARTY HERETO
IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY SUIT OR PROCEEDING BROUGHT
TO ENFORCE OR INTERPRET THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
"Purchaser" SPARTECH CORPORATION
By:_______________________________
"Mergeco" SPARTECH PLASTICS, INC.
By:_______________________________
"Company" PORTAGE INDUSTRIES CORPORATION
By:_______________________________
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<PAGE> 77
EXHIBIT B
SECTION 262
OF THE
DELAWARE GENERAL CORPORATION LAW
s 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 his 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 of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251, 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 subsections (f) or (g) 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 Section Section 251,
<PAGE> 78
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;
b. Shares of stock of any other corporation, or
depository receipts in respect thereof, which shares of stock
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 Section 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
<PAGE> 79
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
(2) If the merger or consolidation was approved pursuant to
Section 228 or 253 of this title, the surviving or resulting
corporation, either before the effective date of the merger or
consolidation or within 10 days thereafter, shall notify each of the
stockholders entitled to appraisal rights of the effective date of the
merger or consolidation and that appraisal rights are available for
any or all of the shares of the constituent corporation, and shall
include in such notice a copy of this section. The notice shall be
sent by certified or registered mail, return receipt requested,
addressed to the stockholder at his address as it appears on the
records of the corporation. Any stockholder entitled to appraisal
rights may, within 20 days after the date of mailing of the notice,
demand in writing from the surviving or resulting corporation the
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.
(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 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
<PAGE> 80
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 the
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 1 or more
publications at least 1 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 who have become 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 of 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
or 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
<PAGE> 81
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.
(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 dividends 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 time
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.
<PAGE> 82
EXHIBIT C
SHAREHOLDER OPTION AGREEMENT
This Shareholder Option Agreement (the "Agreement") is entered into
this 26th day of January, 1996 by and between ALLSTATE INSURANCE COMPANY
("Shareholder") and SPARTECH CORPORATION, a Delaware corporation ("Optionee").
WITNESSETH:
WHEREAS, Optionee has entered into a letter of intent dated January
22, 1996 (the "Letter of Intent") with Portage Industries Corporation, a
Delaware corporation ("Portage"), providing for the purchase by Optionee of all
outstanding Portage Common Stock at a price of $6.60 per share; and
WHEREAS, the transaction is expected to be structured as a cash merger
(the "Merger"); and
WHEREAS, Shareholder owns 459,660 shares of Portage Common Stock (the
"Optioned Shares"); and
WHEREAS, Shareholder desires to induce Optionee to proceed with the
Merger.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and in consideration of $1.00 and such other
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Grant and Exercise of Option. Shareholder hereby grants
Optionee an irrevocable option (the "Option") to purchase all of its Optioned
Shares during the Exercise Period (as defined below) at a price in cash of
$6.60 per share, or such higher price as may be offered by Optionee pursuant to
the Merger. On the terms and subject to the conditions of this Agreement,
Optionee may exercise the Option in whole, but not in part, at any time during
the Exercise Period. To exercise the Option, Optionee shall give written
notice to Shareholder specifying a place and date for the closing which date
shall not be later than ten business days from the date of such notice and may
be one day after the delivery of such notice or earlier if reasonably
practicable. The giving of such notice shall create a binding obligation of
Optionee to buy and of Shareholder to sell the Optioned Shares on the closing
date. For the purposes of this Agreement, the "Exercise Period" shall mean the
period commencing on the date hereof and extending for a period of 120 days
thereafter.
2. Closing. At the closing (the "Closing") of the purchase of
Optioned Shares:
<PAGE> 83
(a) against delivery of Shareholder's Optioned Shares,
Optionee shall pay to Shareholder the aggregate purchase price for such
Optioned Shares by bank cashier's check or by wire transfer to a bank
designated by Shareholder; and
(b) Shareholder shall deliver to Optionee a duly-executed
certificate or certificates representing all of the Optioned Shares, together
with stock powers endorsed in blank, relating to such certificates and, if
requested by Optionee, an irrevocable proxy, duly executed by Shareholder,
authorizing such persons as Optionee shall designate to act for Shareholder as
its lawful agent, attorney and proxy, with full power of substitution, to vote
in such manner as such agent, attorney and proxy or its substitute shall in its
sole discretion deem proper, and otherwise act with respect to the Optioned
Shares which Shareholder is entitled to vote at any meeting (whether annual or
special and whether or not an adjourned meeting) of Portage's Shareholder or
otherwise, and revoking any prior proxies granted by Shareholder with respect
to the Optioned Shares.
3. Covenants of Shareholder. During the period from the date of
this Agreement until the termination of the Option, except in accordance with
the provisions of this Agreement, Shareholder agrees that it will not:
(a) sell, transfer, pledge, assign or otherwise dispose
of, or enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer, pledge, assignment or other disposition of
any Optioned Shares;
(b) grant any proxies, deposit any Optioned Shares into a
voting trust or enter into a voting agreement with respect to any Optioned
Shares; or
(c) solicit or encourage any party, other than Optionee,
to acquire or offer to acquire Portage, any of its stock or a material portion
of the Portage's assets or business;
4. Representations and Warranties of Shareholder. Shareholder
represents and warrants to Optionee as follows:
(a) Shareholder owns the number of Optioned Shares
specified in the recitals of this Agreement and has the right, power and
authority to execute and deliver this Agreement and to sell the Optioned
Shares; such execution, delivery and sale will not violate or breach any
outstanding agreement or instrument to which Shareholder is a party; and this
Agreement constitutes a valid and binding agreement on the part of Shareholder,
enforceable in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles relating to or limiting creditor's rights generally;
<PAGE> 84
(b) the Optioned Shares will at the Closing be held by
Shareholder, or by a custodian for the account of the Shareholder, free and
clear of all liens, claims, encumbrances and security interests with respect to
the ownership or voting of the Optioned Shares or otherwise, other than
pursuant to this Agreement;
(c) upon purchase of the Optioned Shares, Optionee shall
receive good and marketable title to the Optioned Shares, free and clear of all
liens, claims, encumbrances and security interests.
5. Representations and Warranties of Optionee. Optionee
represents and warrants to Shareholder that it has the right, power and
authority to execute and deliver this Agreement and to purchase the Optioned
Shares; such execution and delivery, and such purchase, if any, will not
violate or breach any outstanding agreement or instrument to which Optionee is
a party; and this Agreement constitutes the valid and binding agreement on the
part of Optionee, enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or limiting
creditor's rights generally.
6. Permitted Sale. If Optionee or any of its affiliates
commences a tender or exchange offer for shares of Portage, Shareholder may
tender or sell its Optioned Shares pursuant thereto, notwithstanding any
provision of this Agreement to the contrary. Upon the purchase of such
Optioned Shares, pursuant to such tender or exchange offer, Shareholder's
obligations under this Agreement with respect to such purchased shares shall
terminate.
7. Termination. In the event that Optionee determines not to
proceed with the Merger or to otherwise acquire all of the outstanding shares
of Portage Common Stock, and communicates the same to Portage pursuant to the
terms of the Letter of Intent or the definitive merger agreement, this
Agreement shall immediately terminate without liability to either party, except
that the obligations contained in Article 14 shall survive.
8. Adjustments. In the event of any increase or decrease or
other change in the stock of Portage by reason of stock dividends, split-up,
recapitalizations, combinations, exchanges of shares or the like, the number of
Portage shares subject to the Option and the exercise price per Optioned Share
shall be adjusted appropriately.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Missouri.
10. Further Assurances. Each party hereto shall perform such
further acts and execute such further documents as may reasonably be required
to carry out the provisions of this Agreement,
-3-
<PAGE> 85
including instruments necessary or desirable to complete the transfer, sale and
assignment of the Optioned Shares.
11. Assignment. This Agreement may not be assigned by any party
hereto, except that Optionee may assign to one or more of its affiliates any
and all of the rights and obligations of Optionee under this Agreement,
including, without limitation, the right to substitute in its place such
affiliates as the Optionee may designate.
12. Remedies. The parties agree that the Optioned Shares are
unique and that legal remedies for breach of this Agreement will be inadequate
and that this Agreement may be enforced by injunctive or other equitable
relief.
13. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed duly given if
delivered in person, by cable, telex, telecopy or telegram or by registered or
certified mail, postage prepaid addressed as follows:
To Optionee: Spartech Corporation
7733 Forsyth, Suite 1450
Clayton, Missouri 63105-1817
Attention: David B. Mueller
With copies to: Armstrong, Teasdale, Schlafly & Davis
One Metropolitan Square, Suite 2700
St. Louis, Missouri 63102-2740
Attention: Albert F. Bender, III, Esq.
To Shareholder: Allstate Insurance Company
Allstate Plaza South, Ste. G5B
Northbrook, Illinois 60062
Attn: Venture Capital Division,
D. O'Connell
14. Effect of Invalidity. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, such
provision shall be interpreted to be only so broad as is enforceable.
15. Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
-4-
<PAGE> 86
16. Entire Agreement; Binding Effect; Benefits. This Agreement
contains the entire agreement between the parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. No supplement,
modification, or amendment of this Agreement shall be binding unless executed
in writing by both parties. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns. Nothing in this Agreement,
expressed or implied, is intended to or shall confer on any person other than
the parties hereto and their respective heirs, legal representatives and
successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
17. Expenses. Each of the parties hereto shall bear and pay all
costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the day and year first above written.
Optionee:
SPARTECH CORPORATION
By:_______________________________
Title:____________________________
Shareholder:
ALLSTATE INSURANCE COMPANY
By:_______________________________
Title: Authorized Signatory
By:_______________________________
Title: Authorized Signatory
-5-
<PAGE> 87
EXHIBIT D
SHAREHOLDER OPTION AGREEMENT
This Shareholder Option Agreement (the "Agreement") is entered into
this 26th day of January, 1996 by and between MADISON ALLEN SELF
("Shareholder") and SPARTECH CORPORATION, a Delaware corporation ("Optionee").
WITNESSETH:
WHEREAS, Optionee has entered into a letter of intent dated January
22, 1996 (the "Letter of Intent") with Portage Industries Corporation, a
Delaware corporation ("Portage"), providing for the purchase by Optionee of all
outstanding Portage Common Stock at a price of $6.60 per share; and
WHEREAS, the transaction is expected to be structured as a cash merger
(the "Merger"); and
WHEREAS, Shareholder owns 324,500 shares of Portage Common Stock (the
"Optioned Shares"); and
WHEREAS, Shareholder desires to induce Optionee to proceed with the
Merger.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and in consideration of $1.00 and such other
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Grant and Exercise of Option. Shareholder hereby grants
Optionee an irrevocable option (the "Option") to purchase all of his Optioned
Shares during the Exercise Period (as defined below) at a price in cash of
$6.60 per share, or such higher price as may be offered by Optionee pursuant to
the Merger. On the terms and subject to the conditions of this Agreement,
Optionee may exercise the Option in whole, but not in part, at any time during
the Exercise Period. To exercise the Option, Optionee shall give written
notice to Shareholder specifying a place and date for the closing which date
shall not be later than ten business days from the date of such notice and may
be one day after the delivery of such notice or earlier if reasonably
practicable. The giving of such notice shall create a binding obligation of
Optionee to buy and of Shareholder to sell the Optioned Shares on the closing
date. For the purposes of this Agreement, the "Exercise Period" shall mean the
period commencing on the date hereof and extending for a period of 120 days
thereafter.
2. Closing. At the closing (the "Closing") of the purchase of
Optioned Shares:
-1-
<PAGE> 88
(a) against delivery of Shareholder's Optioned Shares,
Optionee shall pay to Shareholder the aggregate purchase price for such
Optioned Shares by bank cashier's check or by wire transfer to a bank
designated by Shareholder; and
(b) Shareholder shall cause to be delivered to Optionee a
duly executed certificate or certificates representing all of the Optioned
Shares, together with stock powers endorsed in blank, relating to such
certificates (or at Optionee's request the shares which are currently held in
street name, may be delivered as instructed by Optionee through the facilities
of the Depository Trust Company) and, if requested by Optionee, an irrevocable
proxy, duly executed by Shareholder, authorizing such persons as Optionee shall
designate to act for Shareholder as his lawful agent, attorney and proxy, with
full power of substitution, to vote in such manner as such agent, attorney and
proxy or its substitute shall in its sole discretion deem proper, and otherwise
act with respect to the Optioned Shares which Shareholder is entitled to vote
at any meeting (whether annual or special and whether or not an adjourned
meeting) of Portage's Shareholder or otherwise, and revoking any prior proxies
granted by Shareholder with respect to the Optioned Shares.
3. Covenants of Shareholder. During the period from the date of
this Agreement until the termination of the Option, except in accordance with
the provisions of this Agreement, Shareholder agrees that he will not:
(a) sell, transfer, pledge, assign or otherwise dispose
of, or enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer, pledge, assignment or other disposition of
any Optioned Shares;
(b) grant any proxies, deposit any Optioned Shares into a
voting trust or enter into a voting agreement with respect to any Optioned
Shares; or
(c) solicit or encourage any party, other than Optionee,
to acquire or offer to acquire Portage, any of his stock or a material portion
of the Portage's assets or business;
4. Representations and Warranties of Shareholder. Shareholder
represents and warrants to Optionee as follows:
(a) Shareholder owns the number of Optioned Shares
specified in the recitals of this Agreement and has the right, power and
authority to execute and deliver this Agreement and to sell the Optioned
Shares; such execution, delivery and sale will not violate or breach any
outstanding agreement or instrument to which Shareholder is a party; and this
Agreement constitutes a valid and binding agreement on the part of Shareholder,
enforceable in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar
<PAGE> 89
laws or equitable principles relating to or limiting creditor's rights
generally;
(b) the Optioned Shares will at the Closing be held by
Shareholder, or by a custodian for the account of the Shareholder, free and
clear of all liens, claims, encumbrances and security interests with respect to
the ownership or voting of the Optioned Shares or otherwise, other than
pursuant to this Agreement;
(c) upon purchase of the Optioned Shares, Optionee shall
receive good and marketable title to the Optioned Shares, free and clear of all
liens, claims, encumbrances and security interests.
5. Representations and Warranties of Optionee. Optionee
represents and warrants to Shareholder that it has the right, power and
authority to execute and deliver this Agreement and to purchase the Optioned
Shares; such execution and delivery, and such purchase, if any, will not
violate or breach any outstanding agreement or instrument to which Optionee is
a party; and this Agreement constitutes the valid and binding agreement on the
part of Optionee, enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or limiting
creditor's rights generally.
6. Permitted Sale. If Optionee or any of its affiliates
commences a tender or exchange offer for shares of Portage, Shareholder may
tender or sell his Optioned Shares pursuant thereto, notwithstanding any
provision of this Agreement to the contrary. Upon the purchase of such
Optioned Shares, pursuant to such tender or exchange offer, Shareholder's
obligations under this Agreement with respect to such purchased shares shall
terminate.
7. Termination. In the event that Optionee determines not to
proceed with the Merger or to otherwise acquire all of the outstanding shares
of Portage Common Stock, and communicates the same to Portage pursuant to the
terms of the Letter of Intent or the definitive merger agreement, this
Agreement shall immediately terminate without liability to either party, except
that the obligations contained in Article 14 shall survive.
8. Adjustments. In the event of any increase or decrease or
other change in the stock of Portage by reason of stock dividends, split-up,
recapitalizations, combinations, exchanges of shares or the like, the number of
Portage shares subject to the Option and the exercise price per Optioned Share
shall be adjusted appropriately.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Missouri.
-3-
<PAGE> 90
10. Further Assurances. Each party hereto shall perform such
further acts and execute such further documents as may reasonably be required
to carry out the provisions of this Agreement, including instruments necessary
or desirable to complete the transfer, sale and assignment of the Optioned
Shares.
11. Assignment. This Agreement may not be assigned by any party
hereto, except that Optionee may assign to one or more of its affiliates any
and all of the rights and obligations of Optionee under this Agreement,
including, without limitation, the right to substitute in its place such
affiliates as the Optionee may designate.
12. Remedies. The parties agree that the Optioned Shares are
unique and that legal remedies for breach of this Agreement will be inadequate
and that this Agreement may be enforced by injunctive or other equitable
relief.
13. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed duly given if
delivered in person, by cable, telex, telecopy or telegram or by registered or
certified mail, postage prepaid addressed as follows:
To Optionee: Spartech Corporation
7733 Forsyth, Suite 1450
Clayton, Missouri 63105-1817
Attention: David B. Mueller
With copies to: Armstrong, Teasdale, Schlafly & Davis
One Metropolitan Square, Suite 2700
St. Louis, Missouri 63102-2740
Attention: Albert F. Bender, III, Esq.
To Shareholder: Madison Allen Self
Tioga International, Inc.
1440 Huntington Drive
Calumet City, Illinois 60409
With copies to: Stephen A. Tsoris, Esq.
McDermott, Will & Emery
227 West Monroe
Chicago, Illinois 60606
14. Effect of Invalidity. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any
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provision of this Agreement is so broad as to be unenforceable, such provision
shall be interpreted to be only so broad as is enforceable.
15. Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
16. Entire Agreement; Binding Effect; Benefits. This Agreement
contains the entire agreement between the parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. No supplement,
modification, or amendment of this Agreement shall be binding unless executed
in writing by both parties. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns. Nothing in this Agreement,
expressed or implied, is intended to or shall confer on any person other than
the parties hereto and their respective heirs, legal representatives and
successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
17. Expenses. Each of the parties hereto shall bear and pay all
costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, except that Optionee shall reimburse
Shareholder for up to $2,000 of the legal fees incurred by Shareholder in
connection with the negotiation of this Agreement.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the day and year first above written.
Optionee:
SPARTECH CORPORATION
By:_______________________________
Title:____________________________
Shareholder:
_______________________________
Madison Allen Self
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<PAGE> 92
Appendix ___
PORTAGE INDUSTRIES CORPORATION
1325 Adams Street
Portage, WI 53901
(608) 742-7123
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints _____________ and ________________,
and each of them, as Proxies, each with the power to appoint his substitute;
and hereby authorizes them to represent and to vote, as designated below, all
the shares of Common Stock of Portage Industries Corporation (the "Company")
held of record by the undersigned on _________, 1996, at the Special Meeting of
Stockholders to be held on ________ , 1996 and at any adjournment thereof.
1. On the proposal to approve the merger ("Merger") of the
Company with a wholly-owned subsidiary of Spartech Corporation
pursuant to an Agreement and Plan of Merger dated February
____, 1996, as described in the accompanying proxy statement.
[_] FOR the Merger [_] AGAINST the Merger [_] ABSTAIN
- -----------------------------------------------------------------
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
(Continued and to be signed on the reverse side)
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<PAGE> 93
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE MERGER.
Dated ________________________, 1996
------------------------------------
Signature
------------------------------------
Signature if held jointly
(Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, personal
representative, executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE
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