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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [X] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
CHEMI-TROL CHEMICAL CO.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: common
stock, without par value
(2) Aggregate number of securities to which transaction applies: 2,004,930
(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): $23.00
(4) Proposed maximum aggregate value of transaction: $46,113,390
(5) Total fee paid: $9,223
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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CHEMI-TROL CHEMICAL CO.
2776 C.R. 69 - GIBSONBURG, OHIO 43441
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NOTICE OF SPECIAL MEETING AND PROXY STATEMENT
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To All Shareholders:
A Special Meeting of Shareholders of Chemi-Trol Chemical Co. will be held
on April 22, 1998 at 10:00 a.m. local time, at the Holiday Inn Fremont/Port
Clinton, located at 3422 North State Route 53, Fremont, Ohio 43420, for the
following purposes:
1. To vote on a proposal to approve and adopt an Agreement and Plan of
Merger dated as of February 20, 1998, among Harsco Corporation, a
Delaware corporation ("Harsco"), H-Chemi Acquisition Corp., a
Pennsylvania corporation ("Acquisition Sub"), and Chemi-Trol Chemical
Co., an Ohio corporation ("Company") (the "Merger Agreement"). A copy of
the Merger Agreement is attached to the accompanying Proxy Statement as
Appendix A. If the Merger Agreement is approved, at the effective time
(the "Effective Time") of the merger: (i) Acquisition Sub shall be
merged with and into the Company (the "Merger") and the Company will
become a wholly owned subsidiary of Harsco and (ii) each share of common
stock, without par value, of the Company (each, a "Share") (the holders
of the Shares being hereinafter referred to as "shareholders") that is
issued and outstanding immediately prior to the Effective Time will be
converted into the right to receive $23.00 in cash (without interest
thereon), except those Shares owned by shareholders, if any, who
properly exercise their dissenters' rights will not be so converted.
2. To transact any other business that may properly come before the
meeting.
For the Board of Directors
Robert W. Woolf
Chairman, President and Chief
Executive Officer
March 25, 1998
PLEASE SIGN THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE
ENCLOSED POSTAGE-PAID ENVELOPE WHETHER OR NOT YOU
EXPECT TO ATTEND THE SPECIAL MEETING.
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CHEMI-TROL CHEMICAL CO.
2776 C.R. 69, Gibsonburg, Ohio 43431
March 25, 1998
PROXY STATEMENT
GENERAL MATTERS
The accompanying proxy is solicited by the Board of Directors of Company
for the Special Meeting of shareholders of the Company to be held at Holiday Inn
Fremont/Port Clinton, located at 3422 North State Route 53, Fremont, Ohio 43420
on April 22, 1998 at 10:00 a.m. local time. This proxy statement and the
enclosed form of proxy were first mailed, sent or given to shareholders on or
about March 25, 1998.
The cost of solicitation of proxies will be borne by the Company.
Solicitation other than by mail may be made by officers or by regular employees
of the Company for no additional compensation. In addition to using the mails
and officers and employees of the Company to solicit proxies, Morrow & Co. has
been retained at a cost of $4,500 plus expenses to aid in the solicitation of
proxies. Proxies may be solicited personally, by telephone, by telegram or other
electronic means.
Only shareholders of record at the close of business on March 20, 1998,
will be entitled to notice of and to vote at the meeting and at all adjournments
thereof (the "Record Date"). At the close of business on the Record Date, the
Company had outstanding 2,004,930 Shares, held by approximately [ ]
shareholders of record. Each Share will be entitled to one vote on the Merger
and on any other matter presented to shareholders at the Special Meeting.
Abstentions will be deemed to be present for the purpose of determining a
quorum for the meeting, but will be deemed not voting on issues or matters as to
which the abstention is applicable. Shares held by brokers that are not voted
will not be counted for any purposes.
The persons named in the proxy will vote all shares in accordance with the
instructions given by the shareholders in their respective proxies, returned,
duly executed and received by the Company on or prior to 10:00 a.m. on April 22,
1998. Any shareholder giving a proxy has the right to revoke it any time before
it is voted by giving notice to the Company in writing or in an open meeting.
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TABLE OF CONTENTS
PAGE
----
SUMMARY OF PROXY STATEMENT.................................. 3
THE SPECIAL MEETING......................................... 5
Introduction.............................................. 5
Matters to be Considered at the Special Meeting........... 5
Record Date and Voting.................................... 5
Vote Required; Revocability of Proxies.................... 6
Dissenting Shareholders' Rights........................... 6
PARTIES TO THE MERGER....................................... 8
Certain Information Concerning the Company................ 8
Certain Information Concerning Harsco and Acquisition
Sub.................................................... 12
THE MERGER.................................................. 13
Background of and Reasons for the Merger.................. 13
Financial Advisor......................................... 14
Accounting Treatment of the Merger........................ 17
Regulatory Requirements Applicable to the Merger.......... 17
THE MERGER AGREEMENT........................................ 18
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION............. 24
CERTAIN TAX CONSEQUENCES TO SHAREHOLDERS.................... 24
SELECTED FINANCIAL DATA..................................... 25
PRICE RANGE OF THE SHARES................................... 26
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 27
INDEPENDENT AUDITORS........................................ 28
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING............... 28
NOMINATIONS FOR THE BOARD OF DIRECTORS MADE BY
SHAREHOLDERS.............................................. 28
OTHER MATTERS............................................... 29
ADDITIONAL INFORMATION...................................... 29
Appendix A Agreement and Plan of Merger Dated as of February 20,
1998 among Harsco, Acquisition Sub and Company.
Appendix B Sections 1701.84 and 1701.85 of the Ohio General
Corporation Law
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SUMMARY OF PROXY STATEMENT
The following is a summary of certain information contained elsewhere in
this Proxy Statement. It is not, and is not intended to be, complete in itself.
Reference is made to, and this summary is qualified in its entirety by, the more
detailed information contained elsewhere in this Proxy Statement, including the
Appendices hereto, which are a part of this Proxy Statement. Shareholders are
encouraged to read carefully all of the information contained in this Proxy
Statement.
THE COMPANY
Chemi-Trol Chemical Co....... The Company manufactures steel pressure tanks for
above ground and underground storage of liquefied
petroleum gas and anhydrous ammonia, provides
pavement marking and vegetation management
services, and distributes herbicides, adjuvants,
plant growth regulators, sprayers, pavement
marking products and other related equipment and
products. The Company was reorganized in 1952 as
an Ohio corporation. The principal executive
offices of the Company are located at 2776 C.R.
69, Gibsonburg, Ohio 43431 and its telephone
number is (419) 665-2367. See "PARTIES TO THE
MERGER -- Certain Information Concerning the
Company."
Market Price Data............ The Shares are listed and traded on the NASDAQ
National Market under the symbol "CTRL." The
closing price of the Shares on December 17, 1997,
the last day on which trading in the Shares
occurred prior to the public announcement of the
Merger, as reported by NASDAQ, was $13.75 per
share. See "PRICE RANGE OF THE SHARES."
THE SPECIAL MEETING
Time, Date and Place......... The Special Meeting will be held on April 22,
1998, at 10:00 a.m., local time, at the Holiday
Inn Fremont/Port Clinton, located at 3422 North
State Route 53, Fremont, Ohio 43420.
Purpose...................... Holders of Shares will consider and vote upon a
proposal to approve and adopt the Merger
Agreement among Harsco, Acquisition Sub and the
Company pursuant to which each Share issued and
outstanding immediately prior to the Effective
Time will be converted into the right to receive
$23.00 in cash (without interest thereon), except
those Shares owned by shareholders, if any, who
properly exercise their dissenters' rights will
not be so converted.
Record Date.................. Only shareholders of record of Common Stock at
the close of business on March 20, 1998 are
entitled to notice of and to vote at the Special
Meeting. On such date, there were outstanding
2,004,930 Shares held by approximately [ ]
holders of record.
Voting Rights................ Each Share is entitled to one vote with respect
to the Merger Agreement and all other matters
presented at the Special Meeting.
Quorum; Votes Required....... The presence, in person or by proxy, at the
Special Meeting of the holders of a majority of
the aggregate number of Shares outstanding as of
the Record Date will be necessary to constitute a
quorum. The affirmative vote of the holders of
two-third of the outstanding Shares will be
required approve and adopt the Merger Agreement.
Revocability of Proxy........ Any shareholder who executes and returns a proxy
may revoke such proxy at any time before it is
voted by (i) notifying in writing or in person
the Corporate Secretary of the Company at the
principal executive offices of the Company, (ii)
granting a subsequent proxy, or (iii) appearing
in person and voting at the Special Meeting.
Attendance at the Special Meeting will not in and
of itself constitute revocation of a
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proxy. A holder of Shares will find enclosed a
form of proxy for such Shares and should sign and
return such proxy.
Dissenters' Rights........... Shareholders who do not vote to approve the
Merger Agreement and who exercise their
dissenters' rights in accordance with the
procedures set forth in Sections 1701.84 and
1701.85 of the OGCL will be entitled to receive
judicially determined fair value for their Shares
in lieu of merger consideration of $23 per Share.
See "THE SPECIAL MEETING -- Dissenting
Shareholders' Rights."
THE MERGER
Background of and Reasons
for the Merger............. Since December 31, 1994, the Shares have
generally under-performed most broad market
indexes. In addition, there is very little
trading activity in the Shares and the Company
receives no research coverage from any brokerage
firm. Therefore, shareholders of the Company have
very little liquidity in their investment in the
Company and little prospect of increased
liquidity in the future. The Board of Directors
determined that the Merger was in the best
interests of shareholders given the prospects of,
and the probable period of time required for, the
Company to achieve for its shareholders a level
of value equal to the value achieved for them by
the Merger if the Company remained independent or
pursued other alternatives.
Merger Considerations........ $23 cash per Share (without interest thereon)
Harsco Stock Option.......... The Company granted Acquisition Sub an option to
acquire 190,468 Shares at $13.75 per Share in the
event a Purchase Event (as defined) occurred with
a person other than Harsco or Acquisition Sub.
See "THE MERGER AGREEMENT -- Harsco Stock
Option."
Termination Fee.............. The Company has agreed to pay Harsco a
termination fee of $1.7 million in cash in the
event Harsco terminates the Merger Agreement due
to (i) a material breach of the Merger Agreement
by the Company that is not cured within five
business days following notice thereof or (ii)
failure of the shareholders to approve the Merger
Agreement following the Board of Directors
withdrawal of its recommendation or its
recommendation of another person's tender or
exchange offer.
Financial Advisor............ McDonald & Company Securities, Inc. ("McDonald &
Company") advised the Board to the effect that,
as of the date of its approval of the Merger
Agreement, the consideration to be received by
shareholders in the Merger was fair, from a
financial point of view. See "THE
MERGER -- Financial Advisor."
Regulatory Requirements...... Consummation of the Merger is subject to
expiration or early termination of the 30-day
waiting period (and any extension thereof) under
the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR Act"). The Company and Harsco
filed the required notifications under the HSR
Act on February 27, 1998.
Certain Federal Income Tax
Consequences of the
Merger..................... If the Merger Agreement is approved, each
Shareholder will recognize capital gain or loss
upon receipt of the cash payable in exchange for
his Shares in an amount equal to the difference
between the aggregate amount received by him and
his aggregate tax basis in the Shares exchanged.
A shareholder exercising dissenter's rights under
Ohio Law will also recognize gain or loss in an
amount equal to the difference between the cash
received by him in redemption of his Shares and
his aggregate tax basis in such Shares.
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CAUTIONARY STATEMENT FOR "SAFE HARBOR" PURPOSES UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
This Proxy Statement contains forward-looking statements within the meaning
of the federal securities laws. As a general matter, forward-looking statements
are statements focused upon future plans, objectives or performance as opposed
to historical items and include statements of anticipated events or trends and
expectations and beliefs relating to matters not historical in nature. Such
forward-looking statements are subject to uncertainties that are difficult to
predict and could cause actual results of the Company to differ materially from
those matters expressed or implied by such forward-looking statements.
THE SPECIAL MEETING
INTRODUCTION
This Proxy Statement is being furnished to the shareholders of Chemi-Trol
Chemical Co., an Ohio corporation, in connection with the Special Meeting to be
held on April 22, 1998 at 10:00 a.m. at the Holiday Inn Fremont/Port Clinton,
located at 3422 North State Route 53, Fremont, Ohio 43420.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
Each copy of this Proxy Statement mailed, sent or given to shareholders is
accompanied by a proxy card furnished in connection with the solicitation of
proxies by the Board of Directors of the Company (the "Board of Directors") for
use at the Special Meeting. At the Special Meeting, shareholders will consider
and vote on:
(a) A proposal to approve and adopt the Merger Agreement among Harsco,
Acquisition Sub and the Company. A copy of the Merger Agreement is
attached to this Proxy Statement as Appendix A. If the Merger
Agreement is approved, at the Effective Time: (i) Acquisition Sub
shall be merged with and into the Company and the Company will
become a wholly owned subsidiary of Harsco and (ii) each Share
that is issued and outstanding immediately prior to the Effective
Time will be converted into the right to receive $23.00 in cash
(without interest thereon), except those Shares owned by
shareholders, if any, who properly exercise their dissenters'
rights will not be so converted.
(b) Such other business as may properly come before the Special
Meeting or any adjournments or postponements thereof.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY ADOPTED THE MERGER AGREEMENT,
APPROVED THE MERGER, DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF THE
SHAREHOLDERS, AND RECOMMENDS THAT THE SHAREHOLDERS VOTE THEIR SHARES "FOR" AN
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE. FAILURE
TO RETURN THE PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL MEETING
WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" THE MERGER AGREEMENT.
RECORD DATE AND VOTING
The Board of Directors has fixed the close of business on March 20, 1998 as
the Record Date for the determination of the shareholders entitled to notice of
and to vote at the Special Meeting. Only shareholders of record at the close of
business on that date will be entitled to vote at the Special Meeting. At the
close of business on the Record Date, there were 2,004,930 Shares outstanding
and entitled to vote at the Special Meeting, held by approximately [ ]
shareholders of record.
Each shareholder on the Record Date will be entitled to one vote for each
Share held of record. The presence, in person or by proxy, of a majority of the
outstanding Shares is necessary to constitute a quorum at the Special Meeting.
Abstentions will also be included in the calculation of the number of votes
represented at the
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Special Meeting for purposes of determining whether a quorum has been achieved.
Shares held by brokers that are not voted will not be counted for any purpose.
The affirmative vote of holders of two-thirds of the outstanding Shares is
required to approve and adopt the Merger Agreement. If a Shareholder was a
record holder of Shares as of the close of business on the Record Date, such
Shareholder may elect to grant a proxy in favor of or against, or abstain with
respect to the Merger proposal by marking the "FOR," "AGAINST" or "ABSTAINS"
box, as applicable, underneath the Merger proposal on the accompanying proxy
card and signing, dating and returning it promptly in the enclosed post-paid
envelope. However, a vote to "ABSTAIN" on the Merger proposal or the failure to
vote a Share, in person or by proxy, acts as the equivalent of a vote "AGAINST"
the Merger proposal.
If the enclosed proxy card is properly executed and received by the Company
in time to be voted at the Special Meeting, the Shares represented thereby will
be voted in accordance with the instructions marked thereon. Executed proxies
with no instructions indicated thereon will be voted "FOR" approval and adoption
of the Merger Agreement.
The Board is not aware of any matters other than those set forth in the
Notice of Special Meeting of shareholders (which has been mailed to shareholders
along with this Proxy Statement) that may be brought before the Special Meeting.
If any other matters properly come before the Special Meeting, the persons named
in the accompanying proxy will vote the Shares represented by all properly
executed proxies on such matters in such manner as shall be determined by a
majority of the Board, except that Shares represented by proxies which have been
voted "against" the Merger Agreement will not be used to vote "for" postponement
or adjournment of the Special Meeting for the purposes of allowing additional
time for soliciting additional votes "for" the Merger Agreement. See " -- Vote
Required; Revocability of Proxies."
Shareholders should not forward any certificates for Shares with their
proxy cards. If the Merger is consummated, certificates for Shares should be
delivered in accordance with instructions set forth in a letter of transmittal,
which will be sent to shareholders as soon as reasonably practicable after the
Effective Time by The Fifth Third Bank of Northwestern Ohio, N.A., in its
capacity as the exchange agent and paying agent for the Merger.
VOTE REQUIRED; REVOCABILITY OF PROXIES
The affirmative vote of holders of two-thirds of the outstanding Shares is
required to approve and adopt the Merger Agreement. Each Share entitles the
record holder thereof as of the Record Date to one vote on the Merger Agreement.
Because the required vote of shareholders on the Merger Agreement is based upon
the total number of outstanding Shares, the failure to submit a proxy card (or
to vote in person at the Special Meeting) or the abstention from voting by a
shareholder (including broker non-votes) will have the same effect as a vote
cast "against" the approval and adoption of the Merger Agreement.
A shareholder may vote his or her Shares at the Special Meeting in person
or by proxy. A shareholder may appoint a proxy to vote or otherwise act for him
or her by signing and dating a proxy appointment form, either personally or by
his or her attorney-in-fact. An appointment of proxy is effective when received
by the Corporate Secretary. The appointment of proxy under the laws of the State
of Ohio is valid for eleven months, unless a longer period is expressly provided
in the appointment form.
The presence of a shareholder at the Special Meeting will not automatically
revoke such shareholder's proxy. However, a shareholder may revoke a proxy at
any time prior to its exercise by (i) delivering to the Corporate Secretary of
the Company a written notice of revocation prior to the Special Meeting, (ii)
delivering prior to the Special Meeting a duly executed proxy bearing a later
date or (iii) attending the Special Meeting and voting in person.
DISSENTING SHAREHOLDERS' RIGHTS
Shareholders of the Company will have certain rights under Ohio law to
dissent and demand appraisal of, and to receive payment in cash of the fair
value of, their Shares. Shareholders who perfect such rights by complying with
the procedures set forth in Sections 1701.84 and 1701.85 of the OGCL will have
the fair value of
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their Shares determined by an Ohio trial court and will be entitled to receive a
cash payment equal to such fair value from the Surviving Corporation. In
addition, such dissenting shareholders would be entitled to receive payment of a
fair rate of interest from the date and at a rate determined by the trial court
on the amount determined to be the fair value of their Shares. In determining
the fair value of the Shares, the court is required to take into account all
relevant factors; provided, however, any appreciation or depreciation in market
value of the Shares resulting from the transactions contemplated by the Merger
Agreement will be excluded. Accordingly, such determination could be based upon
considerations other than or in addition to, the market value of the Shares,
including, among other things, asset values and earning capacity.
A shareholder who wishes to perfect his rights as a dissenting shareholder
in the event the Merger Agreement is adopted must (a) have been the holder of
record of the Shares as to which he seeks relief as of the Record Date, (b) not
have voted his Shares in favor of adopting the Merger Agreement and (c) deliver
to the Company, not later than ten days after the Special Meeting, a written
demand for payment to him of the fair cash value of the Shares as to which he
seeks relief. Such written demand must state the name of the shareholder, his
address, the number of Shares as to which he seeks relief and the amount claimed
as the fair cash value thereof.
A vote against adoption of the Merger Agreement will not satisfy the
requirements of a written demand for payment as described above.
If the Company sends to a dissenting shareholder, at the address specified
in his written demand, a request for the certificates representing the Shares as
to which he seeks relief, the dissenting shareholder must within fifteen days
thereafter deliver the certificates requested. The Company will then endorse the
certificates with a legend to the effect that a demand for the fair cash value
of the Shares represented thereby has been made and promptly return such
certificates to the dissenting shareholder. Failure on the part of the
dissenting shareholder to deliver such certificates terminates his rights as a
dissenting shareholder, at the option of the Company, exercised by written
notice of such termination delivered to him within twenty days after the
expiration of the fifteen-day period, unless a court, for good cause shown,
otherwise directs. Nevertheless, upon such termination, the shareholder would be
entitled to receive merger consideration of $23 per Share for his Shares.
Unless the dissenting shareholder and the Company agree on the fair cash
value per Share as to which relief is sought, either may, within three months
after service of the shareholder's written demand, file a complaint in the Court
of Common Pleas of Sandusky County, Ohio. If the court finds that the
shareholder is entitled to be paid the fair cash value of any Shares, the court
may appoint one or more appraisers to receive evidence and to recommend a
decision on the amount of the fair cash value.
Fair cash value will be determined as of the day prior to the Special
Meeting, will be the amount a willing seller and willing buyer would accept or
pay with neither being under the compulsion to sell or buy, will not exceed the
amount specified in the shareholder's written demand, and will exclude any
appreciation or depreciation in the market value resulting from the Merger. The
court will make a finding as to the fair cash value of a Share and render
judgment against the Company for its payment with interest at such rate and from
such date as the court considers equitable. The cost of the proceedings,
including reasonable compensation to the appraisers to be fixed by the court,
shall be assessed or apportioned as the court considers equitable.
The rights of any dissenting shareholder will terminate if (a) he has not
complied with Section 1701.85 of the OGCL, unless the Company by action of its
Board of Directors waives such failure, (b) the Company abandons or is finally
enjoined or prevented from carrying out the Merger or the shareholders rescind
their adoption of the Merger Agreement, (c) the shareholder withdraws his
demand, with the consent of the Company by action of its Board of Directors, or
(d) the Company and the dissenting shareholder shall not have come to an
agreement as to the fair cash value per Share, and neither the Company nor the
shareholder shall have timely filed or joined in a complaint in an appropriate
court for a determination of the fair cash value of the Shares.
Because a proxy which does not contain voting instructions will, unless
revoked, be voted FOR adoption of the Merger Agreement, a shareholder who wishes
to exercise his dissenters' rights must either not sign or return his proxy or,
if he signs and returns his proxy, vote against or abstain from voting on
adoption of the Merger Agreement.
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THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING SHAREHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
SHAREHOLDERS DESIRING TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SECTIONS 1701.84 AND
1701.85 OF THE OGCL INCLUDED HEREWITH IN APPENDIX B. THE PRESERVATION AND
EXERCISE OF APPRAISAL RIGHTS ARE CONDITIONED ON STRICT ADHERENCE TO THE
APPLICABLE PROVISIONS OF THE OGCL.
PARTIES TO THE MERGER
CERTAIN INFORMATION CONCERNING THE COMPANY
GENERAL
The Company was incorporated under the laws of the State of Ohio in 1952.
The Company is presently organized on an operational basis into two divisions:
the Tank Division, located in Fremont, Ohio and the Chemical Group, located in
Gibsonburg, Ohio. Each division is headed by a General Manager who reports
directly to the Company's executive officers in Gibsonburg, Ohio. The complete
mailing address for the Company's principal executive offices is 2776 C.R. 69,
Gibsonburg, Ohio 43431 and its telephone number is (419) 665-2367.
The Company announced on December 6, 1996 that it had retained McDonald &
Company to advise it in connection with the possible sale of two of its non-core
businesses, the Cal-Van Tools and Cory Orchard & Turf Divisions. After a
strategic review of the Company's business, the Board of Directors determined
that, to maximize the potential for future growth and profitability, it should
concentrate on its Chemical Group and Tank Division and should dispose of the
Company's non-core businesses: the Cal-Van Tools and Cory Orchard & Turf
Divisions.
On March 25, 1997, the Company completed the sale of its Cory Orchard &
Turf Division to Terra International, Inc. for approximately $4.8 million.
On November 18, 1997, the Company completed the sale of certain assets of
its Cal-Van Tools Division to Eagle Tools, Inc., an Ohio Corporation ("Eagle"),
having its principal office in Guilford County, North Carolina. Eagle is a newly
formed corporation having common ownership with Horizon Tool, Inc. ("Horizon"),
a privately owned company located in Greensboro, North Carolina. Eagle purchased
inventory, machinery, equipment, fixtures, dies and the Cal-Van Tools name for a
cash payment of $1.5 million and a note of approximately $2.4 million. The
Company retained accounts receivable of approximately $4.8 million and inventory
having an estimated net market value of approximately $400,000. Eagle signed a
related one-year lease for the land and a building used by the Cal-Van Tools
Division that were not sold as a part of the business. All obligations of Eagle
under the acquisition agreement, the lease and the note have been guaranteed by
Horizon and certain obligations have been guaranteed by Eagle and Horizon's
principle shareholders.
TANK DIVISION
Products
Through its Tank Division, the Company manufactures steel pressure tanks
for above ground and underground storage of liquefied petroleum gas ("LPG") and
anhydrous ammonia ("NH3") at its plant located in Fremont, Ohio. The steel tanks
are manufactured in sizes ranging from 124-gallon water capacity to 1990-gallon
water capacity for LPG tanks and from 124-gallon water capacity to 2050-gallon
water capacity for NH3 tanks. Approximately 95% of the tanks manufactured by the
Company are for the storage of LPG. The Tank Division accounted for 75%, 72%,
and 71% of the Company's total revenues for 1997, 1996 and 1995, respectively.
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Marketing and Distribution
Sales of the Company's tanks are made directly by the Company to either
regional independent dealers or major multi-state marketers within a marketing
radius of approximately 1,000 miles from Fremont, Ohio. The 20 largest
industrial customers of the Company accounted for approximately one-third of the
net sales of this division for its fiscal year ended December 31, 1997.
The Company markets its tanks through the efforts of its own sales
personnel, telephone calls to existing and potential customers, direct mail
advertising, publication and distribution of catalogues, advertisements in trade
journals and attendance at various trade shows. Sales of the Company's tanks to
major multi-state marketers are made by the Tank Division's sales manager from
its principal office located in Fremont, Ohio. Sales to independent dealers are
made through Company-employed salesmen and independent sales representatives.
Each of the independent sales representatives is assigned an exclusive territory
and is compensated by commissions based upon sales in such representative's
respective territory. Sales representative agreements generally may be
terminated with minimal notice by either party. The Company transports its steel
tanks to its customers by means of its own truck fleet.
Financing of Customer Accounts
Sales of tanks are normally made on a net basis. The Company does, however,
offer to its qualified customers two alternate methods of financing the purchase
of its steel tanks: the "Tank Finance Plan" and the "Tank Lease Plan".
Under the Tank Finance Plan, the Company finances 90% of the sales price of
a tank over a 24 to 48 month period at an effective annual interest rate of
approximately 10.25% in 1997. The Company retains a security interest in the
tanks as security for the payment of the financed amount. The installment paper
evidencing the customer's obligation is either held by the Company as an
investment, sold with recourse for the principal amount thereof to the Company's
profit sharing plan or pledged as collateral for borrowings over a like period.
In 1997, the Company did not borrow any funds under the latter arrangement, but
sold notes with recourse with an aggregate principal amount of approximately
$1,672,000 to the Company's profit sharing plan. For the fiscal year ended
December 31, 1997, approximately 15% of the total net sales of the Tank Division
was sold to customers under the Tank Finance Plan.
Under the Tank Lease Plan, the Company leases liquid propane gas tanks to
customers for noncancellable terms of five or ten years. The present value of
the minimum payments under such leases is included in net sales and the cost of
the tanks is charged to cost of sales. Estimated residual values of the leased
tanks are not significant. During the fiscal year ended December 31, 1997, the
Company invested approximately $395,220 in such leases. For the fiscal year
ended December 31, 1997, approximately 1% of the total net sales of the Tank
Division was made under the Tank Lease Plan.
Raw Materials and Supplies
Steel plate is the major raw material used by the Company in the
manufacture of steel pressure tanks. The Company purchases steel plate from a
variety of domestic and foreign sources. Although the Company believes that it
will be able to obtain its steel plate requirements from multiple sources on a
competitive basis, the inability of the Company to obtain a satisfactory supply
of steel plate could have a materially adverse effect on its tank manufacturing
operations.
Backlog
The dollar amounts of backlog of the Tank Division believed to be firm as
of March 1, 1998 and 1997 were $4,560,000 and $4,514,000, respectively. The
entire 1998 backlog is expected to be filled during 1998.
Competition
The markets for the Company's steel tanks are highly competitive and the
Company competes with other companies having a higher total sales volume and
greater financial resources than the Company. Competition in
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these markets is based primarily on service and price. The Company's largest
competitors are Trinity Industries, Inc. of Dallas, Texas, American Welding and
Tank Co. of Harrisburg, Pennsylvania, a subsidiary of Harsco, Quality Tank and
Manchester Tank.
Regulations
The manufacture of steel pressure tanks by the Company is subject to
regulation by the American Society of Mechanical Engineers ("ASME"), which
prescribes minimum standards and specifications relating to (i) the size and
chemical properties of steel plate, (ii) the manufacturing process (including
welding procedures and testing) and (iii) the pressure capacity of steel tanks
and valves. These standards are enforced by the National Board of Boiler and
Pressure Vessels Inspectors, which commissions inspectors who perform
independent inspection through insurance companies. These inspectors inspect all
phases of the manufacturing process as well as the finished product. Steel tanks
manufactured by the Company must be certified by these inspectors to be in
compliance with the regulations prescribed by the ASME, and all propane vessels
are registered with the National Board of Boiler and Pressure Vessels Inspectors
prior to their sale by the Company.
CHEMICAL GROUP
Products and Services
The Chemical Group's operations are divided into two divisions: the
Contracting Division and CADCO, the material distribution division. The
Contracting Division is comprised of the pavement marking and vegetation
management departments. The pavement marking department provides various forms
of pavement marking services on a contract basis. These services include fast
dry alkyd, fast dry water-borne, and polyester paint striping, the installation
of preformed plastic and the measurement, determination and marking of
"no-passing" zones on highways. The vegetation management department applies
under contract various types of vegetation control materials including selective
herbicides for weed, brush and grass control, as well as nonselective herbicides
for total vegetation control. The CADCO division sells herbicides, adjuvants,
plant growth regulators, sprayers, and pavement marking products and other
related equipment and products. The Chemical Group accounted for 25%, 28% and
29% of the Company's revenues for 1997, 1996 and 1995, respectively.
Marketing and Distribution
Sales of the products and services offered by the Chemical Group are made
throughout 21 states in the midwestern, eastern and southern parts of the United
States. For the year ended December 31, 1997, approximately 95% of the total net
sales of the Chemical Group were to state, county, municipal and township
highway departments, drainage commissions and toll road authorities. The balance
of the net sales of this division are derived primarily from public utilities,
pipeline companies, railroads, general contractors and other industrial,
commercial and noncommercial users. During the past three years, approximately
90% of the net sales of this division were derived from contracts entered into
with various governmental authorities located in the states of Ohio, West
Virginia, Michigan, Indiana, New York, Kentucky and Tennessee. The work
performed by the Chemical Group is seasonal inasmuch as warm dry weather is
needed to apply pavement marking and vegetation control materials. The season in
the Company's general area of operations is from April 1 through November 30.
This season is extended on occasions when the Company is able to obtain
contracts in southern states where more favorable weather conditions also allow
work to be performed from December through March.
The Chemical Group's highway operations are generally conducted under fixed
price contracts awarded by governmental authorities for a fixed period of time
ranging from a few months to two years. These contracts generally require the
Company to comply with standards and specifications relating to (i) the type and
amount of chemicals, paints and polyesters used by the Company, (ii) the type,
size and number of application units used by the Company, (iii) the training,
work experience and licensing of the personnel used by the Company, and (iv) the
method of application of chemicals, paints, polyesters and plastics used by the
Company. The Company owns the equipment it uses in its operation of the Chemical
Group.
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Supplies
The principal supplies used by the pavement-marking department are paint,
polyester, glass beads, and preformed plastic materials. The Company obtains
these materials from a wide range of suppliers. Herbicides used in vegetation
management and CADCO material sales are obtained from a wide range of suppliers.
The Company does not believe that the loss of any one source of supply would
have a material effect on its business.
Backlog
The dollar amounts of backlog of the Chemical Group believed to be firm as
of March 1, 1998 and 1997 were approximately $6,010,893 and $2,909,000,
respectively. Dollar amounts of backlog can vary significantly based upon the
timing of bid lettings and the division's success in obtaining contracts and are
not necessarily indicative of the results for the year. All of the contracts
comprising the 1998 backlog are expected to be completed during 1998.
Competition
The business done by the Chemical Group is highly competitive. Most
contracts are awarded on the basis of price, reputation, experience and ability
to perform. The number of competitors decreases significantly as the size of the
job and the complexity of tasks to be performed increases. Generally, the
competitors of the Company are local companies operating in a particular
geographical area. Although reliable statistics are not available, the Company
believes that based on annual net sales of the Chemical Group, it is one of the
larger contractors in the states in which it operates in the application of
highway vegetation control materials and of highway pavement marking and
striping materials.
Since the Company obtains all of its public contracts through competitive
bidding, there can be no assurance that the Company will retain any or all of
its present contracts after their respective dates of expiration, nor can there
be any assurance that the Company will be able to obtain new contracts in the
future. Although the Company believes that its relationship with its customers
is good, loss of existing contracts due to expiration or cancellation could have
a materially adverse effect on the Company's net sales and net income.
Regulations
Much of the Chemical Group's business is oriented to highway safety
considerations. Regulations applicable to the various public authorities with
which the Company contracts affect the demand and specifications for highway
striping and vegetation control performed by the Company.
EMPLOYEES
The following table sets forth information with respect to the Company's
approximately 317 employees, as of March 1, 1998:
DIVISION PERMANENT SEASONAL
-------- --------- --------
Corporate Staff.............. 14 0
Tank Division................ 150 0
Chemical Group............... 43 110
--- ---
Total........................ 207 110
=== ===
Employees at the Company's Tank Division Plant in Fremont, Ohio are subject
to a collective bargaining agreement between the Company and the United
Steelworkers of America, AFL-CIO-CLC, Local 1915. The current agreement will
expire April 30, 1999. Seasonal employees in the Company's Chemical Group are
subject to a collective bargaining agreement between the Company and Laborers
International Union Local 480, which will expire March 1, 1999. The Company
believes that its relations with its Unions and other employees are good.
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PROPERTIES
The following table lists the materially important properties used in its
operations, together with certain information regarding such properties:
DESCRIPTION LAND BUILDING
AND LOCATION(1) (ACRES) (SQ. FT.) USE
--------------- ------- --------- ---
Land and buildings 80.0 30,400 Administrative offices of the Company; Chemical
2776 & 2780 CR 69 Group offices; maintenance and storage for
Gibsonburg, Ohio 43431 spraying, striping and traffic survey equipment
Land and buildings 6.3 45,000 Former Tank Division facility; currently being held
2098 W. State Street for lease or sale
Fremont, Ohio 43420
Land and buildings 10.8 91,050 Former Cal-Van Tools warehouse and offices;
1500 Walter Avenue currently being leased
Fremont, Ohio 43420
Land and building 16.1 68,800 Tank Division offices; manufacture of tanks.
721 Graham Drive
Fremont, Ohio 43420
- - - ---------------
(1) The Company believes that its properties are adequately maintained, are in
good condition and are suitable and adequate for its business as presently
conducted
CERTAIN INFORMATION CONCERNING HARSCO AND ACQUISITION SUB
Harsco is a diversified industrial services and manufacturing company with
its principal executive offices located in Camp Hill, Pennsylvania. Harsco's
principal lines of business are: industrial mill services that are provided to
steel producers in 29 countries, including the United States; scaffolding
services to the industrial maintenance and construction markets primarily in
North America; railway maintenance equipment and services that are provided to
worldwide railroads; gas control and containment products for customers
worldwide; and several other lines of business including, but not limited to,
industrial grating and bridge decking, pipe fittings, process equipment, slag
abrasives and roofing granules. The complete mailing address for Harsco's
principal executive offices are P. O. Box 8888 Camp Hill, Pennsylvania
17001-8888 and its telephone number is (717) 763-7064.
Acquisition Sub is a recently organized Pennsylvania corporation and a
wholly owned subsidiary of Harsco formed for the sole purpose of effecting the
Merger. Acquisition Sub has not conducted any prior business. Acquisition Sub's
principal executive offices are located in Camp Hill, Pennsylvania. The complete
mailing address for Acquisition Sub's principal executive offices are P. O. Box
8888, Camp Hill, Pennsylvania 17001-8888 and its telephone number is (717)
763-7064.
Harsco's operations fall into three Operating Groups: Metal Reclamation and
Mill Services; Infrastructure and Construction; and Process Industry Products.
Harsco has over 175 major facilities in 30 countries, including the United
States. Harsco also holds a 40% equity interest in United Defense, L.P., a $1.0
billion partnership with FMC Corporation, which principally manufactures armored
combat vehicles and other defense systems for the U.S. and allied governments.
In 1994, Harsco formed a new Operating Group structure to reflect its strategic
refocusing. The new Groups were formed because: (1) Harsco was no longer
directly involved in the Defense business as a result of the formation of United
Defense, L.P., effective January 1, 1994, to which it contributed its military
tracked vehicle business; the completion of the five-ton truck contract with the
U.S. Government and the related conversion of production to school buses in 1993
and (2) the acquisition of MultiServ International, N.V., which substantially
increased Harsco's presence in metal reclamation and mill services.
In 1995, the Infrastructure, Construction and Transportation Group was
renamed the Infrastructure and Construction Group due to Harsco's announced
exits from the school bus and military truck businesses. Harsco ceased all bus
operations in June 1995. Truck operations were ended in June 1994.
The operations of Harsco in any one country, except the United States, do
not account for more than 10% of its sales. No single customer or group under
common control represented 10% or more of Harsco's sales during 1996, 1995, and
1994. There are no significant intergroup sales.
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THE MERGER
BACKGROUND OF AND REASONS FOR THE MERGER
Since December 31, 1994, the Shares have generally under-performed most
broad market indexes. In addition, there is very little trading activity in the
Shares and the Company receives no research coverage from any brokerage firm.
Therefore, shareholders of the Company have very little liquidity in their
investment in the Company and little prospect of increased liquidity in the
future. The Board of Directors and management of the Company, from time to time,
have considered strategic alternatives available to the Company to enhance
shareholder value and liquidity, including the adoption of an employee stock
ownership plan, the sale of the Company's non-core businesses, the redeployment
of its assets, as well as the sale of the Company as a whole.
In December 1996, after a strategic review of the Company's business, the
Board of Directors determined that, to maximize the potential for future growth
and profitability, it should (i) concentrate the Company's resources on the
businesses conducted by the Tank Division and Chemical Group and (ii) dispose of
its two non-core businesses: the Cal-Van Tools and Cory Orchard & Turf
Divisions. At that time, the Company engaged McDonald & Company to assist and
advise it in connection with the sale of its non-core businesses.
On March 25, 1997, the Company completed the sale of the assets of its Cory
Orchard & Turf Division to Terra International, Inc. for approximately $4.8
million. On November 18, 1997, the Company completed the sale of certain assets,
including certain inventory, machinery, equipment, fixtures, dies and the
Cal-Van Tools name, to Eagle for approximately $1.5 million in cash and a note
in original principal amount of $2.4 million. The Company retained accounts
receivable of approximately $4.8 million and inventory with an estimated net
market value of approximately $400,000.
In April 1997, the Company received an unsolicited expression of interest
from Trinity Industries, Inc. ("Trinity") in acquiring all of the outstanding
Shares in a tax-free transaction. This expression of interest did not specify a
price range per Share. The Board of Directors of the Company authorized
management to explore a possible transactions with Trinity and engaged McDonald
& Company to act as its financial advisor with respect to its discussions with
Trinity and any other potential acquirer of the Company. Pursuant to this
authorization, representatives of management and Trinity met, in person and by
telephone, on a number of occasions from April through October 1997 to discuss a
possible combination.
These discussions resulted in Trinity submitting a nonbinding proposal on
October 16, 1997 to acquire via merger all the outstanding shares of the Company
for $16.00 per share of Trinity common stock. The Board rejected Trinity's
proposal as financially inadequate and highly conditional. Representatives of
the Company and Trinity continued to meet throughout October and November 1997
to discuss the proposal. In addition, the Board of Directors charged McDonald &
Company to solicit proposals to acquire the Company from other interested
parties, including Harsco.
On November 4, 1997, Trinity submitted a revised proposal. This revised
proposal contained no improvement in the financial terms of the offer. Also on
November 4, 1997, the Board of Directors of the Company met to discuss the
status of negotiations with Trinity and appointed a Special Committee of
directors to respond to any subsequent proposals by Trinity or other potential
acquirers.
On November 13, 1997, the Special Committee determined that Trinity's
revised proposal was not in the best interests of the Company's shareholders for
the following reasons, among others: (i) the financial consideration per share
proposed by Trinity was financially inferior to other expressions of interest
received by the Company and (ii) the Trinity proposal was conditioned on Trinity
receiving a $1.6 million fee if Trinity and the Company could not reach a
definitive agreement and the Company was sold to another bidder
During November and December 1997, McDonald & Company contacted a number of
potential acquirers identified by it and management and solicited indications of
interest in a possible merger or other business combination transaction with the
Company. Of those companies contacted, five companies (including Harsco)
expressed interest and, upon request, were provided with evaluation materials
regarding the Company. Throughout the balance of November and through December
4, 1997, McDonald & Company continued to solicit each interested party to submit
its highest and best bid. Proposals received by the Company outlined combination
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transactions with values ranging from $16.50 to $23 per Share. On December 4,
1997, Harsco presented its proposal to acquire all outstanding Shares via a
merger for cash consideration of $23 per Share.
On December 5, 1997, the Board of Directors met with its financial and
legal advisors to consider developments with respect to the various proposals.
The Board reviewed potential transaction candidates contacted by McDonald &
Company on behalf of the Company and the terms of their respective proposals.
Following a discussion regarding the terms and conditions of the proposals, the
Board authorized management to enter into a definitive letter of intent upon the
terms outlined in the Harsco proposal. On December 8, 1997, the Company entered
into a nonbinding letter of intent with Harsco.
From December 8, 1997 through February 20, 1998, the Company's management,
legal counsel and McDonald & Company negotiated with Harsco in an attempt to
reach a definitive agreement. On February 3, 1998, after presentations from
management, legal counsel and McDonald & Company, the Board of Directors of the
Company authorized the Company to enter the Merger Agreement, subject to certain
conditions. On February 20, 1998, the Company, Harsco and Acquisition Sub
entered into the Merger Agreement.
In the course of reaching its decision to approve the Merger Agreement, the
Board of Directors considered a number of factors, including:
(a) The historical performance and liquidity of the Shares.
(b) The substantial premium represented by the Harsco proposal over
the market price of the Shares immediately prior to the first public
announcement of the Merger. The closing sale price of the Shares on
December 17, 1997 (the last day on which Shares traded before the Merger
transaction was publicly announced) was $13.75. Based on this market price,
the Company's shareholders would receive a premium over market of
approximately 67% pursuant to the Harsco proposal.
(c) The opinion of McDonald & Company that the merger consideration of
$23.00 per Share is fair to shareholders from a financial point of view.
(d) The Company's prospects of, and the probable period of time
required for, the Company to achieve for its shareholders a level of value
comparable to the value achieved for shareholders by the Merger, if the
Company remained independent or pursued other alternatives.
All the factors listed above were considered as a whole by the Board of
Directors in reaching its decision, and it is impractical to assign relative
weights to the factors considered.
THE BOARD OF DIRECTORS BELIEVES THAT THE TERMS OF THE MERGER AGREEMENT ARE
FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS SHAREHOLDERS AND
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ADOPTION OF THE MERGER AGREEMENT.
FINANCIAL ADVISOR
On February 3, 1998, McDonald & Company orally advised the Board of
Directors of the Company that, in its opinion, as of that date, the merger
consideration of $23.00 per Share in cash provided for in the Merger Agreement
is fair to shareholders from a financial point of view.
In connection with rendering such advice, McDonald & Company reviewed,
among other things, (i) the Merger Agreement; (ii) this Proxy Statement; (iii)
Annual Reports to Shareholders and Annual Reports on Form 10-K of the Company
for the five years ended December 31, 1996; (iv) certain interim reports to
shareholders and Quarterly Reports on Form 10-Q; (v) certain other
communications from the Company to its shareholders; and (vi) certain internal
financial analyses and the five year plan of the Company. McDonald & Company
also held discussions with members of the senior management of the Company
regarding the past and current business operations, financial condition, and
future prospects of the Company. In addition, McDonald & Company reviewed the
reported price and trading activity for the Shares, compared certain financial
and stock market information for the Company with similar information for
certain other companies the securities of which are publicly traded, reviewed
the financial terms of certain recent business combinations in the Company's
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industry specifically and in other industries generally and performed such other
studies and analyses as it considered appropriate.
In McDonald & Company's review and analysis and in arriving at its opinion,
McDonald & Company assumed and relied upon the accuracy and completeness of all
of the financial and other information provided or that was publicly available
and assumed and relied upon the representations and warranties of the Company
and Harsco contained in the Merger Agreement. McDonald & Company was not engaged
to, and did not independently attempt to, verify any of such information. In
addition, McDonald & Company did not conduct an evaluation or appraisal of any
of the assets, properties or facilities of the Company nor was it furnished with
any such evaluation or appraisal. McDonald & Company also assumed that the
conditions to the transaction as set forth in the Merger Agreement would be
satisfied and that the sale of the Company would be consummated on a timely
basis in the manner contemplated by the Merger Agreement.
The following is a summary of the financial and other analyses performed by
McDonald & Company in connection with its opinion.
COMPARABLE COMPANY ANALYSIS. McDonald & Company compared selected
historical and projected market value multiples of four publicly traded
companies that it deemed to be comparable to the Company (the "Peer Group"). The
companies included in the Peer Group were Essef Corporation, Harsco Corporation,
Trinity and Worthington Industries. No company used in McDonald & Company's
analysis was identical to the Company. Accordingly, McDonald & Company
considered the market multiples for the composite of comparable companies to be
more relevant than the market multiples of any single company.
McDonald & Company calculated a range of implied values based upon the
market multiples of companies in the Peer Group and applied them to the
historical and projected results of the Company in order to determine a range of
implied enterprise values for the Company. McDonald calculated the multiples of
market value to latest twelve months ("LTM") sales, Earnings Before Interest,
Taxes, Depreciation and Amortization ("EBITDA"), Earnings Before Interest and
Taxes ("EBIT") and multiples of market value to 1997 net income, and projected
net income (based on published third party estimates) for 1998 for each of the
companies in the Peer Group. McDonald & Company applied the multiples of the
Peer Group companies to the Company's LTM sales, EBITDA, EBIT and net income,
and to management's projected fiscal 1998 net income. The companies in the Peer
Group had multiples ranging from 0.7x to 1.3x LTM sales, 7.3x to 10.2x LTM
EBITDA, 9.8x to 14.0x LTM EBIT, 13.6x to 20.0x 1997 net income and 11.7x to
14.9x projected 1998 net income. The Peer Group companies had median multiples
of 1.0x LTM sales, 7.5x LTM EBITDA, 11.1x LTM EBIT and 15.8x 1997 net income,
and 12.8x projected 1998 net income. McDonald & Company also examined multiples
of book value for the companies in the Peer Group. Those multiples ranged from
2.2x to 2.9x, with a median multiple of 2.4x.
The companies comprising the Peer Group had significantly larger revenue
bases and market capitalizations than the Company. Accordingly, in conducting
its comparable company analysis, McDonald & Company applied a 10% discount to
the Peer Group multiples to reflect the Company's smaller market capitalization
and revenue base. The amount of the discount was determined by McDonald &
Company based on its judgment concerning the appropriate discount to apply based
upon its experience in dealing with sale transactions involving smaller
capitalization companies and its experience in the trading markets for such
companies' securities. This discount resulted in adjusted Peer Group median
multiples of 0.9x LTM sales, 6.7x LTM EBITDA, 10.0x LTM EBIT, 14.2x 1997 net
income and 11.5x projected 1998 net income. The adjusted Peer Group median
multiple for book value is 2.2x.
Application of the adjusted median Peer Group multiples to the Company
resulted in an implied enterprise value of $46.9 million based on LTM sales,
$30.2 million based on LTM EBITDA, $32.4 million based on LTM EBIT, $18.5
million based on 1997 net income and $38.2 million based on projected 1998 net
income. The implied enterprise value derived from applying the median book value
multiple to the Company is $51.4 million. The average enterprise value for the
Company suggested by these multiples was $36.3 million. McDonald & Company also
calculated a weighted average enterprise value by assigning relative weights to
each of the various multiples based on its experience in prior transactions.
EBITDA and LTM sales multiples were each given a weighting of 25% for purposes
of this analysis, while EBIT multiples, Book Value, and 1997 net income
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multiples were given weightings of 10%. 1998 projected net income was given a
20% weighting. The weighted average enterprise value for the Company suggested
by this analysis was $37.2 million. McDonald & Company then deducted the
Company's estimated outstanding indebtedness at December 31, 1997 and added the
estimated excess cash at December 31, 1997, in order to derive an implied equity
value for the Company. This analysis resulted in implied equity values of $34.3
million (using a straight average approach) and $35.2 million (using a weighted
average approach).
ANALYSIS OF SELECTED ACQUISITION TRANSACTIONS. McDonald & Company reviewed
thirty acquisition transactions in the Company's industry and related industries
completed since January 1, 1995 for which relevant information was available.
McDonald & Company analyzed the multiples of LTM, EBITDA and EBIT represented by
the purchase price paid in the acquisition transactions it reviewed. EBIT
multiples ranged from approximately 5.8x to 15.9x, with a median multiple of
11.8x. EBITDA multiples ranged from 4.4x to 15.4x, with a median multiple of
10.1x. McDonald & Company selected an EBITDA multiple range of 6.0x to 8.0x, and
an EBIT multiple range of 8.0x to 10.0x for purposes of this analysis.
Application of these multiples to the Company resulted in a mean implied
enterprise value of $31.9 million. By deducting the Company's estimated
outstanding debt at December 31, and adding back the Company's estimated cash at
December 31, 1997, to this implied enterprise value, McDonald & Company derived
an equity value for the Company of $29.9 million.
DISCOUNTED CASH FLOW ANALYSIS. McDonald & Company estimated the
theoretical present value of the Company based on the sum of (i) the discounted
cash flows which the Company could generate over a five year period based on
management's business plan and (ii) a terminal value for the Company assuming
that it performs in accordance with management's business plan. McDonald &
Company calculation of a theoretical terminal value of the Company was based
upon applying a 2.5% growth rate to the cash flow in 2002 and dividing that
product by the difference between the cost of capital and the 2.5% growth rate.
This terminal value and the cash flows generated by the Company were discounted
to a present value to derive an enterprise value for the Company. The equity
value of the Company was calculated by deducting estimated outstanding debt and
from the enterprise value and adding back estimated cash. Using a discount rates
of 11.1% and a perpetual growth rate for future cash flow of 2.5%, McDonald &
Company estimated that, based on a discounted cash flow analysis of management's
projections, the present equity value of the Company would be $36.4 million.
McDonald & Company also performed a discounted cash flow analysis assuming
certain synergies to be realized by the Merger. Projected synergies from the
Merger of $1.75 million per year were calculated by the Company. Using the same
assumptions set forth above, the resulting equity value of the Company would be
$46.6 million.
Inherent in any discounted cash flow valuation are the use of a number of
assumptions, including those relating to the reasonableness and achievability of
management's projections, and the subjective determination of an appropriate
terminal value and discount rate to apply to the projected cash flows of the
entity under examination. Variations in any of these assumptions or judgments
could significantly alter the results of a discounted cash flow analysis.
LEVERAGED BUYOUT ANALYSIS. McDonald & Company also performed a leveraged
buyout analysis of the Company as a means of establishing the value of the
Company assuming the sale of the Company to a typical financial buyer. A
leveraged buyout ("LBO") involves the acquisition or recapitalization of a
company financed primarily by incurring indebtedness that is serviced by the
post-LBO operating cash flow of the company. McDonald & Company used the same
projections provided by management used in its discounted cash flow analysis and
assumed, for purposes of the LBO analysis, a leveraged capital structure (52.4%
senior debt, 23.8% subordinated debt and 23.8% equity). Management's projections
supported an aggregate purchase price under an LBO analysis of $31.5 million.
This purchase price and capital structure resulted in a total debt to 1997
EBITDA multiple of 5.36x and an EBITDA to fixed charges ratio of 1.70x. Based on
management's projections, the LBO equity holders would earn an internal rate of
return of 39.4%.
SOLICITATION PROCESS. In rendering its opinion, McDonald & Company also
considered the fact that it conducted a solicitation process on behalf of the
Company with respect to the sale of the Company. During the course of that
process, McDonald & Company contacted several potential strategic buyers to
determine their
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interest in participating in the solicitation of acquisition proposals for the
Company. That process resulted in preliminary indications of interest from five
companies. The other expressions of interest were lower in value than Harsco
proposal.
OTHER MATTERS. No company or transaction used in the above analyses for
comparative purposes is identical to the Company. Accordingly, an analysis of
the results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors. Mathematical analysis (such as determining the
average or median) is not, in itself, a meaningful method of using comparable
company or transaction data.
The summary of the analyses set forth above does not purport to be a
complete description of the analyses conducted by McDonald & Company. The
preparation of a fairness opinion is not necessarily susceptible to partial
analysis or summary description. McDonald & Company believes that its analyses
and the summary set forth above must be considered as a whole and that selecting
portions of its analyses, without considering all analyses, or of the above
summary, without considering all factors and analyses, would create an
incomplete view of the process underlying the analyses set forth in McDonald's
opinion. In addition, McDonald & Company may have deemed various assumptions
more or less probable than other assumptions, so that the ranges of valuations
resulting from any particular analysis described above should not be taken to
represent the actual value of the Company.
The term "fair, from a financial point of view," is a standard phrase
contained in investment banking fairness opinions and refers to the fact that
McDonald & Company's opinion is addressed solely to the financial attributes of
the consideration to be paid in connection with the sale of the Company. In
performing its analyses, McDonald & Company made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of the Company. The analyses
performed by McDonald & Company are not necessarily indicative of actual values
or actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of
McDonald & Company's analysis of the fairness of the consideration to be paid
pursuant to the Merger Agreement. The analyses do not purport to be appraisals
or to reflect the prices at which a company might actually be sold or the prices
at which any securities may trade at the present time or at any time in the
future. In addition, as described above, McDonald & Company's oral opinion to
the Board was one of many factors taken into consideration by the Board in
making its determination to approve the Merger Agreement. Consequently, the
McDonald & Company analyses described above should not be viewed as
determinative of the Board's conclusions with respect to the value of the
Company.
McDonald & Company has expressed no opinion as to the prices at which the
Shares may trade in the future.
The Company has agreed to pay McDonald & Company a fee of $425,000 for its
services as its financial advisor in connection with the Merger. All of McDonald
& Company's fee is contingent upon the closing of the transaction. The Company
also has agreed to reimburse McDonald & Company for its reasonable out-of-pocket
expenses and to indemnify McDonald & Company against certain liabilities,
including liabilities under the federal securities laws.
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for using the purchase method of accounting in
accordance with generally accepted accounting principles ("GAAP"). In the
application of the purchase method of accounting, all assets and liabilities of
the Company will be recorded at their fair value at the Effective Time with a
resulting adjustment to shareholders' equity in an amount equal to the
difference between the price paid by Harsco and the fair value of the Company's
assets minus its liabilities.
REGULATORY REQUIREMENTS APPLICABLE TO THE MERGER
The Merger is subject to the expiration or termination of the 30-day
waiting period (and any extensions thereof) under the HSR Act and no action
having been instituted by the Department of Justice (the "DOJ") or
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Federal Trade Commission (the "FTC") that is not withdrawn or terminated prior
to the Effective Time. The HSR Act, and the rules and regulations thereunder,
provide that certain sale transactions (including the Merger) may not be
consummated until required information and materials have been furnished to the
DOJ and FTC and certain waiting period have expired or been terminated. The
Company and Harsco made their respective filings with the DOJ and the FTC on or
about February 27, 1998.
The DOJ and FTC frequently scrutinize the legality under the antitrust laws
of transactions such as the Merger. Notwithstanding the expiration of the HSR
Act waiting period, any time before or after the Effective Time, the FTC, the
DOJ or others can take action under the antitrust laws, including seeking to
enjoin the consummation of the Merger. There can be no assurance that a
challenge to the Merger on antitrust grounds will not be made, or if such a
challenge is made, that it would not be successful.
THE MERGER AGREEMENT
On February 20, 1998, the Company, Harsco and Acquisition Sub entered into
the Merger Agreement. The following is a summary of certain provisions of the
Merger Agreement, a copy of which is attached hereto as Appendix A. Such summary
is qualified in its entirety by reference to the Merger Agreement.
THE MERGER AGREEMENT
THE MERGER. The Merger Agreement provides that, at the Effective Time of
the Merger, in accordance with the Merger Agreement, the OGCL and the
Pennsylvania Business Corporation Law ("PBCL"), Acquisition Sub shall be merged
with and into the Company, the separate corporate existence of Acquisition Sub
shall cease and the Company shall continue as the surviving corporation
("Surviving Corporation"). As a consequence, the Company will become a wholly
owned subsidiary of Harsco. At the Effective Time, by virtue of the Merger and
without any action on the part of the Company, Harsco, the Acquisition Sub or
the holder of any Shares, each Share issued and outstanding (other than treasury
shares and dissenting shares) immediately prior to the Effective Time shall be
converted into and become the right to receive $23.00 per Share (the "Merger
Price") in cash, without interest thereon. All of the issued and outstanding
shares of the common stock, par value $.01 per share, of Acquisition Sub, issued
and outstanding immediately prior to the Effective Time, shall remain
outstanding and unchanged after the Merger and shall thereafter constitute all
of the issued and outstanding shares of the capital stock of the Surviving
Corporation.
HARSCO STOCK OPTION. Upon execution of the Merger Agreement, and as a
condition precedent thereto, the Company entered into a stock option agreement
pursuant to which the Company granted Acquisition Sub an option (the "Harsco
Stock Option") to acquire 190,468 Shares at an exercise price of $13.75 per
Share (the closing sale price of the Shares on December 17, 1997, the last day
on which Shares traded preceding the first public announcement of the merger).
The Harsco Stock Option is exercisable, in whole or in part, only in the event
(each, a "Purchase Event") that:
(1) any person (other than Harsco or Acquisition Sub) shall have
commenced (as such term is defined in Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), a tender offer or
exchange offer to purchase Shares such that, upon consummation of such
offer, such person could own or control 20 percent or more of the
outstanding Shares, and such person has obtained approval of shareholders
of the Company in accordance with Section 1701.831 of the OGCL in respect
of such control share acquisition;
(2) the Company shall have authorized, recommended, proposed or
announced an intention to authorize, recommend or propose, or entered into,
an agreement with any person (other than Harsco or Acquisition Sub) to (A)
merge or consolidate with the Company or enter into any similar transaction
with such person, (B) sell, lease or otherwise dispose of all or
substantially all of the assets of the Company to such person, or (C) sell
or otherwise dispose of (including by way of merger, consolidation, share
exchange or similar transaction) securities representing 20 percent or more
of the voting power of the Company, and the same shall have been scheduled
by the Company to close within 365 calendar days following the date of
termination of the Merger Agreement;
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(3) any person (other than Harsco or Acquisition Sub) shall have
acquired beneficial ownership (as such term is defined in Rule 13d-3 under
the 1934 Act) or the right to acquire beneficial ownership of, or a new
group has been formed which beneficially owns, 20 percent or more of the
outstanding Shares, and such person has obtained approval of shareholders
of the Company in accordance with Section 1701.831 of the OGCL in respect
of such control share acquisition; or
(4) the shareholders of the Company shall have disapproved the Merger
after any person (other than Harsco or Acquisition Sub) shall have publicly
announced a proposal to acquire the Company by merger, consolidation,
purchase of all or substantially all of its assets or any other similar
transaction, and the same shall have been scheduled by the Company to close
within 365 calendar days following the date of termination of the Merger
Agreement.
In the event that Harsco receives payment in full of the $1.7 million
termination fee set forth in the Merger Agreement, the number of Shares covered
by the Harsco Stock Option is reduced from 190,468 to 95,234.
If a Purchase Event shall occur at any time prior to the expiration of the
Stock Option, the Harsco Stock Option provides that, at Acquisition Sub's
request, the Company shall pay to Acquisition Sub an amount equal to the product
of (a) the excess, if any of (i) the greater of (A) the highest price paid or
proposed to be paid in connection with such Purchase Event for any Shares and
(B) the aggregate consideration paid or proposed to be paid in connection with
such Purchase Event divided by the number of Shares then outstanding (the value
of any consideration other than cash to be determined, in the case of
consideration with a readily ascertainable market value, by reference to such
market value and, in the case of any consideration other than cash, by agreement
in good faith between Acquisition Sub and the Company) over (ii) the Purchase
Price multiplied by (b) the total number of Option Shares as to which the Option
has not theretofore been exercised. Such payment extinguishes all other rights
of Harsco and Acquisition Sub under the Harsco Stock Option.
The Harsco Stock Option expires six months following the date of a Purchase
Event.
DIRECTORS AND OFFICERS. The persons appointed by Harsco, in its sole
discretion, to be the directors and officers of the Surviving Corporation shall
be the directors and officers, respectively, of the Surviving Corporation until
their successors shall have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Articles of Incorporation and Regulations.
EXCHANGE PROCEDURES. Pursuant to the Merger Agreement, as soon as
reasonably practicable after the Effective Time of the Merger, the Surviving
Corporation shall cause The Fifth Third Bank of Northwestern Ohio, N.A. (the
"Exchange Agent") to mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates") whose Shares have been converted into
the right to receive $23.00 per Share in cash, without interest thereon (the
"Merger Price"), (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 the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as the Surviving Corporation may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the merger. Upon surrender of a Certificate to
the Exchange Agent for cancellation, together with such letter of transmittal,
duly executed and completed in accordance with its terms, the holder of such
Certificate shall be entitled to receive in exchange therefor a check
representing the merger per Share multiplied by the number of Shares represented
by such Certificate. Any Certificate so surrendered shall forthwith be canceled.
In no event will the holder of any Certificate be entitled to receive interest
on any funds to be received by reason of the Merger. In the event of a transfer
of ownership of a Share which is not registered in the transfer records of the
Company, the merger may be issued to a transferee if the Certificate
representing such Share is presented to the Exchange 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 as
contemplated herein, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Merger Price per Share.
REPRESENTATIONS AND WARRANTIES. In the Merger Agreement, the Company has
made customary representations and warranties to Harsco and Acquisition Sub. The
representations and warranties of the Company relate,
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among other things, to its organization and qualification; capital structure;
authority to enter into the Merger Agreement and Stock Option Agreement and to
consummate the transactions contemplated thereby; non-contravention of any laws
or regulations with respect to the transactions contemplated; required consents
and approvals; filings made by the Company with the SEC under the Securities Act
of 1933, as amended, or the 1934 Act (including financial statements included in
the documents filed by the Company under these Acts); absence of any material
adverse change; absence of material adverse undisclosed liabilities; absence of
material adverse legal proceedings; information supplied; compliance with laws;
contracts and certain agreements; tax matters; benefit plans and employees and
employment practices; insurance; environmental matters; tangible property and
assets; intellectual property rights; vote required; and opinion of a financial
advisor.
Harsco and Acquisition Sub have also made customary representations and
warranties to the Company. Representations and warranties of Harsco and
Acquisition Sub relate, among other things, to: their organization and authority
to enter into the Merger Agreement and Stock Option Agreement and to consummate
the transactions contemplated thereby; non-contravention of any laws or
regulations with respect to the transactions contemplated; required consents and
approvals; absence of material adverse legal proceedings; information supplied;
and financing.
CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. Prior to the
Effective Time the Company covenants and agrees that (except as expressly
contemplated in the Merger Agreement or the Stock Option Agreement, or to the
extent that Harsco shall otherwise consent in writing, which consent shall not
be unreasonably withheld):
(a) The business of the Company will be conducted only in the ordinary
course consistent with past practice.
(b) The Company will use all commercially reasonable efforts to
preserve intact in all material respects its present business organization
and reputation, to keep available the services of its key officers and
employees, to maintain its assets and properties in good working order and
condition, ordinary wear and tear excepted, to maintain insurance on its
tangible assets and businesses in such amounts and against such risks and
losses as are currently in effect, to preserve its relationships with
customers and suppliers having significant business dealings with them and
to comply in all material respects with all Laws and Orders of all
Governmental or Regulatory Authorities applicable to them.
(c) Except as otherwise permitted in the Merger Agreement, the Company
will not (i) amend its Articles of Incorporation or Regulations (or
comparable charter documents); (ii) declare, set aside or pay any dividends
on or make other distributions in respect of any of its capital stock other
than the regular cash dividend for the first quarter of 1998 in an amount
consistent with past practice, and payable at a time prior to April 30,
1998; provided, however, that in no event shall such first quarter regular
cash dividend exceed $.09 per Share; and provided further, that in no event
shall such dividend be paid after April 30, 1998; (iii) split, combine,
reclassify or take similar action with respect to any of its capital stock
or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for Shares of its capital stock;
(iv) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization; or
(iv) directly or indirectly, redeem, repurchase or otherwise acquire any
Shares of its capital stock or any option with respect thereto;
(d) The Company will not: (i) issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any Shares of its capital stock
or any Option with respect thereto, or modify or amend any right of any
holder of outstanding Shares of capital stock or Options with respect
thereto; (ii) acquire (by merging or consolidating with, or purchasing a
substantial equity interest in or a substantial portion of the assets of,
or by any other manner) any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets other than in the ordinary course of
its business consistent with past practice; (iii) other than dispositions
in the ordinary course of its business consistent with past practice, sell,
lease, grant any security interest in or otherwise dispose of or encumber
any of its assets or properties; (iv) except to the extent required by
applicable law or GAAP
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(A) permit any material change in (1) any pricing marketing, purchasing,
investment, accounting, financial reporting, inventory, credit, allowance
or tax practice or policy or (2) any method of calculating any bad debt,
contingency or other reserve for accounting, financial reporting or tax
purposes or (B) make any material tax election or settle or compromise any
material income tax liability with any Governmental or Regulatory
Authority; (v) incur (which shall not be deemed to include entering into
any credit agreements, lines of credit or similar arrangements until
borrowings are made under such arrangements) any indebtedness for borrowed
money or guarantee such indebtedness other than in the ordinary course of
its business consistent with past practice; (vi) enter into, adopt, amend
in any material respect (except as may be required by applicable law) or
terminate any Company benefit plan or other agreement, arrangement, plan or
policy between the Company and one or more of its directors, officers or
employees, or, except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not
result in a material increase in benefits or compensation expense of the
Company, increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any plan
or arrangement then in effect, except for normal increases in the ordinary
course of business consistent with past practice that, in the aggregate, do
not result in a material increase in benefits or compensation expense to
the Company; (vii) enter into any contract or amend or modify any existing
contract, or engage in any new transaction outside the ordinary course of
business consistent with past practice or not on an arm's length basis,
with any affiliate of the Company; (viii) make any capital expenditures or
commitments for additions to plant, property or equipment constituting
capital assets except in the ordinary course of business consistent with
past practice; (ix) make any change in the lines of business in which it
participates or is engaged; or (x) enter into any contract, agreement,
commitment to do or engage in any of the foregoing.
NO SOLICITATION. The Merger Agreement provides that the Company will not,
nor will it authorize or permit any officer, director, employee, investment
banker, financial advisor attorney, accountant or other agent or representative
(each, a "Representative") retained by or acting on behalf of the Company to,
directly or indirectly, initiate, solicit, encourage, or, unless the Board of
Directors of the Company believes, on the basis of written advice furnished by
independent legal counsel, that the failure to take such actions would
constitute a breach of applicable fiduciary duties, participate in any
negotiations regarding, furnish any confidential information in connection with,
endorse or otherwise cooperate with, assist, participate in or facilitate the
making of any proposal or offer for, or which may be reasonably expected to lead
to, an Acquisition Transaction (as defined below), by any person, corporation,
partnership or other entity or group (a "Potential Acquirer"). The Company shall
promptly inform Harsco, orally and in writing, of the material terms and
conditions of any proposal or offer for, or which may reasonably be expected to
lead to, an Acquisition Transaction that it receives and the identity of the
Potential Acquirer. The Company will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Transaction. As used in the
Merger Agreement, "Acquisition Transaction" means any merger, consolidation or
other business combination involving the Company, or any acquisition in any
manner of all or a substantial portion of the assets of the Company whether for
cash, securities or any other consideration or combination thereof other than
pursuant to the transactions contemplated by the Merger Agreement and Stock
Option Agreement.
INVESTIGATION; CONFIDENTIALITY. Pursuant to the Merger Agreement, the
Company shall (i) provide Harsco and its Representatives with full access, upon
reasonable prior notice and during normal business hours, to all officers,
employees, agents and accountants of the Company and its assets, properties,
books and records, and (ii) furnish promptly to such persons (A) a copy of each
report, statement, schedule, and other document filed or received by the Company
pursuant to the requirements of federal or state securities laws or filed with
any other Governmental or Regulatory Authority, and (B) all other information
and data (including, without limitation, copies of Contracts, Company Benefit
Plans and other books and records) concerning the business and operations of the
Company as Harsco or any of such other persons reasonably may request. No
investigation pursuant to this paragraph or otherwise shall affect any
representation or warranty contained in the Merger Agreement or any condition to
the obligations of the parties hereto.
Harsco will hold, and will use its best efforts to cause its
Representatives to hold, in strict confidence, unless (i) compelled to disclose
by judicial or administrative process or by other requirements as applicable
Laws of
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Governmental or Regulatory Authorities (including, without limitation, in
connection with obtaining the necessary approvals of this Agreement or the
transactions contemplated hereby of Governmental or Regulatory Authorities), or
(ii) disclosed in an action or proceeding brought by a party hereto in pursuit
of its rights or in the exercise of its remedies hereunder, all documents and
information concerning the Company furnished to it by the Company or its
Representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (A) previously known by Harsco or its Representatives, (B)
in the public domain (either prior to or after the furnishing of such documents
or information hereunder) through no fault of Harsco and its Representatives or
(C) later acquired by Harsco or its Representatives from another source if
Harsco or such Representatives is not aware that such source is under an
obligation to the Company to keep such documents and information confidential.
In the event that this Agreement is terminated without the transactions
contemplated hereby having been consummated, upon the request of the Company,
Harsco will, and will cause its Representatives to, promptly redeliver or cause
to be redelivered all copies of documents and information furnished by the
Company or its Representatives to Harsco and its Representatives in connection
with this Agreement or the transactions contemplated hereby and destroy or cause
to be destroyed all notes, memoranda, summaries, analyses, compilations and
other writings related thereto or based thereon prepared by Harsco or its
Representatives.
PROXY STATEMENT AND SPECIAL MEETING. The Company shall prepare and file
with the SEC the Proxy Statement as soon as reasonably practicable after the
date hereof, and shall use its best efforts to have the Proxy Statement cleared
by the SEC. If at any time prior to the Effective Time any event shall occur
that should be set forth in an amendment of or a supplement to the Proxy
Statement, the Company shall prepare and file with the SEC such amendment or
supplement as soon thereafter as is reasonably practicable. Harsco, Acquisition
Sub and the Company shall cooperate with each other in the preparation of the
Proxy Statement, and the Company shall notify Harsco of the receipt of any
comments of the SEC with respect to the Proxy Statement and of any requests by
the SEC for any amendment or supplement thereto or for additional information,
and shall provide to Harsco promptly copies of all correspondence between the
Company or any representative of the Company and the SEC with respect to the
Proxy Statement. The Company shall give Harsco and its counsel the opportunity
to review the Proxy Statement and all responses to requests for additional
information by and replies to comments of the SEC before their being filed with,
or sent to, the SEC. Each of the Company, Harsco and Acquisition Sub agrees to
use its best efforts, after consultation with the other parties hereto, to
respond promptly to all such comments of and requests by the SEC and to cause
the Proxy Statement to be mailed to the holders of Company Common Stock entitled
to vote at the Company shareholders' Meeting at the earliest practicable time.
REGULATORY AND OTHER APPROVALS. The Merger Agreement provides that each of
the Company and Harsco will proceed diligently and in good faith and will use
all commercially reasonable efforts to do, or cause to be done, all things
necessary, proper or advisable to, as promptly as practicable, (a) obtain all
consents, approvals or actions of, make all filings with and give all notices to
Governmental or Regulatory Authorities or any other public or private third
parties required of Harsco, the Company or any of their Subsidiaries to
consummate the Merger and the other matters contemplated hereby and by the Stock
Option Agreement, and (b) provide such other information and communications to
such Governmental or Regulatory Authorities or other public or private third
parties as the other party or such Governmental or Regulatory Authorities or
other public or private third parties may reasonably request. In addition to and
not in limitation of the foregoing, (i) each of the parties will (A) take
promptly all actions necessary to make the filings required of Harsco and the
Company or their affiliates under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder ("HSR Act"),
(B) comply at the earliest practicable date with any request for additional
information received by such party or its affiliates from the Federal Trade
Commission (the "FTC") or the Antitrust Division of the Department of Justice
(the "Antitrust Division") pursuant to the HSR Act, and (C) cooperate with the
other party in connection with such party's filings under the HSR Act and in
connection with resolving any investigation or other inquiry concerning the
Merger or the other matters contemplated by this Agreement commenced by either
the FTC or the Antitrust Division or state attorneys general.
CONDITIONS PRECEDENT. The Merger Agreement provides that the respective
obligation of each party to effect the Merger is subject to the fulfillment, at
or prior to the Effective Time, of each of the following
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conditions: (i) The merger agreement shall have been adopted by the requisite
vote of the shareholders under the OGCL and the Company's Articles of
Incorporation; (ii) any waiting period (and any extension thereof) applicable to
the consummation of the Merger under the HSR Act shall have expired or been
terminated; (iii) all consents, approvals and actions of, filings with and
notices to any Governmental or Regulatory Authority or any other public or
private third party required of Harsco, the Company or any of their Subsidiaries
to consummate the Merger and the other matters contemplated by the Merger
Agreement and by the Stock Option Agreement, the failure of which to be obtained
or taken could be reasonably expected to have a material adverse effect on
Harsco and its Subsidiaries or the Surviving Corporation and its Subsidiaries,
in each case taken as a whole, or on the ability of Harsco and the Company to
consummate the transactions contemplated by the Merger Agreement or by the Stock
Option Agreement shall have been obtained, all in form and substance reasonably
satisfactory to Harsco and no such consent, approval or action shall contain any
term or condition which could be reasonably expected to result in a material
diminution of the benefits of the Merger to Harsco.
TERMINATION; TERMINATION FEE. The Merger Agreement may be terminated at
any time prior to the Effective Time, whether prior to or after approval by the
Company's shareholders, (i) by mutual written agreement of the parties hereto;
(ii) by either the Company or Harsco upon notification to the non-terminating
party to the terminating party, (A) at any time after April 30, 1998 if the
merger shall not have been consummated on or prior to such date and such failure
to consummate the Merger is not caused by a breach of this Agreement by the
terminating party; provided however, the date may be extended indefinitely by
the mutual written agreement of the parties; and provided further, that such
date shall be extended by the parties for a reasonable period if the only
condition hereunder that remains unsatisfied as of such date relates to the
receipt of any Governmental or Regulatory Authority Consent or approval required
in connection with this transaction including, without limitation, any consent
or approval required under the HSR Act; (B) if the Company Shareholders'
Approval shall not be obtained by reason of the failure to obtain the requisite
vote upon a vote held at a meeting of such shareholders, or any adjournment
thereof, called therefor; (C) if any Governmental or Regulatory Authority, the
taking of action by which is a condition to the obligations of either the
Company or Harsco to consummate the transactions contemplated hereby, shall have
determined not to take such action and all appeals of such determination shall
have been taken and have been unsuccessful; (D) if there has been a material
breach of any representation, warranty, covenant or agreement on the part of the
non-terminating party set forth in this Agreement which breach has not been
cured within five business days following receipt by the non-terminating party
of notice of such breach from the terminating party or assurance of such cure
reasonably satisfactory to the terminating party shall not have been given by or
on behalf of the non-terminating party within such five business day period; or
(E) if any court of competent jurisdiction or other competent Governmental or
Regulatory Authority shall have issued an Order making illegal or otherwise
restricting, preventing or prohibiting the Merger and such Order shall have
become final and nonappealable.
If the Merger Agreement is validly terminated by either the Company or
Harsco, the Merger Agreement will forthwith become null and void and there will
be no liability or obligation on the part of either the Company or Harsco (or
any of their respective Representatives or affiliates), except that (i) the
provisions relating to confidentiality, no solicitation, fees and expenses and
certain other provisions will continue to apply following any such termination
and (ii) nothing shall relieve any party from liability for willful breach of
its representations, warranties, covenants or agreements contained in the Merger
Agreement, and (iii) as provided in the next paragraph herein.
In the event that (i) Harsco terminates this Agreement pursuant to (ii)(D)
above, or (ii) either Harsco or the Company terminates this Agreement pursuant
to (ii)(B) above following a failure of the shareholders of the Company to
approve this Agreement and, before the Company Shareholders' Meeting, the Board
of Directors of the Company shall have recommended that its shareholders accept
any tender offer or exchange offer with respect to their Shares (other than an
offer by Harsco) or shall have withdrawn or modified in any manner adverse to
Harsco its recommendation with respect to the Merger, then the Company shall,
within one business day after receipt of a request from Harsco, pay to Harsco in
cash a termination fee of $1.7 million.
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FEES AND EXPENSES. Except as provided in the Merger Agreement, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with the Merger Agreement shall be paid by the party incurring such costs and
expenses.
AMENDMENT, EXTENSION AND WAIVER. The Merger Agreement may be amended,
supplemented or modified by action taken by or on behalf or the respective
Boards of Directors of the parties hereto at any time prior to the Effective
Time, whether prior to or after the adoption of the Merger Agreement at the
Special Meeting, but after such adoption only to the extent permitted by
applicable law. No such amendment, supplement or modification shall be effective
unless set forth in a written instrument duly executed by each party hereto.
The Merger Agreement further provides that at any time prior to the
Effective Time, any party hereto, by action taken by or on behalf of its Board
of Directors, may to the extent permitted by applicable law (i) extend the time
for the performance of any of the obligations or other acts of the other
parties, (ii) waive any inaccuracies in the representations and warranties of
the other parties contained in the Merger Agreement or in any document delivered
pursuant to the Merger Agreement or (iii) waive compliance with any of the
covenants, agreements or conditions of the other parties contained in the Merger
Agreement. No such extension or waiver shall be effective unless set forth in a
written instrument duly executed by or on behalf of the party extending the time
of performance or waiving any such inaccuracy or non-compliance. No waiver by
any party of any term or condition of the Merger Agreement shall be deemed to be
or construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion.
INTEREST OF CERTAIN PERSONS IN THE TRANSACTION
Certain executive officers and directors of the Company have interests in
the Merger as a result of employment agreements provide for payments in certain
circumstances following a "change in control" of the Company. Under these
agreements, the Merger would constitute a "change in control."
EXECUTIVE EMPLOYMENT AGREEMENTS
In August 1996, the Company entered into agreements to employ Mr. Robert W.
Woolf as the President and Chief Operating officer, Mr. John P. Simcox as Vice
President and General Manager of the Tank Division, and Mr. Kevin D. Lauck, as
Secretary and Controller, each for a term of three years that is automatically
extended annually for an additional year, unless either party gives notice to
the contrary. The employment agreements provide for annual base compensation
equal to an amount which is not less than the officers' annual base compensation
on the date of the agreement and for an annual bonus which is not less than the
greater of 15% annual base compensation or the bonus paid in the preceding
fiscal year. In addition the employment agreements provide that during the term
of the agreement and for one year thereafter, the officers shall not compete
with any business carried on by the Company (provided that no change of control
shall have occurred). The agreements further provide that if the officers'
employment is terminated following a change of control, other than for cause,
disability or retirement, the officer shall be entitled to receive, in lieu of
any salary or bonuses payable under the agreement, an amount equal to three
times the present value of his annual base compensation and bonus. Messrs.
Woolf, Lauck, and Simcox will be entitled to compensation of approximately
$425,327, $281,539 and $281,539, respectively, plus certain fringe benefits,
under these agreements if their respective employment terminates following the
Merger.
In addition, each of them would be entitled to receive an additional
payment (the "gross up") sufficient to cover any tax imposed by Section 4999 of
the Internal Revenue Code (the "Code") on the payments made under the employment
agreements, including the gross up, if such payments are considered "contingent
on a change in ownership or control" of the Company within the meaning of
Section 280G of the Code.
CERTAIN TAX CONSEQUENCES TO SHAREHOLDERS
A shareholder will recognize capital gain or loss upon receipt of the cash
payable in exchange for his Shares in an amount equal to the difference between
the aggregate amount received by him and his aggregate tax basis in the Shares
exchanged. A shareholder exercising dissenter's rights under Ohio Law will also
recognize gain or loss in an amount equal to the difference between the cash
received by him in redemption of his Shares and his aggregate tax basis in such
Shares.
24
27
SELECTED FINANCIAL DATA
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
Operating results:
Revenues................ $50,348,978 $46,556,082 $47,604,671 $47,612,229 $42,695,793
Income from continuing
operations........... 2,057,274 1,313,471 1,371,449 1,306,137 775,705
Income (loss) from
discontinued
operations(a)........ (916,813) (55,188) 103,256 303,582 5,031
Net income.............. 1,140,461 1,258,283 1,474,705 1,609,719 896,731(b)
Income (loss) per
Share(c):
Continuing
operations......... 1.03 .66 .69 .65 .39
Discontinued
operations......... (.46) (.03) .05 .15 --
Net income per Share.... .57 .63 .74 .80 .45(b)
At December 31:
Total assets............ 34,719,538 47,423,367 48,592,539 45,917,360 41,186,807
Long-term debt.......... 1,920,222 3,329,267 9,789,973 7,235,827 8,761,989
Working capital......... 11,317,456 11,151,188 14,430,716 12,218,263 12,174,075
Cash dividends declared
per Share(c)............ $ .36 $ .36 $ .36 $ .327 $ .298
- - - ---------------
(a) See Footnote #2, Discontinued Operations, in Item 8. Financial Statements
filed with the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 for further information relating to the gain or loss from
discontinued operations.
(b) Effective January 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method as required by
FASB Statement 109, "Accounting for Income Taxes". The cumulative effect of
adopting statement 109 as of January 1, 1993 was to increase net income by
$115,995, or $.06 per share.
(c) Share data has been computed on the basis of the weighted average number of
Shares outstanding during each period in accordance with SFAS. No 128
"Earnings per Share" and restated for the 10% stock dividends paid in March
1995 and 1994.
25
28
PRICE RANGE OF THE SHARES
The Shares are trades on the NASDAQ National Market under the symbol
"CTRL." The following table sets forth the high and low sales prices for the
Shares for the periods indicated as reported by the NASDAQ National Market:
SALE PRICE AVERAGE
--------------------- DAILY
HIGH LOW VOLUME
---------- ------- -------
1995
First Quarter............................................. $ 10.45 $ 9.50 222
Second Quarter............................................ 11.00 9.125 3,530
Third Quarter............................................. 11.50 10.25 1,047
Fourth Quarter............................................ 12.00 11.00 1,278
1996
First Quarter............................................. 12.625 10.50 1,666
Second Quarter............................................ 11.625 9.375 528
Third Quarter............................................. 11.75 9.25 4,935
Fourth Quarter............................................ 13.125 10.00 2,245
1997
First Quarter............................................. 11.00 9.25 735
Second Quarter............................................ 13.00 10.00 1,271
Third Quarter............................................. 14.50 11.75 2,251
Fourth Quarter
(through December 18, 1997)............................... 14.00 12.00 1,553
On December 18, 1997, the last full trading day prior to the public
announcement of the proposed Merger, the Shares did not trade. On December 17,
1997, the high and low sales prices of the Shares were $14.00 and $13.25,
respectively and the closing sale price was $13.75.
DIVIDENDS
Except for ordinary quarterly dividends of $.09 per Share, no dividends
have been paid on the Company's Shares during the last two fiscal years and none
are expected to be paid in the foreseeable future.
26
29
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
FIVE PERCENT HOLDERS
Set forth below is certain information concerning persons who are known by
the Company to own beneficially more than 5% of any class of the Company's
Shares on March 1, 1998.
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP (1) OF CLASS
-------------- ------------------- ----------------- --------
Common Shares Arthur F. Doust 253,015(2) 12.62%
2690 CR 69
Gibsonburg, Ohio 43431
Common Shares Trilon Dominion Partners, 241,351(3) 12.03%
L.L.C. F/K/A Venture Capital,
Equities, L.L.C.
250 Park Avenue, Suite 2020
New York, New York 10022
Common Shares Asher B. Edelman 125,200(4) 6.24%
717 Fifth Ave.
New York, New York 10022
- - - ---------------
(1) All shares are held of record with sole voting and investment power unless
otherwise indicated.
(2) Includes (a) 157,014 shares held in trust by Arthur F. Doust and Anna K.
Doust, Co-Trustees, of which 78,507 shares are held for their own benefit;
(b) 45,265 shares owned by Anna K. Doust, wife of Arthur F. Doust; and (c)
12,743 shares owned by the children of Arthur F. Doust.
(3) Based upon most recent Schedule 13D filing dated September 27, 1996. VC
Holdings, Inc., the sole manager and the holder of 100% of the voting
interests of Trilon Dominion Partners, L.L.C. ("L.L.C."), is the indirect
beneficial owner of the 241,351 shares of common stock of the issuer owned
by L.L.C. Ronald W. Cantwell ("Mr. Cantwell") is the holder of 100% of the
capital stock of VC Holdings, Inc., which is the sole manager and the holder
of 100% of the voting interests of L.L.C. Consequently, Mr. Cantwell is the
indirect beneficial owner of the 241,351 shares of common stock of the
issuer owned by the L.L.C. Dominion Capital, Inc. holds a 50% non-voting
preferred interest in the L.L.C. Dominion Capital, Inc. has disclaimed
beneficial ownership of these securities.
(4) Based upon Form 4 filing dated December 9, 1997. Edelman Value Partners,
L.P. owns 43,700 Shares and Edelman Value Fund, Ltd. owns 81,500 shares.
Asher B. Edelman is the President and Sole Director of A.B. Edelman
Management Company, Inc., which is the Sole General Partner of Edelman Value
Partners, L.P. and also the Investment Manager of Edelman Value Fund, Ltd.
Therefore, Mr. Edelman may be deemed the beneficial owner of both of these
holdings.
27
30
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as to the beneficial ownership
of Shares as of December 31, 1997, by each Director of the Company and by all
directors and officers of the Company as a group:
AMOUNT AND NATURE
OF BENEFICIAL
BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP (1) PERCENT
---------------- -------------- ----------------- -------
Arthur F. Doust Common Shares 253,015(2) 12.62%
Robert W. Woolf Common Shares 4,225 .21%
John P. Simcox Common Shares 1,550 .08%
Kevin D. Lauck Common Shares 2,952 .15%
W. Burton Lloyd Common Shares 61,463(3) 3.07%
Robert H. Moyer Common Shares 2,452 .12%
Fred J. Roynon Common Shares 500 .02%
Richard J. Dudley Common Shares 242 .01%
Asher B. Edelman Common Shares 125,200(4) 6.24%
All directors and officers as a
group (10 persons) Common Shares 454,555 22.67%
- - - ---------------
(1) All shares are held of record with sole voting and investment power unless
otherwise indicated.
(2) Includes (a) 157,014 shares held in trust by Arthur F. Doust and Anna K.
Doust, Co-Trustees, of which 78,507 shares are held for their own benefit;
(b) 45,265 shares owned by Anna K. Doust, wife of Arthur F. Doust; and (c)
12,743 shares owned by the children of Arthur F. Doust.
(3) Includes (a) 58,269 shares owned by Roselyn Lloyd, wife of W. Burton Lloyd.
(4) Includes (a) 43,700 shares held by Edelman Value Partners, L.P., a Delaware
limited partnership of which A. B. Edelman Management Co., Inc., a New York
corporation is sole general partner. Mr. Edelman is President and sole
director of such corporation. (b) 81,500 shares held by Edelman Value Fund,
Ltd., a British Virgin Islands corporation for which Mr. Edelman serves as
Investment Manager.
INDEPENDENT AUDITORS
The firm of Ernst & Young L.L.P., independent certified public accountants,
has audited the records of the Company since 1959. A representative of Ernst &
Young L.L.P. will be present at the Special Meeting to make a statement if he or
she so desires and to be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of shareholders intended to be included in the 1998 Annual
Meeting Proxy Statement must have been received by the Corporate Secretary of
the Company at Chemi-Trol Chemical Co., 2776 C.R. 69, Gibsonburg, Ohio 43431 no
later than February 15, 1998. No proposals were submitted for inclusion in the
proxy statement in accordance to the applicable rules and requirements of the
Securities and Exchange Commission.
NOMINATIONS FOR THE BOARD OF DIRECTORS MADE BY A SHAREHOLDER
A nomination must be made by written notice and received by the Secretary
not less than 50 days nor more than 75 days prior to the meeting (or if fewer
than 60 days' notice or prior public disclosure of the meeting date is given or
made to shareholders, not later than the 10th day following the day on which the
notice of the date of the meeting was mailed or such public disclosure was
made). Such notice of nomination must contain certain information about the
proposed nominee and certain information about the shareholder proposing to
nominate such person. The Company may also require any proposed nominee to
furnish other information reasonably required by the Company to determine the
proposed nominee's eligibility to serve as a director. If a person were
28
31
not nominated in accordance with the foregoing procedures, such person would not
be eligible for election as a director.
A shareholder must provide written notice of such an intention to bring
business before an annual meeting not less than 60 nor more than 90 days prior
to the first anniversary of the preceding year's annual meeting (or if the date
of the annual meeting is changed by more than 30 days from such anniversary
date, not later than the 10th day following the earlier of the day on which
notice of the date of the meeting was mailed or public disclosure was made).
Such notice must contain a description of the business desired to be brought
before the meeting and certain information about the shareholder proposing such
business. If business is not brought by a shareholder in accordance with the
foregoing procedures, such business shall be declared not properly brought
before the meeting and shall not be discussed or presented for a vote by
shareholders.
OTHER MATTERS
The Board of Directors does not expect or intend to bring any business
before the meeting other than pertaining to the subjects referred to in this
Proxy Statement. However, in the event that other business does properly come
before the meeting, it is intended that the persons voting such proxies will
vote thereon according to their best judgment in the interest of the Company.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the 1934 Act
and in accordance therewith files periodic reports, proxy statements and other
information with the Securities and Exchange Commission ("SEC"). All reports,
proxy statements and other information filed by the Company with the SEC can be
inspected and copied at prescribed rates at the public reference facilities
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or at the regional offices of the SEC located at 7 World
Trade Center, Thirteenth Floor, New York, New York 10048 and the Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such materials may also be obtained at prescribed rates from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
The SEC also maintains a Website (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC.
The following documents filed with the SEC are incorporated herein by
reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
(b) All other reports filed by the Company pursuant to Section 13(a)
or 15(d) of the 1934 Act since December 31, 1997.
The Company will provide without charge to each person to whom a copy of
this Proxy Statement has been delivered, upon the written or oral request of
such person and by first class mail or other equally prompt means, within one
business day of receipt of such request, a copy of any or all documents
incorporated herein by reference (not including exhibits to such documents,
unless such exhibits are specifically incorporated by reference into such
documents). Requests for such copies should be directed to Chemi-Trol Chemical
Co., 2776 C.R. 69, Gibsonburg, Ohio 43431, Attention: Corporate Secretary or, by
telephone, at (419) 665-2367.
By Order of the Board of Directors
KEVIN D. LAUCK
Secretary
March 25, 1998
29
32
APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 20, 1998
BY AND AMONG
HARSCO CORPORATION,
H-CHEMI ACQUISITION CORP.
AND
CHEMI-TROL CHEMICAL CO.
33
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to
which it is attached but is inserted for convenience only.
PAGE
NO.
----
ARTICLE I PLAN OF MERGER.................................... A-1
1.01 The Merger.......................................... A-1
1.02 Effective Time...................................... A-1
1.03 Closing............................................. A-1
1.04 Articles of Incorporation; Bylaws of the Surviving
Corporation; Location of Principal Office........... A-1
1.05 Directors and Officers of the Surviving
Corporation......................................... A-2
1.06 Effects of the Merger............................... A-2
1.07 Further Assurances.................................. A-2
1.08 Consent to be Sued and Served with Process.......... A-2
1.09 Transaction of Business............................. A-2
1.10 Other Matters....................................... A-2
ARTICLE II CONVERSION OF SHARES............................. A-2
2.01 Conversion of Capital Stock......................... A-2
2.02 Exchange of Certificates............................ A-3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY... A-4
3.01 Organization and Qualification...................... A-4
3.02 Capital Stock....................................... A-4
3.03 Authority Relative to this Agreement and the Stock
Option Agreement.................................... A-5
3.04 Non-Contravention; Approvals and Consents........... A-5
3.05 SEC Reports and Financial Statements................ A-6
3.06 Absence of Certain Changes or Events................ A-6
3.07 Absence of Undisclosed Liabilities.................. A-7
3.08 Legal Proceedings................................... A-7
3.09 Information Supplied................................ A-7
3.10 Compliance with Laws and Orders..................... A-7
3.11 Compliance with Agreements; Certain Agreements...... A-8
3.12 Taxes............................................... A-8
3.13 Benefit Plans; ERISA................................ A-9
3.14 Insurance........................................... A-11
3.15 Labor Matters....................................... A-11
3.16 Environmental Matters............................... A-12
3.17 Tangible Property and Assets........................ A-13
3.18 Intellectual Property Rights........................ A-13
3.19 Vote Required....................................... A-14
3.20 Opinion of Financial Advisor........................ A-14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF HARSCO AND
ACQUISITION SUB........................................... A-14
4.01 Organization and Qualification...................... A-14
4.02 Authority Relative to this Agreement and the Stock
Option Agreement.................................... A-14
4.03 Non-Contravention; Approvals and Consents........... A-15
4.04 Legal Proceedings................................... A-15
4.05 Information Supplied................................ A-15
4.06 Financing........................................... A-16
i
34
PAGE
NO.
----
ARTICLE V COVENANTS OF THE COMPANY.......................... A-16
5.01 Conduct of Business................................. A-16
5.02 No Solicitations.................................... A-17
ARTICLE VI ADDITIONAL AGREEMENTS............................ A-18
6.01 Access to Information; Confidentiality.............. A-18
6.02 Preparation of Proxy Statement...................... A-18
6.03 Approval of Shareholders............................ A-19
6.04 Regulatory and Other Approvals...................... A-19
6.05 Benefit Plans....................................... A-19
6.06 Stock Option Agreement.............................. A-20
6.07 Expenses............................................ A-20
6.08 Brokers or Finders.................................. A-20
6.09 Notice and Cure..................................... A-20
6.10 Fulfillment of Conditions........................... A-20
6.11 1997 Audited Financial Statements................... A-21
ARTICLE VII CONDITIONS...................................... A-21
7.01 Conditions to Each Party's Obligation to Effect the
Merger.............................................. A-21
7.02 Conditions to Obligation of Harsco and Acquisition
Sub to Effect the Merger............................ A-21
7.03 Conditions to Obligation of the Company to Effect
the Merger.......................................... A-22
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.............. A-23
8.01 Termination......................................... A-23
8.02 Effect of Termination............................... A-23
8.03 Amendment........................................... A-24
8.04 Waiver.............................................. A-24
ARTICLE IX GENERAL PROVISIONS............................... A-24
9.01 Non-Survival of Representations, Warranties,
Covenants and Agreements............................ A-24
9.02 Knowledge........................................... A-24
9.03 Notices............................................. A-24
9.04 Entire Agreement.................................... A-25
9.05 Public Announcements................................ A-25
9.06 No Third Party Beneficiary.......................... A-25
9.07 No Assignment; Binding Effect....................... A-25
9.08 Headings............................................ A-25
9.09 Invalid Provisions.................................. A-26
9.10 Governing Law....................................... A-26
9.11 Counterparts........................................ A-26
EXHIBITS
EXHIBIT A Opinion of Counsel to the Company
EXHIBIT B Opinion of Counsel to Harsco and Acquisition Sub
ii
35
This AGREEMENT AND PLAN OF MERGER dated as of February 20, 1998 is made and
entered into by and among HARSCO CORPORATION, a Delaware corporation ("Harsco"),
H-CHEMI ACQUISITION CORP., a Pennsylvania corporation wholly owned by Harsco
("Acquisition Sub"), and CHEMI-TROL CHEMICAL CO., an Ohio corporation (the
"Company").
WHEREAS, the Boards of Directors of Harsco, Acquisition Sub and the Company
have each determined that it is advisable and in the best interests of their
respective shareholders to consummate, and have approved, the business
combination transaction provided for herein in which Acquisition Sub would merge
with and into the Company and the Company would become a wholly-owned subsidiary
of Harsco (the "Merger"); and
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Harsco's and Acquisition Sub's willingness to
enter into this Agreement, the Company, Harsco and Acquisition Sub have entered
into a stock option agreement of even date herewith (the "Stock Option
Agreement") granting Acquisition Sub an option to purchase from the Company
190,468 authorized and unissued shares of Company Common Stock (as defined in
Section 2.01(b)), subject to the terms and conditions set forth therein; and
WHEREAS, Harsco, Acquisition Sub and the Company desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PLAN OF MERGER
1.01 The Merger. At the Effective Time (as defined in Section 1.02), upon
the terms and subject to the conditions of this Agreement, Acquisition Sub shall
be merged with and into the Company in accordance with the General Corporation
Law of the State of Ohio (the "OGCL") and the Business Corporation Law of the
Commonwealth of Pennsylvania (the "PBCL"). The Company shall be the surviving
corporation in the Merger (the "Surviving Corporation"). Acquisition Sub and the
Company are sometimes referred to herein as the "Constituent Corporations." As a
result of the Merger, the outstanding shares of capital stock of the Constituent
Corporations shall be converted or canceled in the manner provided in Article
II.
1.02 Effective Time. At the Closing (as defined in Section 1.03), a
certificate of merger (the "Certificate of Merger") and articles of merger
("Articles of Merger") shall be duly prepared and executed by the Constituent
Corporations and thereafter delivered to the Secretary of State of the State of
Ohio (the "Ohio Secretary of State") for filing, as provided in Section 1701.81
of the OGCL, and the Secretary of State of the Commonwealth of Pennsylvania (the
"Pennsylvania Secretary of State") for filing, as provided in Section 1927 of
the PBCL, on, or as soon as practicable after, the Closing Date (as defined in
Section 1.03). The Merger shall become effective on the date the Certificate of
Merger and Articles of Merger are filed (the date so provided in the Certificate
of Merger being referred to herein as the "Effective Time").
1.03 Closing. The closing of the Merger (the "Closing") will take place
at the offices of Morgan, Lewis & Bockius LLP, One Commerce Square, 417 Walnut
Street, Harrisburg, Pennsylvania 17101, or at such other place as the parties
hereto mutually agree, on a date and at a time to be specified by the parties,
which shall in no event be later than 10:00 a.m., local time, on the 5th
business day following satisfaction of the condition set forth in Section
7.01(a), provided that the other closing conditions set forth in Article VII
have been satisfied or, if permissible, waived in accordance with this
Agreement, or on such other date as the parties hereto mutually agree (the
"Closing Date"). At the Closing there shall be delivered to Harsco, Acquisition
Sub and the Company the certificates and other documents and instruments
required to be delivered under Article VII.
1.04 Articles of Incorporation; Bylaws of the Surviving Corporation;
Location of Principal Office. At the Effective Time, (i) the Articles of
Incorporation of the Company as in effect immediately prior to the Effective
Time shall be amended so that such articles are identical (except for (i) the
name, which shall remain "Chemi-
36
Trol Chemical Co.", and (ii) the state of incorporation, which shall remain
Ohio, to the articles of incorporation of Acquisition Sub as in effect
immediately prior to the Effective Time, and, as so amended, such Articles of
Incorporation shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Articles of
Incorporation, and (ii) the Bylaws of Acquisition Sub as in effect immediately
prior to the Effective Time shall be the Regulations of the Surviving
Corporation until thereafter amended as provided by law, the Articles of
Incorporation of the Surviving Corporation and such Regulations. The location of
the principal office of the Surviving Corporation shall be 2776 Country Road 69,
Gibsonburg, OH 43431.
1.05 Directors and Officers of the Surviving Corporation. The directors
and the officers of the Company at or following the Effective Time, at the
request of Harsco, shall submit their resignations as of the Effective Time and
the persons appointed by Harsco, in its sole discretion, to be the directors and
officers of the Surviving Corporation shall be the directors and officers,
respectively, of the Surviving Corporation until their successors shall have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's Articles
of Incorporation and Regulations.
1.06 Effects of the Merger. Subject to the foregoing, the effects of the
Merger shall be as provided in the applicable provisions of the OGCL and the
PBCL.
1.07 Further Assurances. Each party hereto will execute such further
documents and instruments and take such further actions as may reasonably be
requested by one or more of the others to consummate the Merger, to vest the
Surviving Corporation with full title to all assets, properties, rights,
approvals, immunities and franchises of either of the Constituent Corporations
or to effect the other purposes of this Agreement.
1.08 Consent to be Sued and Served with Process. The Surviving
Corporation consents to be sued and served with process in the State of Ohio and
irrevocably appoints the Ohio Secretary of State as its agent to accept service
of process in any proceeding in the state and to enforce against the Surviving
Corporation any obligation of any Ohio domestic constituent corporation or to
enforce the rights of any holders of Dissenting Shares.
1.09 Transaction of Business. If Harsco exercises its rights under
Section 1.10 hereof, the Surviving Corporation shall transact business in the
State of Ohio as a foreign corporation and shall appoint a statutory agent with
respect to service of any process, notice or demand upon such statutory agent or
the Ohio Secretary of State, as required when a foreign corporation applies for
a license to transact business in the State of Ohio.
1.10 Other Matters. Notwithstanding any terms of this Agreement to the
contrary, Harsco shall have the right to cause Acquisition Sub to be the
Surviving Corporation of the Merger, so long as the exercise of such right does
not have a material adverse effect on the interests of the holders of the
Company's Common Stock in a manner which has not been disclosed to them in the
Proxy Statement (as defined herein at Section 3.09) or cause a material delay
in, or otherwise adversely affect, consummation of the transaction described
herein; if such right is exercised, this Agreement shall be deemed to be
modified to accord such change, including, without limitation, that the laws of
the Commonwealth of Pennsylvania, together with the OGCL, will govern the
Merger.
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof:
(a) Capital Stock of Acquisition Sub. All of the issued and
outstanding shares of the common stock, par value $.01 per share, of
Acquisition Sub ("Acquisition Sub Common Stock") issued and outstanding
immediately prior to the Effective Time shall remain outstanding and
unchanged after the Merger and shall thereafter constitute all of the
issued and outstanding shares of the capital stock of the Surviving
Corporation ("Surviving Corporation Common Stock").
A-2
37
(b) Cancellation of Treasury Stock. All shares of common stock,
without par value, of the Company ("Company Common Stock") that are owned
by the Company as treasury stock shall be canceled and retired and shall
cease to exist and no stock of Harsco or other consideration shall be
delivered in exchange therefor.
(c) Exchange Ratio for Company Common Stock. Each issued and
outstanding share of Company Common Stock (other than shares to be canceled
in accordance with Section 2.01(b) and other than Dissenting Shares (as
defined in Section 2.01(d))) shall be converted into the right to receive
$23.00 in cash (the "Merger Price"). All such shares of Company Common
Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Price per share, upon the
surrender of such certificate in accordance with Section 2.02, without
interest.
(d) Dissenting Shares.
(i) To the extent applicable, each outstanding share of Company
Common Stock the holder of which has not voted in favor of the Merger,
has perfected such holder's right to an appraisal of such holder's
shares in accordance with the applicable provisions of the OGCL and has
not effectively withdrawn or lost such right to appraisal (a "Dissenting
Share"), shall not be converted into or represent a right to receive the
Merger Price pursuant to Section 2.01(c), but the holder thereof shall
be entitled only to such rights as are granted by the applicable
provisions of the OGCL; provided, however, that any Dissenting Share
held by a person at the Effective Time who shall, after the Effective
Time, withdraw the demand for appraisal or lose the right of appraisal,
in either case pursuant to the OGCL, shall be deemed to be converted
into, as of the Effective Time, the right to receive the Merger Price
pursuant to Section 2.01(c).
(ii) The Company shall give Harsco (x) prompt notice of any
written demands for appraisal, withdrawals of demands for appraisal and
any other instruments served pursuant to the applicable provisions of
the OGCL relating to the appraisal process received by the Company and
(y) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the OGCL. The Company will not
voluntarily make any payment with respect to any demands for appraisal
and will not, except with the prior written consent of Harsco, settle or
offer to settle any such demands.
2.02 Exchange of Certificates.
(a) Exchange Agent. At the Closing or immediately prior to the
Effective Time, Harsco shall make available to the Surviving Corporation
for deposit with The Fifth Third Bank of Northwestern Ohio, N.A., by Harsco
(the "Exchange Agent"), a cash amount equal to the aggregate Merger Price
to which holders of shares of Company Common Stock shall be entitled upon
consummation of the Merger, to be held for the benefit of and distributed
to such holders in accordance with this Section. The Exchange Agent shall
agree to hold such funds (such funds, together with earnings thereon, being
referred to herein as the "Exchange Fund") for delivery as contemplated by
this Section and upon such additional terms as may be agreed upon by the
Exchange Agent, the Company and Harsco.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to
mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Certificates") whose shares are converted
pursuant to Section 2.01(c) into the right to receive the Merger Price (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 the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as the Surviving Corporation may
reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Price. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together
with such letter of transmittal duly executed and completed in accordance
with its terms, the holder of such Certificate shall be entitled to receive
in exchange therefor a check representing the Merger Price per share of
Company Common Stock represented thereby which such holder has the right to
receive pursuant to the provisions of this Article II,
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and the Certificate so surrendered shall forthwith be canceled. In no event
shall the holder of any Certificate be entitled to receive interest on any
funds to be received in the Merger. In the event of a transfer of ownership
of Company Common Stock which is not registered in the transfer records of
the Company, the Merger Price may be issued to a transferee if the
Certificate representing such Company Common Stock is presented to the
Exchange 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 as contemplated by this Section 2.02(b), each
Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger Price
per share of Company Common Stock represented thereby as contemplated by
this Article II.
(c) No Further Ownership Rights in Company Common Stock. All cash
paid upon the surrender of shares of Company Common Stock in accordance
with the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to such shares of Company Common
Stock. From and after the Effective Time, the stock transfer books of the
Company shall be closed and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the
shares of Company Common Stock which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be
canceled and exchanged as provided in this Section.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the shareholders of the Company twenty-four
(24) months after the Effective Time shall be delivered to the Surviving
Corporation, upon demand, and any shareholders of the Company who have not
theretofore complied with this Article II shall thereafter look only to the
Surviving Corporation (subject to abandoned property, escheat and other
similar laws) as general creditors for payment of their claim for the
Merger Price per share. Neither Harsco nor the Surviving Corporation shall
be liable to any holder of shares of Company Common Stock for cash
representing the Merger Price delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Harsco and Acquisition Sub as
follows:
3.01 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has full corporate power and authority to
conduct its business as and to the extent now conducted and to own, use and
lease its assets and properties. The Company is duly qualified, licensed or
admitted to do business and is in good standing in each jurisdiction listed on
Schedule 3.01 hereto in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing which, individually or in the
aggregate, (i) are not having and could not be reasonably expected to have a
material adverse effect on the Company, and (ii) could not be reasonably
expected to have a material adverse effect on the validity or enforceability of
this Agreement or the Stock Option Agreement or on the ability of the Company to
perform its obligations hereunder or thereunder. As used in this Agreement, any
reference to any event, change or effect being "material" or "materially
adverse" or having a "material adverse effect" on or with respect to an entity
(or group of entities taken as a whole) means such event, change or effect is
material or materially adverse, as the case may be, to the business, condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities (including contingent liabilities), prospects or results of
operations of such entity (or, if with respect thereto, of such group of
entities taken as a whole). The Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
3.02 Capital Stock. (a) The authorized capital stock of the Company
consists solely of 6,000,000 shares of Company Common Stock. As of the date
hereof, 2,004,930 shares of Company Common Stock were issued
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and outstanding, and 0 shares were held in the treasury of the Company. There
has been no change in the number of issued and outstanding shares of Company
Common Stock or shares of Company Common Stock held in the treasury since such
date other than the reservation of 190,468 shares pursuant to the Stock Option
Agreement. All of the issued and outstanding shares of Company Common Stock are,
and all shares reserved for issuance will be, upon issuance in accordance with
the terms specified in the instruments or agreements pursuant to which they are
issuable, duly authorized, validly issued, fully paid and nonassessable. Except
pursuant to this Agreement and the Stock Option Agreement, there are no
outstanding subscriptions, options, warrants, rights (including "phantom" stock
rights), preemptive rights or other contracts, commitments, understandings or
arrangements, including any right of conversion or exchange under any
outstanding security, instrument or agreement (together, "Options"), obligating
the Company to issue or sell any shares of capital stock of the Company or to
grant, extend or enter into any Option with respect thereto.
(b) There are no outstanding contractual obligations of the Company
to repurchase, redeem or otherwise acquire any shares of Company Common
Stock or to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in any other person.
3.03 Authority Relative to this Agreement and the Stock Option
Agreement. The Company has full corporate power and authority to enter into
this Agreement and the Stock Option Agreement and, subject (in the case of this
Agreement) to obtaining the Company Shareholders' Approval (as defined in
Section 6.03), to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Stock Option Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly and validly approved by the Board of Directors
of the Company, the Board of Directors of the Company has recommended adoption
of this Agreement by the shareholders of the Company and directed that this
Agreement be submitted to the shareholders of the Company for their
consideration, and no other corporate proceedings on the part of the Company or
its shareholders are necessary to authorize the execution, delivery and
performance of this Agreement and the Stock Option Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby and
thereby, other than obtaining the Company Shareholders' Approval. This Agreement
and the Stock Option Agreement have been duly and validly executed and delivered
by the Company and, subject (in the case of this Agreement) to the obtaining of
the Company Shareholders' Approval, constitute legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.04 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement and the Stock Option
Agreement by the Company do not, and the performance by the Company of its
obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby will not, conflict with,
result in a violation or breach of, constitute (with or without notice or
lapse of time or both) a default under, result in or give to any person any
right of payment or reimbursement, termination, cancellation, modification
or acceleration of, or result in the creation or imposition of any liens,
claims, mortgages, encumbrances, pledges, security interests, equities and
charges of any kind (each a "Lien") upon any of the assets or properties of
the Company under, any of the terms, conditions or provisions of (i) the
articles of incorporation or regulations (or other comparable charter
documents) of the Company, or (ii) subject to the obtaining of the Company
Shareholders' Approval and the taking of the actions described in paragraph
(b) of this Section, (x) any statute, law, rule, regulation or ordinance
(together, "Laws"), or any judgment, decree, order, writ, permit or license
(together, "Orders"), of any court, tribunal, arbitrator, authority,
agency, commission, official or other instrumentality of the United States,
any foreign country or any domestic or foreign state, county, city or other
political subdivision (a "Governmental or Regulatory Authority"),
applicable to the Company or any of its assets or properties, or (y) any
note, bond, mortgage, security agreement, indenture, license, franchise,
permit, concession, contract, lease or other instrument, obligation or
agreement of any kind (together, "Contracts") to which the Company is a
party or by which the Company or any of its assets or properties is bound,
excluding from the foregoing clauses (x) and (y)
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conflicts, violations, breaches, defaults, terminations, modifications,
accelerations and creations and impositions of Liens which, individually or
in the aggregate, could not be reasonably expected to have a material
adverse effect on the Company taken as a whole or on the ability of the
Company to consummate the transactions contemplated by this Agreement and
the Stock Option Agreement.
(b) Except (i) for the filing of a premerger notification report by
the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder (the "HSR Act"), (ii)
for the filing of the Proxy Statement (as defined in Section 3.09) with the
Securities and Exchange Commission (the "SEC") pursuant to the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder
(the "Exchange Act"), (iii) for the filing of the Certificate of Merger,
the Articles of Merger and other appropriate merger documents required by
the OGCL and the PBCL with the Ohio Secretary of State and the Pennsylvania
Secretary of State and appropriate documents with the relevant authorities
of other states in which the Constituent Corporations are qualified to do
business, and (iv) as disclosed in Schedule 3.04 hereto, no consent,
approval or action of, filing with or notice to any Governmental or
Regulatory Authority or other public or private third party is necessary or
required under any of the terms, conditions or provisions of any Law or
Order of any Governmental or Regulatory Authority or any Contract to which
the Company is a party or by which the Company or any of its assets or
properties is bound for the execution and delivery of this Agreement and
the Stock Option Agreement by the Company, the performance by the Company
of its obligations hereunder and thereunder or the consummation of the
transactions contemplated hereby and thereby, other than such consents,
approvals, actions, filings and notices which the failure to make or
obtain, as the case may be, individually or in the aggregate, could not be
reasonably expected to have a material adverse effect on the Company or on
the ability of the Company to consummate the transactions contemplated by
this Agreement and the Stock Option Agreement.
3.05 SEC Reports and Financial Statements. The Company delivered to
Harsco prior to the execution of this Agreement a true and complete copy of each
form, report, schedule, registration statement, definitive proxy statement and
other document (together with all amendments thereof and supplements thereto)
filed by the Company with the SEC since December 2, 1997 (as such documents have
since the time of their filing been amended or supplemented, the "Company SEC
Reports"), which are all the documents (other than preliminary material) that
the Company was required to file with the SEC since such date. As of their
respective dates, the Company SEC Reports (i) complied as to form in all
material respects with the requirements of the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "Securities Act"), or the
Exchange Act, as the case may be, and (ii) did not contain any untrue statement
of a material fact or omit 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 audited financial
statements and unaudited interim financial statements (including, in each case,
the notes, if any, thereto) included in the Company SEC Reports (the "Company
Financial Statements") complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto and except with respect to unaudited statements
as permitted by Form 10-Q of the SEC) and fairly present (subject, in the case
of the unaudited interim financial statements, to normal, recurring year-end
audit adjustments which are not expected to be, individually or in the
aggregate, materially adverse to the Company) the financial position of the
Company as at the respective dates thereof and the results of its operations and
cash flows for the respective periods then ended.
3.06 Absence of Certain Changes or Events. Except as disclosed Schedule
3.06 hereto, (a) since September 30, 1997 there has not been any change, event
or development having, or that could be reasonably expected to have,
individually or in the aggregate, a material adverse effect on the Company,
other than those occurring as a result of general economic or financial
conditions or other developments which are not unique to the Company but also
generally affect other persons who participate or are engaged in the lines of
business in which the Company participates or is engaged, and (b) except as
disclosed in Schedule 3.06 hereto, between such date and the date hereof (i) the
Company has conducted its business only in the ordinary course consistent with
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past practice and (ii) the Company has not taken any action which, if taken
after the date hereof, would constitute a breach of any provision of clause (ii)
of Section 5.01(b).
3.07 Absence of Undisclosed Liabilities. Except for matters reflected or
reserved against in the balance sheet dated September 30, 1997 included in the
Company Financial Statements or as disclosed in Schedule 3.07 hereto, the
Company has not at such date, or has not incurred since that date, any
liabilities or obligations of any nature that would be required by generally
accepted accounting principles to be reflected on a balance sheet of the Company
(including the notes thereto), except liabilities or obligations (i) which were
incurred in the ordinary course of business consistent with past practice and
(ii) which have not been, and could not be reasonably expected to be,
individually or in the aggregate, materially adverse to the Company.
3.08 Legal Proceedings. Except as disclosed in Schedule 3.08 hereto, (i)
there are no actions, suits, arbitrations or proceedings pending or, to the
knowledge of the Company, threatened against, relating to or affecting, nor to
the knowledge of the Company are there any Governmental or Regulatory Authority
investigations or audits pending or threatened against, relating to or
affecting, the Company or any of its assets and properties which, individually
or in the aggregate, could be reasonably expected to have a material adverse
effect on the Company or on the ability of the Company to consummate the
transactions contemplated by this Agreement or the Stock Option Agreement, and
there are no facts or circumstances known to the Company that could be
reasonably expected to give rise to any such action, suit, arbitration,
proceeding, investigation or audit, and (ii) the Company is not subject to any
Order of any Governmental or Regulatory Authority which, individually or in the
aggregate, is having or could be reasonably expected to have a material adverse
effect on the Company or on the ability of the Company to consummate the
transactions contemplated by this Agreement or the Stock Option Agreement.
3.09 Information Supplied. (a) The proxy statement relating to the
Company Shareholders' Meeting (as defined in Section 6.03), as amended or
supplemented from time to time (as so amended and supplemented, the "Proxy
Statement"), and any other documents to be filed by the Company with the SEC or
any other Governmental or Regulatory Authority in connection with the Merger and
the other transactions contemplated hereby or by the Stock Option Agreement will
not, on the date of its filing or, in the case of the Proxy Statement, at the
date it is mailed to shareholders, and at the time of the Company Shareholders'
Meeting and at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading, except that no representation is made
by the Company with respect to information supplied in writing by or on behalf
of Harsco and Acquisition Sub expressly for inclusion therein and information
incorporated by reference therein from documents filed by Harsco or any of its
Subsidiaries with the SEC. The Proxy Statement and any such other documents
filed by the Company with the SEC under the Exchange Act will comply as to form
in all material respects with the requirements of the Exchange Act. As used in
this Agreement, "Subsidiary" means, with respect to any party, any corporation
or other organization, whether incorporated or unincorporated, of which more
than fifty percent (50%) of either the equity interests in, or the voting
control of, such corporation or other organization is, directly or indirectly
through Subsidiaries or otherwise, beneficially owned by such party.
(b) Neither the information supplied or to be supplied in writing by
or on behalf of the Company for inclusion in any document to be filed by
Harsco or Acquisition Sub with the SEC or any other Governmental or
Regulatory Authority in connection with the Merger and the other
transactions contemplated hereby or by the Stock Option Agreement will on
the date of its filing contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
3.10 Compliance with Laws and Orders. The Company holds all permits,
licenses, variances, exemptions, orders and approvals of all Governmental and
Regulatory Authorities necessary for the lawful conduct of its business (the
"Company Permits"), except for failures to hold such permits, licenses,
variances, exemptions, orders and approvals which, individually or in the
aggregate, are not having and could not be reasonably expected to have a
material adverse effect on the Company. The Company is in compliance with the
terms of the Company Permits, except failures so to comply which, individually
or in the aggregate, are not having and could not be
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reasonably expected to have a material adverse effect on the Company. Except as
set forth in Schedule 3.10,the Company is not in violation of or default under
any Law or Order of any Governmental or Regulatory Authority, except for
violations which, individually or in the aggregate, are not having and could not
be reasonably expected to have a material adverse effect on the Company.
3.11 Compliance with Agreements; Certain Agreements.
(a) Except as disclosed in Schedule 3.11 hereto, neither the Company
nor, to the knowledge of the Company, any other party thereto, is in breach
or violation of, or in default in the performance or observance of any term
or provision of, and no event has occurred which, with notice or lapse of
time or both, could be reasonably expected to result in a default under,
(i) the articles of incorporation or regulations (or other comparable
charter documents) of the Company or (ii) any Contract to which the Company
is a party or by which the Company or any of its assets or properties is
bound, except in the case of clause (ii) for breaches, violations and
defaults which, individually or in the aggregate, are not having and could
not be reasonably expected to have a material adverse effect on the
Company.
(b) Except as disclosed in Schedule 3.11 hereto, as of the date
hereof, the Company is not a party to any oral or written (i) consulting
agreement not terminable on 30 days' or less notice involving the payment
of more than $25,000 per annum or $100,000 per annum in the aggregate for
all such agreements, (ii) union or collective bargaining agreement, (iii)
agreement with any executive officer or other key employee of the Company
the benefits of which are contingent or vest, or the terms of which are
materially altered, upon the occurrence of a transaction involving the
Company of the nature contemplated by this Agreement, (iv) agreement with
respect to any executive officer or other key employee of the Company
providing any term of employment or compensation guarantee extending for a
period longer than 3 years and for the payment of more than $200,000 per
annum or $500,000 per annum in the aggregate for all such agreements or (v)
agreement or plan, including any stock option, stock appreciation right,
restricted stock or stock purchase plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this Agreement
or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement.
3.12 Taxes.
(a) The Company has filed all federal and all material foreign, state
and local tax reports and returns required to be filed and except as
disclosed on Schedule 3.12, has duly paid all such taxes, including,
without limitation, income, capital stock, gross receipts, net proceeds, ad
valorem, value added, turnover, sales, use, real estate transfer, property,
personal property (tangible and intangible), stamp, leasing, lease, user,
excise, franchise, transfer, fuel, vehicle sales, excess profits,
occupational and interest equalization, unitary, severance, withholding,
social security, employment and other taxes, duties, assessments and
charges (including, without limitation, the recapture of any tax items such
as investment tax credits), together with all interest, penalties and
additions imposed with respect to such amounts, which are due on or before
the date hereof or claimed to be due by federal, state, or local taxing
authorities or which are payable on or before the date hereof with respect
to the business and operations of the Company (collectively, "Taxes"). All
such returns are accurate and complete in all material respects. There are
no tax liens upon any property or assets of the Company, except liens for
Taxes not yet due and payable. All such Taxes (including interest and
penalties) applicable for all periods prior to the Closing or other
governmental charges upon the Company or its assets, income or revenues
have been or will be paid (if due) or reserved against if required under
GAAP. The Company has not executed any waivers of the statute of
limitations on the right of the Internal Revenue Service (the "IRS") or any
state or local taxing authority to assess additional Taxes or to contest
the income or loss with respect to any tax return. The basis of any
depreciable assets, and the methods used in determining allowable
depreciation (including cost recovery), held by the Company, are
substantially correct and in compliance with the Internal Revenue Code of
1986, as amended (the "Code"), and all regulations thereunder.
(b) No issues have been raised that are currently pending by any
taxing authority in connection with any of the aforesaid tax returns or
reports. No issues have been raised in any examination by any taxing
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authority with respect to the Company which, by application of similar
principles, reasonably could be expected to result in a material proposed
deficiency for any other period not so examined. The items of income and
deductions reflected on the federal income tax returns and comparable state
and local returns filed by or on behalf of the Company for all taxable
years (including the supporting schedules filed therewith), available
copies of which have been supplied (or will be promptly supplied upon
request) to Harsco, state accurately in all material respects the receipts
and expenditures of the Company, and the same were derived from the books
and records of the Company.
(c) The Company has not entered into any joint venture, partnership,
or other arrangement or contract which is treated as a partnership for
federal income tax purposes, except as set forth on Schedule 3.12.
The Company has never been a "consenting corporation," within the
meaning of Section 341(f)(l) of the Code, or comparable provisions of any
state statutes, and none of the assets of the Company is subject to an
election under Section 341(f) of the Code or comparable provisions of any
state statutes.
(e) No property of the Company is property which the Company or Harsco
is or will be required to treat as being owned by another person pursuant
to the provisions of Section 168(f)(8) of the Code, as in effect prior to
the Tax Reform Act of 1986, or pursuant to any provision of law.
(f) No property of the Company is "tax exempt use property" as such
term is defined in Section 168(h) of the Code.
(g) None of the properties or assets of the Company is tax-exempt bond
financed property within the meaning of Section 168(g)(5) of the Code,
except as disclosed on Schedule 3.12.
(h) Neither the Company nor any predecessor thereof is or has been, or
has filed a tax return claiming that it is or has been, an Electing Small
Business Corporation pursuant to the provisions of Subchapter S of the
Code.
3.13 Benefit Plans; ERISA.
(a) All Benefit Plans are listed in Schedule 3.13, and copies of all
documentation relating to such Benefit Plans have been delivered or made
available to Harsco (including copies of written Benefit Plans, written
descriptions of oral Benefit Plans, summary plan descriptions, trust
agreements, the three most recent annual returns, employee communications,
and IRS determination letters). Except as disclosed in Schedule 3.13
hereto:
(i) each Benefit Plan has at all times been maintained and
administered in all material respects in accordance with its terms and
with the requirements of all applicable law, including ERISA and the
Code, and each Benefit Plan intended to qualify under Section 401(a) of
the Code has at all times since its adoption been so qualified, and each
trust which forms a part of any such plan has at all times since its
adoption been tax-exempt under Section 501(a) of the Code;
(ii) no Benefit Plan has incurred any "accumulated funding
deficiency" within the meaning of Section 302 of ERISA or Section 412 of
the Code;
(iii) the "amount of unfunded benefit liabilities" within the
meaning of Section 4001(a)(18) of ERISA does not exceed zero with
respect to any Benefit Plan subject to Title IV of ERISA;
(iv) no "reportable event" (within the meaning of Section 4043 of
ERISA) has occurred with respect to any Benefit Plan or any Plan
maintained by an ERISA Affiliate since the effective date of Section
4043;
(v) with respect to each Multiemployer Plan (i) no withdrawal
liability has been incurred by the Company or any ERISA Affiliate , and
the Company has no reason to believe that any such liability will be
incurred, prior to the Closing Date, (ii) no such plan is in
"reorganization" (within the meaning of Section 4241 of ERISA), (iii) no
notice has been received that increased contributions may be required to
avoid a reduction in plan benefits or the imposition of an excise tax,
or that the plan is or may become "insolvent" (within the meaning of
Section 4241 of ERISA), (iv) no proceedings have been instituted by the
Pension Benefit Guaranty Corporation against the plan, (v) there is no
contingent liability for withdrawal liability by reason of a sale of
assets pursuant to Section 4204 of ERISA, and (vi) except as disclosed
in Schedule 3.13, if the Company or any ERISA Affiliate were to have a
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complete or partial withdrawal under Section 4203 of ERISA as of the
Closing, no obligation to pay withdrawal liability would exist on the
part of the Company or any ERISA Affiliate;
(vi) no direct, contingent or secondary liability has been incurred
or is expected to be incurred by the Company under Title IV of ERISA to
any party with respect to any Benefit Plan or Multiemployer Plan, or
with respect to any other Plan presently or heretofore maintained or
contributed to by any ERISA Affiliate;
(vii) neither the Company nor any ERISA Affiliate has incurred any
liability for any tax imposed under Section 4971 through 4980B of the
Code or civil liability under Section 502(i) or (l) of ERISA;
(viii) no benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will
be established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement;
(ix) no tax has been incurred under Section 511 of the Code with
respect to any Benefit Plan (or trust or other funding vehicle pursuant
thereto);
(x) no Benefit Plan provides health or death benefit coverage
beyond the termination of an employee's employment, except as required
by Part 6 of Subtitle B of Title I of ERISA or Section 4980B of the Code
or any State laws requiring continuation of benefits coverage following
termination of employment;
(xi) no suit, actions or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) have been
brought or, to the knowledge of the Company, threatened against or with
respect to any Benefit Plan and there are no facts or circumstances
known to the Company that could reasonably be expected to give rise to
any such suit, action or other litigation; and
(xii) all contributions to Benefit Plans and Multiemployer Plans
that were required to be made under such Benefit Plans have been made,
and all benefits accrued under any unfunded Benefit Plan have been paid,
accrued or otherwise adequately reserved in accordance with GAAP, all of
which accruals under unfunded Benefit Plans are as disclosed in Schedule
3.13, and the Company has performed all material obligations required to
be performed under all Benefit Plans.
(b) Except as set forth in Schedule 3.13 hereto, neither the execution
and delivery of this Agreement nor the consummation of the transaction
contemplated hereby constitutes a change of control or has or will
accelerate benefits under any Benefit Plan.
(c) As used herein:
(i) "Benefit Plan" means any Plan, existing at the Closing Date or
prior thereto, established or to which contributions have at any time
been made by the Company, or any predecessor of the foregoing, or under
which any employee, former employee or director of the Company or any
beneficiary thereof is covered, is eligible for coverage or has benefit
rights.
(ii) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
(iii) "ERISA Affiliate" means any business entity which is, or at
any time was, a member of a controlled group (within the meaning of
Section 412(n)(6) of the Code) that includes, or at any time included,
the Company or any predecessor of the foregoing.
(iv) "Multiemployer Plan" means a multiemployer plan within the
meaning of Section 4001(a)(3) of ERISA with respect to which the Company
or any ERISA Affiliate has an obligation to contribute or has or could
have withdrawal liability under Section 4201 of ERISA.
(v) "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, workmen's compensation or
other insurance, severance, separation or other
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employee benefit plan, practice, policy or arrangement of any kind,
whether written or oral, or whether for the benefit of a single
individual or more than one individual including, but not limited to,
any "employee benefit plan" within the meaning of Section 3(3) of ERISA.
3.14 Insurance. The Company delivered to Harsco prior to the execution of
this Agreement a true and complete list of all liability, property, workers'
compensation, directors' and officers' liability and other insurance policies
currently in effect that insure the business, operations, properties, assets or
employees of the Company.
3.15 Labor Matters.
(a) Except as set forth in Schedule 3.15, (i) no employees of the
Company or any affiliated enterprise of the Company ("Affiliate") are
represented by a labor union or organization, no labor union or
organization has been certified or recognized as a representative of any
such employees, and neither the Company nor any Affiliate of the Company is
a party to or has any obligation under any collective bargaining agreement
or other labor union contract, white paper or side agreement with any labor
union or organization, or has any obligation to recognize or deal with any
labor union or organization, and there are no such contracts, white papers
or side agreements pertaining to or which determine the terms or conditions
of employment of any employee of the Company or any Affiliate of the
Company; (ii) there are no pending or threatened representation campaigns,
elections or proceedings or questions concerning union representation
involving any employees of the Company or any Affiliate of the Company;
(iii) neither the Company nor any Affiliate of the Company has any
knowledge of any activities or efforts of any labor union or organization
(or representatives thereof) to organize any employees of the Company or
any Affiliate of the Company, nor of any demands for recognition or
collective bargaining, nor of any strikes, slowdowns, work stoppages or
lock-outs of any kind, or threats thereof, by or with respect to any
employees of the Company or any Affiliate of the Company or any actual or
claimed representatives thereof, and no such activities, efforts, demands,
strikes, slowdowns, work stoppages or lock-outs occurred during the
24-month period preceding the date hereof; (iv) neither the Company nor any
Affiliate of the Company has engaged in, admitted committing or been held
in any administrative or judicial proceeding to have committed any unfair
labor practice under the National Labor Relations Act, as amended; (v)
neither the Company nor any Affiliate of the Company is involved in any
industrial or trade dispute or any dispute or negotiations regarding a
claim of material importance with any labor union or organization; and (vi)
there are no controversies, claims, demands or grievances of material
importance pending or, so far as the Company or any Affiliate of the
Company is aware, threatened, between the Company or any Affiliate of the
Company and any of their respective employees or any actual or claimed
representative thereof. The Company agrees to take such action as shall be
required to fulfill any and all contractual or statutory obligations it or
any Affiliate of the Company may have to any unions or labor organizations
or otherwise as a result of or relating to the execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby.
(b) Schedule 3.15 (and the exhibits thereto) set forth all contracts
and agreements, including, without limitation, employment agreements,
consulting agreements, independent contractor agreements, retainers and
severance agreements under which the Company or any Affiliate of the
Company has any obligation to provide wages, salary, commissions, or other
compensation or remuneration (other than obligations to make current wage
or salary payments terminable at will without notice) to or on behalf of
any employee, former employee, consultant or contractor (or any designee,
assignee or beneficiary thereof). The original or a complete and correct
copy of each written (and a complete and correct written description of
each such oral) contract or agreement, has been delivered or made available
to Harsco.
(c) A true and correct statement of the names, current rates of base
compensation and amounts of (or, where no amount is specified, the formula
for computing) supplemental or bonus compensation of all officers,
directors and employees of the Company and Affiliates of the Company as of
the date hereof, is set forth in Schedule 3.15. Except as set forth in
Schedule 3.15, (i) the Company and Affiliates of the Company have no
obligation (including an obligation for the payment of any fee,
extraordinary bonus, or "golden parachute" based upon the successful
completion of the transactions contemplated hereunder) under any employment
contract, consulting agreement, or any other similar agreements, employment
policies (including vacation and severance pay policies) or retirement or
employee benefit plans, arrangements or
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understandings, written or otherwise, with any officer, director, employee
or agent of the Company or any Affiliate and (ii) since January 1, 1998,
the Company and the Affiliates have (A) not paid or agreed to pay any
bonuses or made or agreed to make any increase in the rate of wages,
salaries or other compensation or remuneration of any of its officers,
directors, consultants or employees (except for increases in accordance
with written binding commitments, true, correct and complete copies of
which have been previously delivered to Harsco, or in accordance with a
past practice described in Schedule 3.15), or (B) become a party to any
employment contract or arrangement with any of its officers or employees
providing for any new or additional bonuses, profit sharing payments,
severance pay or retirement benefits or any other form of employee
compensation or benefits.
(d) The Company and each Affiliate of the Company has at all times
complied in all material respects and is in material compliance with all
applicable federal, state, and local laws, rules and regulations respecting
employment, wages, hours, compensation, benefits, occupational health and
safety, and payment and withholding of taxes in connection with employment.
The Company and each Affiliate of the Company has withheld all amounts
required by law or agreement to be withheld from wages, salaries,
commissions, etc., and neither the Company nor any Affiliate of the Company
is liable for any arrears of wages or any taxes or penalties for failure to
comply with any of the foregoing. There are no claims, complaints or legal
or administrative proceedings pending or, so far as the Company and any
Affiliate of the Company is aware, threatened, against the Company or any
Affiliate of the Company before any federal, state or municipal court or
governmental agency, or any federal, state or municipal taxing authority
involving or relating to any past or present employee(s) or applicant(s)
for employment of the Company or any Affiliate of the Company, or relating
to any acts, omissions or practices of the Company or any Affiliate of the
Company relating to employment, compensation or benefits. Neither the
Company nor any Affiliate of the Company is party to or bound by any court
or administrative order, judgment, decree or ruling of any kind respecting
the employment, compensation or benefits of any employees or prospective
employees of the Company or any Affiliate of the Company.
3.16 Environmental Matters. Except as disclosed in Schedule 3.16 hereto, to
the best of the Company's knowledge:
(a) The Company has obtained all licenses, permits, authorizations,
approvals and consents from Governmental or Regulatory Authorities which
are required in respect of its business, operations, assets or properties
under any applicable Environmental Law (as defined below). The Company is
in compliance in all material respects with the terms and conditions of all
such licenses, permits, authorizations, approvals and consents and with any
applicable Environmental Law.
(b) No Order has been issued, no complaint has been filed, no penalty
has been assessed and no investigation or review is pending or threatened
by any Governmental or Regulatory Authority with respect to any alleged
failure by the Company to have any license, permit, authorization, approval
or consent from Governmental or Regulatory Authorities required under any
applicable Environmental Law in connection with the conduct of the business
or operations of the Company or with respect to any treatment, storage,
recycling, transportation, disposal or "release" as defined in 42 U.S.C.
sec.9601(22) ("Release"), by the Company of any Hazardous Material (as
defined below), which Order, complaint, penalty or investigation,
individually or in the aggregate, is having or could be reasonably expected
to have a material adverse effect on the Company, and the Company is not
aware of any facts or circumstances which could be reasonably expected to
form the basis for any such Order, complaint, penalty or investigation.
(c) Neither the Company nor any prior owner or lessee of any property
now or previously owned or leased by the Company has handled any Hazardous
Material on any property now or previously owned or leased by the Company;
and, without limiting the foregoing, (i) no polychlorinated biphenyl is or
has been present, (ii) no asbestos is or has been present, (iii) there are
no underground storage tanks, active or abandoned and (iv) no Hazardous
Material has been Released in a quantity reportable under, or in violation
of, any Environmental Law, at, on or under any property now or previously
owned or leased by the Company, during any period that the Company owned or
leased such property and which could reasonably be expected to have a
material adverse effect on the Company.
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(d) The Company has not transported or arranged for the transportation
of any Hazardous Material to any location which is the subject of any
action, suit, arbitration or proceeding that could be reasonably expected
to lead to claims against the Company for clean-up costs, remedial work,
damages to natural resources or personal injury claims, which could be
reasonably expected to have a material adverse impact on the Company
including, but not limited to, claims under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, and the rules
and regulations promulgated thereunder ("CERCLA").
(e) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of the Company and no property now
or previously owned or leased by the Company is listed or proposed for
listing on the National Priorities List promulgated pursuant to CERCLA or
on any similar state list of sites requiring investigation or clean-up.
(f) There are no Liens arising under or pursuant to any Environmental
Law with respect to any real property owned or leased by the Company, other
than any such Liens against real property not individually or in the
aggregate material to the Company, and no action of any Governmental or
Regulatory Authority has been taken or is in process which could subject
any of such properties to such Liens, and the Company would not be required
to place any notice or restriction relating to the presence of Hazardous
Material at any such property owned by it in any deed to such property.
(g) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by, or which are in the
possession of, the Company in relation to any property or facility now or
previously owned or leased by the Company which have not been delivered to
Harsco prior to the execution of this Agreement.
(h) As used herein:
(i) "Environmental Law" means any Law of any Governmental or
Regulatory Authority relating to human health, safety or protection of
the environment or to emissions, discharges, releases or threatened
releases of pollutants, contaminants or Hazardous Materials in the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), or otherwise relating
to the treatment, storage, disposal, transport or handling of any
Hazardous Material; and
(ii) "Hazardous Material" means (A) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation and transformers or
other equipment that contain dielectric fluid containing levels of
regulated polychlorinated biphenyls (PCBs); (B) any chemicals,
materials, substances or wastes which are now or hereafter become
defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants" or
words of similar import, under any Environmental Law; and (C) any other
chemical, material, substance or waste, exposure to which is now or
hereafter prohibited, limited or regulated by any Governmental or
Regulatory Authority.
3.17 Tangible Property and Assets. Except as disclosed in Schedule 3.17
hereto, the Company has good and marketable title to, or has valid leasehold
interests in or valid rights under contract to use, all tangible property and
assets used in and, individually or in the aggregate, material to the conduct of
the businesses of the Company free and clear of all Liens other than (i) any
statutory Lien arising in the ordinary course of business by operation of law
with respect to a liability that is not yet due or delinquent and (ii) any minor
imperfection of title or similar Lien which individually or in the aggregate
with other such Liens does not materially impair the value of the property or
asset subject to such Lien or the use of such property or asset in the conduct
of the business of the Company. All such property and assets are, in all
material respects, in good working order and condition, ordinary wear and tear
excepted, and adequate and suitable for the purposes for which they are
presently being used.
3.18 Intellectual Property Rights. The Company has all right, title and
interest in, or a valid and binding license to use, all Intellectual Property
(as defined below) individually or in the aggregate material to the conduct
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of the businesses of the Company. The Company is not in default (or with the
giving of notice or lapse of time or both, would be in default) in any material
respect under any license to use such Intellectual Property, such Intellectual
Property is not being infringed by any third party, and the Company is not
infringing any Intellectual Property of any third party, except for such
defaults and infringements which, individually or in the aggregate, are not
having and could not be reasonably expected to have a material adverse effect on
the Company. For purposes of this Agreement, "Intellectual Property" means
patents and patent rights, trademarks and trademark rights, trade names and
trade name rights, service marks and service mark rights, service names and
service name rights, copyright and copyright rights and other proprietary
intellectual property rights and all pending applications for and registrations
of any of the foregoing.
3.19 Vote Required. The affirmative vote of the holders of record of at
least two-thirds of the outstanding shares of Company Common Stock with respect
to the adoption of this Agreement is the only vote of the holders of any class
or series of the capital stock of the Company required to adopt this Agreement
and approve the Merger and the other transactions contemplated hereby and by the
Stock Option Agreement.
3.20 Opinion of Financial Advisor. If McDonald & Company Securities
delivers to the Company an opinion, dated the date hereof, to the effect that,
as of the date hereof, the consideration to be received in the Merger by the
shareholders of the Company is fair from a financial point of view to the
shareholders of the Company, a true and complete copy of such opinion shall be
delivered to Harsco prior to the execution of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HARSCO AND ACQUISITION SUB
Harsco and Acquisition Sub represent and warrant to the Company as follows:
4.01 Organization and Qualification. Each of Harsco and Acquisition Sub is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation. Acquisition Sub was formed solely for
the purpose of engaging in the transactions contemplated by this Agreement and
the Stock Option Agreement, has engaged in no other business activities and has
conducted its operations only as contemplated hereby. Each of Harsco and
Acquisition Sub is duly qualified, licensed or admitted to do business and is in
good standing in each jurisdiction in which the ownership, use or leasing of its
assets and properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except for such failures to be
so qualified, licensed or admitted and in good standing which, individually or
in the aggregate, could not be reasonably expected to have a material adverse
effect on the validity or enforceability of this Agreement or the Stock Option
Agreement or on the ability of Harsco or Acquisition Sub to perform its
obligations hereunder or thereunder.
4.02 Authority Relative to this Agreement and the Stock Option Agreement.
Each of Harsco and Acquisition Sub has full corporate power and authority to
enter into this Agreement and the Stock Option Agreement and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the Stock Option Agreement by each of Harsco and Acquisition Sub
and the consummation by each of Harsco and Acquisition Sub of the transactions
contemplated hereby and thereby have been duly and validly approved by their
respective Boards of Directors and by Harsco in its capacity as the sole
shareholder of Acquisition Sub and no other corporate proceedings on the part of
Harsco or Acquisition Sub or their shareholders are necessary to authorize the
execution, delivery and performance of this Agreement and the Stock Option
Agreement by Harsco or Acquisition Sub and the consummation by Harsco or
Acquisition Sub of the transactions contemplated hereby and thereby. This
Agreement and the Stock Option Agreement have been duly and validly executed and
delivered by Harsco and Acquisition Sub and constitute legal, valid and binding
obligation of Harsco and Acquisition Sub enforceable against Harsco and
Acquisition Sub in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
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4.03 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement and the Stock Option
Agreement by Harsco and Acquisition Sub do not, and the performance by
Harsco and Acquisition Sub of their obligations hereunder and thereunder
and the consummation of the transactions contemplated hereby and thereby
will not, conflict with, result in a violation or breach of, constitute
(with or without notice or lapse of time or both) a default under, result
in or give to any person any right of termination, cancellation,
modification or acceleration of, or result in the creation or imposition of
any Lien upon any of the assets or properties of Harsco or any of its
Subsidiaries under, any of the terms, conditions or provisions of (i) the
certificates or articles of incorporation or bylaws (or other comparable
charter documents) of Harsco or any of its Subsidiaries, or (ii) subject to
the taking of the actions described in paragraph (b) of this Section, (x)
any Law or Order of any Governmental or Regulatory Authority applicable to
Harsco or any of its Subsidiaries or any of their respective assets or
properties, or (y) any Contract to which Harsco or any of its Subsidiaries
is a party or by which Harsco or any of its Subsidiaries or any of their
respective assets or properties is bound, excluding from the foregoing
clauses (x) and (y) conflicts, violations, breaches, defaults,
terminations, modifications, accelerations and creations and impositions of
Liens which, individually or in the aggregate, could not be reasonably
expected to have a material adverse effect on the ability of Harsco and
Acquisition Sub to consummate the transactions contemplated by this
Agreement and the Stock Option Agreement.
(b) Except (i) for the filing of a premerger notification report by
Harsco under the HSR Act, (ii) for the filing of the Certificate of Merger,
the Articles of Merger and other appropriate merger documents required by
the OGCL and the PBCL with the Ohio Secretary of State and the Pennsylvania
Secretary of State and appropriate documents with the relevant authorities
of other states in which the Constituent Corporations are qualified to do
business, and (iii) as disclosed in Schedule 4.03 hereto, no consent,
approval or action of, filing with or notice to any Governmental or
Regulatory Authority or other public or private third party is necessary or
required under any of the terms, conditions or provisions of any Law or
Order of any Governmental or Regulatory Authority or any Contract to which
Harsco or any of its Subsidiaries is a party or by which Harsco or any of
its Subsidiaries or any of their respective assets or properties is bound
for the execution and delivery of this Agreement and the Stock Option
Agreement by Harsco and Acquisition Sub, the performance by Harsco and
Acquisition Sub of their obligations hereunder and thereunder or the
consummation of the transactions contemplated hereby and thereby, other
than such consents, approvals, actions, filings and notices which the
failure to make or obtain, as the case may be, individually or in the
aggregate, could not be reasonably expected to have a material adverse
effect on the ability of Harsco and Acquisition Sub to consummate the
transactions contemplated by this Agreement and the Stock Option Agreement.
4.04 Legal Proceedings. There are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of Harsco and its Subsidiaries,
threatened against, relating to or affecting, nor to the knowledge of Harsco and
its Subsidiaries are there any Governmental or Regulatory Authority
investigations or audits pending or threatened against, relating to or
affecting, Harsco or any of its Subsidiaries or any of their respective assets
and properties which, if determined adversely to Harsco or any of its
Subsidiaries, individually or in the aggregate, could be reasonably expected to
have a material adverse effect on the ability of Harsco and Acquisition Sub to
consummate the transactions contemplated by this Agreement. Neither Harsco nor
any of its Subsidiaries is subject to any Order of any Governmental or
Regulatory Authority which, individually or in the aggregate, could be
reasonably expected to have a material adverse effect on the ability of Harsco
and Acquisition Sub to consummate the transactions contemplated by this
Agreement or the Stock Option Agreement.
4.05 Information Supplied. Neither the information supplied or to be
supplied in writing by or on behalf of Harsco or Acquisition Sub for inclusion,
nor the information incorporated by reference from documents filed by Harsco or
any of its Subsidiaries with the SEC, in the Proxy Statement or any other
documents to be filed by Harsco, Acquisition Sub or the Company with the SEC or
any other Governmental or Regulatory Authority in connection with the Merger and
the other transactions contemplated hereby or by the Stock Option Agreement will
on the date of its filing or, in the case of the Proxy Statement, at the date it
is mailed to shareholders, and at the time of the Company Shareholders' Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the
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circumstances under which they are made, not misleading. All such documents
filed by Harsco or Acquisition Sub with the SEC under the Exchange Act will
comply as to form in all material respects with the requirements of the Exchange
Act.
4.06 Financing. Harsco has sufficient cash and/or available credit
facilities to pay the aggregate Merger Price in accordance with this Agreement
and to make all other necessary payments of fees and expenses in connection with
the transactions contemplated by this Agreement and the Stock Option Agreement.
ARTICLE V
COVENANTS OF THE COMPANY
5.01 Conduct of Business. At all times from and after the date hereof
until the Effective Time, the Company covenants and agrees that (except as
expressly contemplated or permitted by this Agreement or the Stock Option
Agreement, or to the extent that Harsco shall otherwise consent in writing,
which consent shall not be unreasonably withheld):
(a) Ordinary Course. The Company shall conduct its business only in,
and the Company shall not take any action except in, the ordinary course
consistent with past practice.
(b) Without limiting the generality of paragraph (a) of this Section,
(i) the Company shall use all commercially reasonable efforts to preserve
intact in all material respects its present business organization and
reputation, to keep available the services of its key officers and
employees, to maintain its assets and properties in good working order and
condition, ordinary wear and tear excepted, to maintain insurance on its
tangible assets and businesses in such amounts and against such risks and
losses as are currently in effect, to preserve its relationships with
customers and suppliers and others having significant business dealings
with them and to comply in all material respects with all Laws and Orders
of all Governmental or Regulatory Authorities applicable to them, and (ii)
the Company shall not:
(A) amend or propose to amend its articles of incorporation or
regulations (or other comparable corporate charter documents);
(B) (w) declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock other than the
regular cash dividend for the first quarter of 1998 in an amount
consistent with past practice, and payable at a time prior to April 30,
1998; provided, however, that in no event shall such first quarter
regular cash dividend exceed $.09 per share; and provided further, that
in no event shall such dividend be paid after April 30, 1998; (x) split,
combine, reclassify or take similar action with respect to any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock, (y) adopt a plan of complete or partial liquidation
or resolutions providing for or authorizing such liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization or (z) directly or indirectly redeem, repurchase or
otherwise acquire any shares of its capital stock or any Option with
respect thereto;
(C) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or any Option with
respect thereto, or modify or amend any right of any holder of
outstanding shares of capital stock or Options with respect thereto;
(D) acquire (by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets
of, or by any other manner) any business or any corporation,
partnership, association or other business organization or division
thereof or otherwise acquire or agree to acquire any assets other than
in the ordinary course of its business consistent with past practice;
(E) other than dispositions in the ordinary course of its business
consistent with past practice, sell, lease, grant any security interest
in or otherwise dispose of or encumber any of its assets or properties;
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(F) except to the extent required by applicable law or GAAP, (x)
permit any material change in (A) any pricing, marketing, purchasing,
investment, accounting, financial reporting, inventory, credit,
allowance or tax practice or policy or (B) any method of calculating any
bad debt, contingency or other reserve for accounting, financial
reporting or tax purposes or (y) make any material tax election or
settle or compromise any material income tax liability with any
Governmental or Regulatory Authority;
(G) (x) incur (which shall not be deemed to include entering into
credit agreements, lines of credit or similar arrangements until
borrowings are made under such arrangements) any indebtedness for
borrowed money or guarantee any such indebtedness other than in the
ordinary course of its business consistent with past practice, or (y)
voluntarily purchase, cancel, prepay or otherwise provide for a complete
or partial discharge in advance of a scheduled repayment date with
respect to, or waive any right under, any indebtedness for borrowed
money other than in the ordinary course of its business consistent with
past practice;
(H) enter into, adopt, amend in any material respect (except as
may be required by applicable law) or terminate any Company Benefit Plan
or other agreement, arrangement, plan or policy between the Company and
one or more of its directors, officers or employees, or, except for
normal increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Company, increase in any manner
the compensation or fringe benefits of any director, officer or employee
or pay any benefit not required by any plan or arrangement in effect as
of the date hereof, except for normal increases in the ordinary course
of business consistent with past practice that, in the aggregate, do not
result in a material increase in benefits or compensation expense to the
Company;
(I) enter into any contract or amend or modify any existing
contract, or engage in any new transaction outside the ordinary course
of business consistent with past practice or not on an arm's length
basis, with any affiliate of the Company;
(J) make any capital expenditures or commitments for additions to
plant, property or equipment constituting capital assets, except in the
ordinary course of business consistent with past practice;
(K) make any change in the lines of business in which it
participates or is engaged; or
(L) enter into any contract, agreement, commitment or arrangement
to do or engage in any of the foregoing.
(c) Advice of Changes. The Company shall confer on a regular and
frequent basis with Harsco with respect to its business and operations and
other matters relevant to the Merger, and shall promptly advise Harsco, in
writing, of any change or event, including, without limitation, any
complaint, investigation or hearing by any Governmental or Regulatory
Authority (or communication indicating the same may be contemplated) or the
institution or threat of litigation, having, or which, insofar as can be
reasonably foreseen, could have, a material adverse effect on the Company
or on the ability of the Company to consummate the transactions
contemplated hereby.
5.02 No Solicitations. The Company shall not, and it shall not authorize
or permit any officer, director, employee, investment banker, financial advisor,
attorney, accountant or other agent or representative (each, a "Representative")
retained by or acting for or on behalf of the Company to, directly or
indirectly, initiate, solicit, encourage, or, unless the Board of Directors of
the Company believes, on the basis of written advice furnished by independent
legal counsel, that the failure to take such actions would constitute a breach
of applicable fiduciary duties, participate in any negotiations regarding,
furnish any confidential information in connection with, endorse or otherwise
cooperate with, assist, participate in or facilitate the making of any proposal
or offer for, or which may reasonably be expected to lead to, an Acquisition
Transaction (as defined below), by any person, corporation, partnership or other
entity or group (a "Potential Acquiror"). The Company shall promptly inform
Harsco, in writing, of the material terms and conditions of any proposal or
offer for, or which may reasonably be expected to lead to, an Acquisition
Transaction that it receives and the identity of the Potential Acquiror. The
Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Transaction. As used in this Agreement,
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"Acquisition Transaction" means any merger, consolidation or other business
combination involving the Company, or any acquisition in any manner of all or a
substantial portion of the equity of, or all or a substantial portion of the
assets of the Company whether for cash, securities or any other consideration or
combination thereof other than pursuant to the transactions contemplated by this
Agreement and the Stock Option Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Access to Information; Confidentiality.
(a) The Company shall, throughout the period from the date hereof to
the Effective Time, (i) provide Harsco and its Representatives with full
access, upon reasonable prior notice and during normal business hours, to
all officers, employees, agents and accountants of the Company and its
assets, properties, books and records, and (ii) furnish promptly to such
persons (x) a copy of each report, statement, schedule and other document
filed or received by the Company pursuant to the requirements of federal or
state securities laws or filed with any other Governmental or Regulatory
Authority, and (y) all other information and data (including, without
limitation, copies of Contracts, Company Benefit Plans and other books and
records) concerning the business and operations of the Company as Harsco or
any of such other persons reasonably may request. No investigation pursuant
to this paragraph or otherwise shall affect any representation or warranty
contained in this Agreement or any condition to the obligations of the
parties hereto.
(b) Harsco will hold, and will use its best efforts to cause its
Representatives to hold, in strict confidence, unless (i) compelled to
disclose by judicial or administrative process or by other requirements of
applicable Laws of Governmental or Regulatory Authorities (including,
without limitation, in connection with obtaining the necessary approvals of
this Agreement or the transactions contemplated hereby of Governmental or
Regulatory Authorities), or (ii) disclosed in an action or proceeding
brought by a party hereto in pursuit of its rights or in the exercise of
its remedies hereunder, all documents and information concerning the
Company furnished to it by the Company or its Representatives in connection
with this Agreement or the transactions contemplated hereby, except to the
extent that such documents or information can be shown to have been (x)
previously known by Harsco or its Representatives, (y) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of Harsco and its Representatives or (z) later
acquired by Harsco or its Representatives from another source if Harsco or
such Representative is not aware that such source is under an obligation to
the Company to keep such documents and information confidential. In the
event that this Agreement is terminated without the transactions
contemplated hereby having been consummated, upon the request of the
Company, Harsco will, and will cause its Representatives to, promptly
redeliver or cause to be redelivered all copies of documents and
information furnished by the Company or its Representatives to Harsco and
its Representatives in connection with this Agreement or the transactions
contemplated hereby and destroy or cause to be destroyed all notes,
memoranda, summaries, analyses, compilations and other writings related
thereto or based thereon prepared by Harsco or its Representatives.
6.02 Preparation of Proxy Statement. The Company shall prepare and file
with the SEC the Proxy Statement as soon as reasonably practicable after the
date hereof, and shall use its best efforts to have the Proxy Statement cleared
by the SEC. If at any time prior to the Effective Time any event shall occur
that should be set forth in an amendment of or a supplement to the Proxy
Statement, the Company shall prepare and file with the SEC such amendment or
supplement as soon thereafter as is reasonably practicable. Harsco, Acquisition
Sub and the Company shall cooperate with each other in the preparation of the
Proxy Statement, and the Company shall notify Harsco of the receipt of any
comments of the SEC with respect to the Proxy Statement and of any requests by
the SEC for any amendment or supplement thereto or for additional information,
and shall provide to Harsco promptly copies of all correspondence between the
Company or any representative of the Company and the SEC with respect to the
Proxy Statement. The Company shall give Harsco and its counsel the opportunity
to review the Proxy Statement and all responses to requests for additional
information by and replies to comments of the SEC before their being filed with,
or sent to, the SEC. Each of the Company, Harsco and Acquisition Sub agrees to
use its best efforts, after consultation with the other parties hereto, to
respond promptly to all such comments of and
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requests by the SEC and to cause the Proxy Statement to be mailed to the holders
of Company Common Stock entitled to vote at the Company Shareholders' Meeting at
the earliest practicable time.
6.03 Approval of Shareholders. The Company shall, through its Board of
Directors, duly call, give notice of, convene and hold a meeting of its
shareholders (the "Company Shareholders' Meeting") for the purpose of voting on
the adoption of this Agreement (the "Company Shareholders' Approval") as soon as
reasonably practicable after the date hereof. Except to the extent legally
required for the discharge of its fiduciary duties as reflected in a written
opinion of counsel, the Company shall, through its Board of Directors, include
in the Proxy Statement the recommendation of the Board of Directors of the
Company that the shareholders of the Company adopt this Agreement, and shall use
its best efforts to obtain such adoption. At such meeting, Harsco shall, and
shall cause its Subsidiaries to, cause all shares of Company Common Stock then
owned by Harsco or any such Subsidiary to be voted in favor of the adoption of
this Agreement.
6.04 Regulatory and Other Approvals. Subject to the terms and conditions
of this Agreement and without limiting the provisions of Sections 6.02 and 6.03,
each of the Company and Harsco will proceed diligently and in good faith and
will use all commercially reasonable efforts to do, or cause to be done, all
things necessary, proper or advisable to, as promptly as practicable, (a) obtain
all consents, approvals or actions of, make all filings with and give all
notices to Governmental or Regulatory Authorities or any other public or private
third parties required of Harsco, the Company or any of their Subsidiaries to
consummate the Merger and the other matters contemplated hereby and by the Stock
Option Agreement, and (b) provide such other information and communications to
such Governmental or Regulatory Authorities or other public or private third
parties as the other party or such Governmental or Regulatory Authorities or
other public or private third parties may reasonably request. In addition to and
not in limitation of the foregoing, (i) each of the parties will (x) take
promptly all actions necessary to make the filings required of Harsco and the
Company or their affiliates under the HSR Act, (y) comply at the earliest
practicable date with any request for additional information received by such
party or its affiliates from the Federal Trade Commission (the "FTC") or the
Antitrust Division of the Department of Justice (the "Antitrust Division")
pursuant to the HSR Act, and (z) cooperate with the other party in connection
with such party's filings under the HSR Act and in connection with resolving any
investigation or other inquiry concerning the Merger or the other matters
contemplated by this Agreement commenced by either the FTC or the Antitrust
Division or state attorneys general.
6.05 Benefit Plans.
(a) Company Employees Not Subject to Collective Bargaining Agreements
("Non-Unionized Employees"):
(i) Harsco shall have the right (but not the obligation) to
employ, as officers and employees of Harsco or the Surviving
Corporation, any persons who are officers and Non-Unionized Employees of
the Company immediately before the Effective Time. It shall be a
condition to employment by Harsco or the Surviving Corporation that any
former officer or Non-Unionized Employee of the Company agree to cancel
any existing employment contract, agreement or understanding between him
or herself and the Company, including without limitation, all benefits
related to severance arrangements upon a change of control or otherwise,
prior to accepting such new employment and without accepting any of the
severance benefits or other benefits or payments associated with such
contract, agreement or understanding.
(ii) Each Non-Unionized Employee employed by the Company prior to
the Effective Time who remains an employee of the Surviving Corporation
or Harsco, following the Effective Time (each a "Continued Employee")
shall be entitled, as an employee of Harsco or the Surviving
Corporation, to participate in whatever employee benefit plans, as
defined in Section 3(3) of ERISA, or whatever stock option, bonus or
incentive plans or other fringe benefit programs that may be in effect
generally for employees of Harsco or its Subsidiaries from time to time
("Harsco's Plans"), if such Continued Employee shall be eligible or
selected for participation therein and otherwise shall not be
participating in a similar plan which continues to be maintained by the
Surviving Corporation for such employee. All such participation shall be
subject to such terms of such plans as may be in effect from time to
time provided, further that Continued Employees will be eligible to
participate in Harsco's Plans on the
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same basis as similarly situated employees of Harsco or its
Subsidiaries. Such Continued Employees will receive credit for past
service with the Company for purposes of eligibility and vesting, but
not benefit accrual, under Harsco's Plans.
(iii) the Company shall take all timely and necessary action to
cease participation or accrual of benefits, effective as of the
Effective Time, by each Non-Unionized Employee employed by the Company
prior to the Effective Time in each Company Benefit Plan, and to
terminate each Company Benefit Plan, effective as of the Effective Time;
provided that Harsco may, in its sole discretion, give notice to the
Company, not less than 20 days (61 days in the case of any pension plan)
prior to the Effective Time, that any Company Benefit Plan shall not be
terminated and/or participation or accrual of benefits thereunder shall
not cease pursuant to this Section 6.05. At the sole discretion of
Harsco, the assets of any Company Benefit Plan may be transferred to any
similar such plan maintained and designated by Harsco, effective at or
after the Effective Time, as elected by Harsco, and if Harsco so elects,
the Company shall take any and all timely and necessary action to effect
such transfer.
(b) Company Employees Subject to Collective Bargaining Agreements
("Unionized Employees"):
(i) the rights, duties and obligations of the Company's Unionized
Employees after the Effective Time shall be governed and controlled by
such employees' respective collective bargaining agreements with the
Company as in effect at the Effective Time.
6.06 Stock Option Agreement. The Company, Harsco and Acquisition Sub
shall perform fully their respective obligations under the Stock Option
Agreement.
6.07 Expenses. Except as set forth in Section 8.02, whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the Stock Option Agreement and the transactions contemplated
hereby and thereby shall be paid by the party incurring such cost or expense.
6.08 Brokers or Finders. Each of Harsco and the Company represents, as to
itself and its affiliates, that no agent, broker, investment banker, financial
advisor or other firm or person is or will be entitled to any broker's or
finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement except McDonald & Company
Securities, Inc. whose fees and expenses will be paid by the Company in
accordance with the Company's agreement with such firm (a true and complete copy
of which has been delivered by the Company to Harsco prior to the execution of
this Agreement), and each of Harsco and the Company shall indemnify and hold the
other harmless from and against any and all claims, liabilities or obligations
with respect to any other such fee or commission or expenses related thereto
asserted by any person on the basis of any act or statement alleged to have been
made by such party or its affiliate.
6.09 Notice and Cure. Each of Harsco and the Company will notify the
other promptly in writing of, and contemporaneously will provide the other with
true and complete copies of any and all information or documents relating to,
and will use all commercially reasonable efforts to cure before the Closing, any
event, transaction or circumstance occurring after the date of this Agreement
that causes or will cause any covenant or agreement of Harsco or the Company, as
the case may be, under this Agreement to be breached or that renders or will
render untrue any representation or warranty of Harsco or the Company, as the
case may be, contained in this Agreement as if the same were made on or as of
the date of such event, transaction or circumstance. Each of Harsco and the
Company also will notify the other promptly in writing of, and will use all
commercially reasonable efforts to cure, before the Closing, any violation or
breach of any representation, warranty, covenant or agreement made by Harsco or
the Company, as the case may be, in this Agreement, whether occurring or arising
prior to, on or after the date of this Agreement. No notice given pursuant to
this Section shall have any effect on the representations, warranties, covenants
or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein.
6.10 Fulfillment of Conditions. Subject to the terms and conditions of
this Agreement, each of Harsco and the Company will take or cause to be taken
all commercially reasonable steps necessary or desirable and proceed diligently
and in good faith to satisfy each condition to the other's obligations contained
in this Agreement and to consummate and make effective the transactions
contemplated by this Agreement, and neither
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Harsco nor the Company will, nor will it permit any of its Subsidiaries to, take
or fail to take any action that could be reasonably expected to result in the
nonfulfillment of any such condition.
6.11 1997 Audited Financial Statements. The Company shall cause to be
delivered to Harsco the audited financial statements of the Company for the year
ended December 31, 1997 as soon as the same are available, but in no event later
than 5 days prior to Closing.
ARTICLE VII
CONDITIONS
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
fulfillment, at or prior to the Closing, of each of the following conditions:
(a) Shareholder Approval. This Agreement shall have been adopted by
the requisite vote of the shareholders of the Company under the OGCL and
the Company's Articles of Incorporation.
(b) HSR Act. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated.
(c) No Injunctions or Restraints. No court of competent jurisdiction
or other competent Governmental or Regulatory Authority shall have enacted,
issued, promulgated, enforced or entered any Law or Order (whether
temporary, preliminary or permanent) which is then in effect and has the
effect of making illegal or otherwise restricting, preventing or
prohibiting consummation of the Merger or the other transactions
contemplated by this Agreement and the Stock Option Agreement.
(d) Governmental and Regulatory Consents and Approvals. Other than
the filing provided for by Section 1.02, all consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory
Authority or any other public or private third party required of Harsco,
the Company or any of their Subsidiaries to consummate the Merger and the
other matters contemplated hereby and by the Stock Option Agreement, the
failure of which to be obtained or taken could be reasonably expected to
have a material adverse effect on Harsco and its Subsidiaries or the
Surviving Corporation and its Subsidiaries, in each case taken as a whole,
or on the ability of Harsco and the Company to consummate the transactions
contemplated hereby or by the Stock Option Agreement shall have been
obtained, all in form and substance reasonably satisfactory to Harsco and
no such consent, approval or action shall contain any term or condition
which could be reasonably expected to result in a material diminution of
the benefits of the Merger to Harsco.
7.02 Conditions to Obligation of Harsco and Acquisition Sub to Effect the
Merger. The obligation of Harsco and Acquisition Sub to effect the Merger is
further subject to the fulfillment, at or prior to the Closing, of each of the
following additional conditions (all or any of which may be waived in whole or
in part by Harsco and Acquisition Sub in their sole discretion):
(a) Representations and Warranties. Each of the representations and
warranties made by the Company in this Agreement shall be true and correct
in all material respects as of the Closing Date as though made on and as of
the Closing Date or, in the case of representations and warranties made as
of a specified date earlier than the Closing Date, on and as of such
earlier date and the Company shall have delivered to Harsco a certificate,
dated the Closing Date and executed on behalf of the Company by its
Chairman of the Board, President or any Vice President, to such effect.
(b) Performance of Obligations. The Company shall have performed and
complied with, in all material respects, each agreement, covenant and
obligation required by this Agreement to be so performed or complied with
by the Company at or prior to the Closing, and the Company shall have
delivered to Harsco a certificate, dated the Closing Date and executed on
behalf of the Company by its Chairman of the Board, President or any Vice
President, to such effect.
(c) Orders and Laws. There shall not have been issued, enacted,
promulgated or deemed applicable to Harsco, the Surviving Corporation, any
of their respective Subsidiaries or the transactions contemplated
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by this Agreement any Order or Law of any Governmental or Regulatory
Authority which is then in effect and which could be reasonably expected to
result in a material diminution of the benefits of the Merger to Harsco,
and there shall not be pending or threatened on the Closing Date any
action, suit or proceeding in, before or by any Governmental or Regulatory
Authority which could be reasonably expected to result in any such
issuance, enactment, promulgation or deemed applicability of any such Order
or Law or of any Order or Law referred to in Section 7.01(c).
(d) Governmental and Regulatory Consents and Approvals. Other than
the filing provided for by Section 1.02, all consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory
Authority, the failure of which to be obtained or taken could be reasonably
expected to have a material adverse effect on Harsco and its Subsidiaries
or the Surviving Corporation and its Subsidiaries, in each case taken as a
whole, or on the ability of Harsco and the Company to consummate the
transactions contemplated hereby or by the Stock Option Agreement shall
have been obtained, all in form and substance reasonably satisfactory to
Harsco and no such consent, approval or action shall contain any term or
condition which could be reasonably expected to result in a material
diminution of the benefits of the Merger to Harsco.
(e) Contractual Consents. The Company shall have received, all in
form and substance reasonably satisfactory to Harsco, all material consents
(or in lieu thereof waivers) from parties to each Contract disclosed or
which should have been disclosed pursuant to Section 3.04(b), and no such
consent or waiver shall contain any term or condition which could be
reasonably expected to result in a material diminution of the benefits of
the Merger to Harsco.
(f) Opinion of Counsel. Harsco and Acquisition Sub shall have
received the opinion of Squire, Sanders & Dempsey LLP, counsel to the
Company, dated the Closing Date, substantially in the form and to the
effect of Exhibit A hereto.
(g) Proceedings. All proceedings to be taken on the part of the
Company in connection with the transactions contemplated by this Agreement
and all documents incident thereto shall be reasonably satisfactory in form
and substance to Harsco, and Harsco shall have received copies of all such
documents and other evidences as Harsco may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
(h) Dissenting Shares. No more than seven percent (7%) of the
outstanding Company Common Stock shall be Dissenting Shares.
7.03 Conditions to Obligation of the Company to Effect the Merger. The
obligation of the Company to effect the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by the Company
in its sole discretion):
(a) Representations and Warranties. Each of the representations and
warranties made by Harsco and Acquisition Sub in this Agreement shall be
true and correct in all material respects as of the Closing Date as though
made on and as of the Closing Date or, in the case of representations and
warranties made as of a specified date earlier than the Closing Date, on
and as of such earlier date, and Harsco and Acquisition Sub shall each have
delivered to the Company a certificate, dated the Closing Date and executed
on behalf of Harsco by its Chairman of the Board, President or any Vice
President and on behalf of Acquisition Sub by its Chairman of the Board,
President or any Vice President, to such effect.
(b) Performance of Obligations. Harsco and Acquisition Sub shall have
performed and complied with, in all material respects, each agreement,
covenant and obligation required by this Agreement to be so performed or
complied with by Harsco or Acquisition Sub at or prior to the Closing, and
Harsco and Acquisition Sub shall each have delivered to the Company a
certificate, dated the Closing Date and executed on behalf of Harsco by its
Chairman of the Board, President or any Vice President and on behalf of
Acquisition Sub by its Chairman of the Board, President or any Vice
President, to such effect.
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(c) Opinion of Counsel. The Company shall have received the opinion of
Morgan, Lewis & Bockius LLP, counsel to Harsco and Acquisition Sub, dated
the Closing Date, substantially in the form and to the effect of Exhibit B
hereto.
(d) Proceedings. All proceedings to be taken on the part of Harsco and
Acquisition Sub in connection with the transactions contemplated by this
Agreement and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Company, and the Company shall
have received copies of all such documents and other evidences as the
Company may reasonably request in order to establish the consummation of
such transactions and the taking of all proceedings in connection
therewith.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, at any time prior to the Effective Time,
whether prior to or after the Company Shareholders' Approval:
(a) by mutual written agreement of the parties hereto duly authorized
by action taken by or on behalf of their respective Boards of Directors;
(b) by either the Company or Harsco upon notification to the
non-terminating party by the terminating party:
(i) at any time after April 30, 1998 if the Merger shall not have
been consummated on or prior to such date and such failure to consummate
the Merger is not caused by a breach of this Agreement by the
terminating party; provided however, the date may be extended
indefinitely by the mutual written agreement of the parties; and
provided further, that such date shall be extended by the parties for a
reasonable period if the only condition hereunder that remains
unsatisfied as of such date relates to the receipt of any Governmental
or Regulatory Authority Consent or approval required in connection with
this transaction including, without limitation, any consent or approval
required under the HSR Act;
(ii) if the Company Shareholders' Approval shall not be obtained by
reason of the failure to obtain the requisite vote upon a vote held at a
meeting of such shareholders, or any adjournment thereof, called
therefor;
(iii) if any Governmental or Regulatory Authority, the taking of
action by which is a condition to the obligations of either the Company
or Harsco to consummate the transactions contemplated hereby, shall have
determined not to take such action and all appeals of such determination
shall have been taken and have been unsuccessful;
(iv) if there has been a material breach of any representation,
warranty, covenant or agreement on the part of the non-terminating party
set forth in this Agreement which breach has not been cured within 5
business days following receipt by the non-terminating party of notice
of such breach from the terminating party or assurance of such cure
reasonably satisfactory to the terminating party shall not have been
given by or on behalf of the non-terminating party within such 5
business day period; or
(v) if any court of competent jurisdiction or other competent
Governmental or Regulatory Authority shall have issued an Order making
illegal or otherwise restricting, preventing or prohibiting the Merger
and such Order shall have become final and nonappealable.
8.02 Effect of Termination. (a) If this Agreement is validly terminated by
either the Company or Harsco pursuant to Section 8.01, this Agreement will
forthwith become null and void and there will be no liability or obligation on
the part of either the Company or Harsco (or any of their respective
Representatives or affiliates), except (i) that the provisions of Sections
6.01(b), 6.06, 6.07, and 6.08 will continue to apply following any such
termination, and (ii) that nothing contained herein shall relieve any party
hereto from liability for wilful breach of its representations, warranties,
covenants or agreements contained in this Agreement and (iii) as provided in
paragraph (b) below.
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(b) In the event that (i) Harsco terminates this Agreement pursuant to
Section 8.01(b)(iv), or (ii) either Harsco or the Company terminates this
Agreement pursuant to Section 8.01(b)(ii) following a failure of the
shareholders of the Company to approve this Agreement and, before the
Company Shareholders' Meeting the Board of Directors of the Company shall
have recommended that its shareholders accept any tender or exchange offer
with respect to their Company Common Stock (other than an offer made by or
on behalf of Harsco) or shall have withdrawn or modified in any manner
adverse to Harsco its recommendation with respect to the Merger, then the
Company shall, within one business day after receipt of a request from
Harsco, pay to Harsco in cash a termination fee of $1.7 million.
8.03 Amendment. This Agreement may be amended, supplemented or modified by
action taken by or on behalf of the respective Boards of Directors of the
parties hereto at any time prior to the Effective Time, whether prior to or
after adoption of this Agreement at the Company Shareholders' Meeting, but after
such adoption only to the extent permitted by applicable law. No such amendment,
supplement or modification shall be effective unless set forth in a written
instrument duly executed by or on behalf of each party hereto.
8.04 Waiver. At any time prior to the Effective Time any party hereto, by
action taken by or on behalf of its Board of Directors, may to the extent
permitted by applicable law (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of the other parties hereto
contained herein or in any document delivered pursuant hereto or (iii) waive
compliance with any of the covenants, agreements or conditions of the other
parties hereto contained herein. No such extension or waiver shall be effective
unless set forth in a written instrument duly executed by or on behalf of the
party extending the time of performance or waiving any such inaccuracy or
non-compliance. No waiver by any party of any term or condition of this
Agreement, in any one or more instances, shall be deemed to be or construed as a
waiver of the same or any other term or condition of this Agreement on any
future occasion.
ARTICLE IX
GENERAL PROVISIONS
9.01 Non-Survival of Representations, Warranties, Covenants and Agreements.
The representations, warranties, covenants and agreements contained in this
Agreement or in any instrument delivered pursuant to this Agreement shall not
survive the Merger but shall terminate at the Effective Time.
9.02 Knowledge. With respect to any representations or warranties contained
herein which are made to the knowledge of the Company or Harsco or any of their
respective Subsidiaries, as the case may be, the knowledge of the officers,
directors and employees of the Company or Harsco, as the case may be, and of the
officers, directors and employees of its respective Subsidiaries, shall be
imputed to the Company or Harsco, as the case may be, and such Subsidiaries.
9.03 Notices. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to Harsco or Acquisition Sub, to:
Harsco Corporation
350 Poplar Church Road
P.O. Box 8888
Camp Hill, PA 17001-8888
Facsimile No.: (717) 763-6426
Attn: General Counsel
with a copy to:
Morgan, Lewis & Bockius LLP
One Commerce Square
417 Walnut Street
Harrisburg, PA 17101
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Facsimile No.: (717) 237-4013
Attn: Charles L. O'Brien, Esquire
If to the Company, to:
Chemi-Trol Chemical Co.
2776 County Road 69
Gibsonburg, OH 43431
Facsimile No.: (419) 334-5285
Attn: Robert W. Woolf, Chairman, President and CEO
with a copy to:
Squire, Sanders & Dempsey LLP
4900 Key Tower
127 Public Square
Cleveland, OH 44114-1304
Facsimile No.: (216) 479-8780
Attn: David A. Zagore, Esquire
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other person to whom a
copy of such notice is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other parties hereto.
9.04 Entire Agreement. Except for the Confidentiality Agreement executed by
and between Harsco and the Company, dated October 28, 1997, which shall remain
in full force and effect as provided therein, this Agreement and the Stock
Option Agreement supersede all prior discussions and agreements among the
parties hereto with respect to the subject matter hereof and thereof, including,
without limitation, that certain letter of intent between the Company and Harsco
dated December 8, 1997, and contain the sole and entire agreement among the
parties hereto with respect to the subject matter hereof and thereof.
Notwithstanding anything herein to the contrary, Harsco shall have the right to
exercise its rights and option under the Stock Option Agreement.
9.05 Public Announcements. Except as otherwise required by law or the rules
of any applicable securities exchange or national market system, so long as this
Agreement is in effect, Harsco and the Company will not, and will not permit any
of their respective Representatives to, issue or cause the publication of any
press release or make any other public announcement with respect to the
transactions contemplated by this Agreement without the consent of the other
party, which consent shall not be unreasonably withheld. Harsco and the Company
will cooperate with each other in the development and distribution of all press
releases and other public announcements with respect to this Agreement and the
transactions contemplated hereby, and will furnish the other with drafts of any
such releases and announcements as far in advance as practicable.
9.06 No Third Party Beneficiary. The terms and provisions of this Agreement
are intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and except as provided in Section 6.06, it is
not the intention of the parties to confer third-party beneficiary rights upon
any other person.
9.07 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any party hereto without the
prior written consent of the other parties hereto and any attempt to do so will
be void, except that Acquisition Sub may assign any or all of its rights,
interests and obligations hereunder to another direct or indirect wholly-owned
Subsidiary of Harsco, provided that any such Subsidiary agrees in writing to be
bound by all of the terms, conditions and provisions contained herein. subject
to the preceding sentence, this Agreement is binding upon, inures to the benefit
of and is enforceable by the parties hereto and their respective successors and
assigns.
9.08 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
A-25
60
9.09 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the legal, invalid or unenforceable provision
or by its severance herefrom and (iv) in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
9.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania applicable to a
contract executed and performed in such State without giving effect to the
conflicts of laws principles thereof.
9.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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61
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
signed by its officer thereunto duly authorized as of the date first above
written.
Attest: HARSCO CORPORATION
/s/ Paul C. Coppock By: /s/ Barry M. Sullivan
- - - ----------------------------------------------------- -----------------------------------------------------
Secretary Name: Barry M. Sullivan
Title: Vice President -- Corporate Development
and Treasurer
Attest: H-CHEMI ACQUISITION CORP.
/s/ Paul C. Coppock By: /s/ Barry M. Sullivan
- - - ----------------------------------------------------- -----------------------------------------------------
Secretary Name: Barry M. Sullivan
Title: Treasurer
Attest: CHEMI-TROL CHEMICAL CO.
/s/ Kevin D. Lauck By: /s/ Robert W. Woolf
- - - ----------------------------------------------------- -----------------------------------------------------
Secretary Name: Robert W. Woolf
Title: Chairman, President and CEO
A-27
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EXHIBIT A
[OPINION OF COUNSEL TO THE COMPANY]
, 1998
Harsco Corporation
350 Poplar Church Road
P. O. Box 8888
Camp Hill, PA 17001-8888
H-Chemi Acquisition Corp.
350 Poplar Church Road
P. O. Box 8888
Camp Hill, PA 17001-8888
Dear Sirs:
We have acted as [special] counsel to Chemi-Trol Chemical Co., an Ohio
corporation (the "Company"), in connection with the Agreement and Plan of Merger
dated as of February , 1998, (the "Merger Agreement"), by and among Harsco
corporation, a Delaware corporation, H-Chemi Acquisition Corp., a Pennsylvania
corporation, and the Company and the transactions contemplated thereby.
Capitalized terms not defined herein shall have the meanings ascribed to them in
the Merger Agreement. We are rendering this opinion to you pursuant to Section
7.02(f) of the Merger Agreement.
In rendering the opinions expressed below, we have examined such documents
and such corporate records of the Company as we have deemed necessary as a basis
for the opinions hereinafter expressed. In such examination, we have assumed the
genuineness of all signatures, the authenticity of documents submitted to us as
originals, the conformity with the original documents of all documents submitted
to us as copies and the authenticity of the originals of such latter documents.
When facts relevant to such opinions were not independently established, we have
relied upon the representations and warranties as to factual matters made in or
pursuant to the Merger Agreement and upon certificates of government officials
and of the Company and its officers.
Based upon the foregoing and having regard to legal considerations we deem
relevant, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation
and has full corporate power and authority to conduct its business as and
to the extent now conducted and to own, use and lease its assets and
properties.
2. The authorized capital stock of the Company consists solely of
shares of Company Common Stock. As of , , shares
of Company Common Stock were issued and outstanding, shares were
held in the treasury of the Company. To our knowledge there has been no
change in the number of issued and outstanding shares of Company Common
Stock or shares of Company Common Stock held in treasury or reserved for
issuance since such date other than the reservation of shares
pursuant to the Stock Option Agreement. All of the issued and outstanding
shares of Company Common Stock are, and all shares reserved for issuance
will be, upon issuance in accordance with the terms specified in the
instruments or agreements pursuant to which they are issuable, duly
authorized, validly issued, fully paid and nonassessable. To our knowledge,
except pursuant to the Merger Agreement and the Stock Option Agreement and
except as set forth in Schedule 3.02 to the Merger Agreement, there are no
outstanding Options obligating the Company to issue or sell any shares of
capital stock of the Company or to grant, extend or enter into any Option
with respect thereto.
63
3. The Company has full corporate power and authority to enter into
the Merger Agreement and the Stock Option Agreement, to perform its
obligations thereunder and to consummate the transactions contemplated
thereby. The execution, delivery and performance of the Merger Agreement
and the Stock Option Agreement by the Company and the consummation by the
Company of the transactions contemplated thereby have been duly and validly
approved by the Board of Directors of the Company and the shareholders of
the Company and no other corporate proceedings on the part of the Company
or its shareholders are necessary to authorize the execution, delivery and
performance of the Merger Agreement and the Stock Option Agreement by the
Company and the consummation by the Company of the transactions
contemplated thereby. The Merger Agreement and the Stock Option Agreement
have been duly and validly executed and delivered by the Company and
constitute legal, valid and binding obligation of the Company enforceable
against the Company in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
4. The execution and delivery of the Merger Agreement and the Stock
Option Agreement by the Company did not, and the performance by the Company
of its obligations thereunder and the consummation of the transactions
contemplated thereby will not, conflict with, result in a violation or
breach of, constitute (with or without notice or lapse of time or both) a
default under, result in or give to any person any right of termination,
cancellation, modification or acceleration of, or result in the creation or
imposition of any Lien upon any of the assets or properties of the Company
under, any of the terms, conditions or provisions of (a) the articles of
incorporation or regulations (or other comparable charter documents) of the
Company, (b) any statute, law, rule or regulation, or any other Law or
Order of any Governmental or Regulatory Authority known to us, applicable
to the Company or any of its assets or properties, or (c) any Contract
known to us to which the Company is a party or by which the Company or any
of their respective assets or properties is bound.
5. No consent, approval or action of, filing with or notice to any
Governmental or Regulatory Authority is necessary or required under any of
the terms, conditions or provisions of any statute, law, rule or
regulation, or any other Law or Order of any Governmental or Regulatory
Authority known to us, applicable to the Company or any of its assets or
properties for the execution and delivery of the Merger Agreement and the
Stock Option Agreement by the Company, the performance by the Company of
its obligations thereunder or the consummation of the transactions
contemplated thereby, except as disclosed in Section 3.04(b) of the Merger
Agreement or Schedule 3.04 thereto, all of which consents, approvals,
actions, filings and notices have been obtained, made or given, as the case
may be, are not subject to the satisfaction of any condition that has not
been satisfied or waived and are in full force and effect.
6. Except as disclosed in the Company SEC Reports filed prior to the
date hereof or in Schedule 3.08 to the Merger Agreement, to our knowledge
there are no actions, suits, arbitrations, proceedings or Governmental or
Regulatory Authority investigations or audits pending or threatened
against, relating to or affecting the Company or any of its assets and
properties which, individually or in the aggregate, could be reasonably
expected to have a material adverse effect on the Company or on the ability
of the Company to consummate the transactions contemplated by the Merger
Agreement or the Stock Option Agreement.
We are members of the bar of the State of and we do not
herein express any opinion as to any matters governed by any laws other than the
laws of the State of , the General Corporation Law of the State
of Ohio and the federal law of the United States of America.
This opinion is furnished by as solely for your benefit in connection with
the consummation of the transactions contemplated by the Merger Agreement and
may not be referred to or used for any other purpose or in any other context or
otherwise relied upon by any other person, firm or corporation without our prior
written consent.
Very truly yours,
Ex. A-2
64
EXHIBIT B
[OPINION OF COUNSEL TO HARSCO AND ACQUISITION SUB]
, 1998
Chemi-Trol Chemical Co.
2776 CR 69
Gibsonburg, OH 43431
Dear Sirs:
We have acted as special counsel to Harsco Corporation, a Delaware
corporation ("Harsco"), and H-Chemi Acquisition Corp., a Pennsylvania
corporation wholly owned by Harsco ("Acquisition Sub"), in connection with the
Agreement and Plan of Merger dated as of February , 1998 (the
"Merger Agreement"), by and among Harsco, Acquisition Sub and Chemi-Trol
Chemical Co., an Ohio corporation, and the transactions contemplated thereby.
Capitalized terms not defined herein shall have the meanings ascribed to them in
the Merger Agreement. We are rendering this opinion to you pursuant to Section
7.03(c) of the Merger Agreement.
In rendering the opinions expressed below, we have examined such documents
and such corporate records of Harsco and its Subsidiaries as we have deemed
necessary as a basis for the opinion hereinafter expressed. In such examination,
we have assumed the genuineness of all signatures, the authenticity of documents
submitted to us as originals, the conformity with the original documents of all
documents submitted to us as copies and the authenticity of the originals of
such latter documents. When facts relevant to such opinions were not
independently established, we have relied upon the representations and
warranties as to factual matters made in or pursuant to the Merger Agreement and
upon certificates of government officials and of Harsco and its Subsidiaries and
their respective officers.
Based upon the foregoing and having regard to legal considerations we deem
relevant, we are of the opinion that:
1. Harsco is a corporation validly existing and in good standing under
the laws of its jurisdiction of incorporation. Acquisition Sub is a
corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation.
2. Each of Harsco and Acquisition Sub has full corporate power and
authority to enter into the Merger Agreement and the Stock Option
Agreement, to perform its obligations thereunder and to consummate the
transactions contemplated thereby to be consummated by it. The execution,
delivery and performance of the Merger Agreement and the Stock Option
Agreement by each of Harsco and Acquisition Sub and the consummation by
each of Harsco and Acquisition Sub of the transactions contemplated thereby
to be consummated by it have been duly and validly approved by its Board of
Directors and by Harsco in its capacity as the sole shareholder of
Acquisition Sub, and no other corporate proceedings on the part of Harsco
or Acquisition Sub or their shareholders are necessary to authorize the
execution, delivery and performance of this Agreement and the Stock Option
Agreement by Harsco or Acquisition Sub and the consummation by Harsco or
Acquisition Sub of the transactions contemplated thereby. The Merger
Agreement and the Stock Option Agreement have been duly and validly
executed and delivered by Harsco and Acquisition Sub and constitute legal,
valid and binding obligation of Harsco and Acquisition Sub enforceable
against Harsco and Acquisition Sub in accordance with their terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
We are members of the bar of the State of Pennsylvania, and we do not
herein express any opinion as to any matters governed by any laws other than the
laws of the State of Pennsylvania, the General Corporation Law of the State of
Ohio and the federal law of the United States of America.
This opinion is furnished by as solely for your benefit in connection with
the consummation of the transactions contemplated by the Merger Agreement and
may not be referred to or used for any other purpose or in any other context or
otherwise relied upon by any other person, firm or corporation without our prior
written consent.
Very truly yours,
65
APPENDIX B
SECTIONS 1701.84 AND 1701.85 OF THE OHIO GENERAL CORPORATION LAW
1701.84 DISSENTING SHAREHOLDERS ENTITLED TO RELIEF. The following are
entitled to relief as dissenting shareholders under section 1701.85 of the
Revised Code:
(A) Shareholders of a domestic corporation that is being merged or
consolidated into a surviving or new entity, domestic or foreign, pursuant
to section 1701.78, 1701.781, 1701.79, or 1701.801 of the Revised Code;
(B) In the case of a merger into a domestic corporation, shareholders
of the surviving corporation who under section 1701.78 or 1701.781 of the
Revised Code are entitled to vote on the adoption of an agreement of
merger, but only as to the shares so entitling them to vote;
(C) Shareholders, other than the parent corporation, of a domestic
subsidiary corporation that is being merged into the domestic or foreign
parent corporation pursuant to section 1701.80 of the Revised Code;
(D) In the case of a combination or a majority share acquisition,
shareholders of the acquiring corporation who under section 1701.83 of the
Revised Code are entitled to vote on such transaction, but only as to the
shares so entitling them to vote;
(E) Shareholders of a domestic subsidiary corporation into which one
or more domestic or foreign corporations are being merged pursuant to
section 1701.801 of the Revised Code.
1701.85 RELIEF FOR DISSENTING SHAREHOLDERS; QUALIFICATION; PROCEDURES.
(A)(1) A shareholder of a domestic corporation is entitled to relief
as a dissenting shareholder in respect of the proposals described in
sections 1701.74, 1701.76, and 1701.84 of the Revised Code, only in
compliance with this section
If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date
fixed for the determination of shareholders entitled to notice of a meeting
of the shareholders as to which the proposal is to be submitted, and such
shares shall not have been voted in favor of the proposal. not later than
ten days after the date on which the vote on the proposal was taken at the
meeting of the shareholders, the dissenting shareholder shall deliver to
the corporation a written demand for payment to him of the fair cash value
of the shares as to which he seeks relief, which demand shall state his
address, the number and class of such shares, and the amount claimed by him
as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C)
of section 1701.84 of the Revised Code in the case of a merger pursuant to
section 1701.80 of the Revised Code and a dissenting shareholder entitled
to relief under division (E) of section 1701.84 of the Revised Code in the
case of a merger pursuant to section 1701.801 of the Revised Code shall be
a record holder of the shares of the corporation as to which he seeks
relief as of the date on which the agreement of merger was adopted by the
directors of that corporation. Within twenty days after he has been sent
the notice provided in section 1701.80 or 1701.801 of the Revised Code, the
dissenting stockholder shall deliver to the corporation a written demand
for payment with the same information as that provided for in division
(A)(2) of this section.
In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or
the new entity, whether the dissenting shareholder, within fifteen days
from the date of the sending of such request, shall deliver to the
corporation the certificates requested so that the corporation may
forthwith endorse on them a legend to the effect that demand for the fair
cash value of such shares has been made. The corporation promptly shall
return such endorsed certificates to the dissenting shareholder. A
dissenting shareholder's failure to deliver such certificates terminates
his rights as a shareholder, at the option of the corporation, exercised by
written notice sent to the dissenting shareholder within twenty days after
the lapse of the fifteen-day period, unless a court for good cause shown
otherwise directs. If shares represented by a certificate on which such a
legend has been endorsed are transferred, each
B-1
66
new certificate issued for them shall bear a similar legend, together with
the name of the original dissenting holder of such shares. Upon receiving a
demand for payment from a dissenting shareholder who is the record holder
of uncertificated securities, the corporation shall make an appropriate
notation of the demand for payment in its shareholder records. If
uncertificated shares for which payment has been demanded are to be
transferred, any new certificate issued for the shares shall bear the
legend required for certificated securities as provided in this paragraph.
A transferee of the shares so endorsed, or of uncertificated securities
where such notation has been made, acquires only such rights in the
corporation as the original dissenting holder of such shares had
immediately after the service of a demand for payment of the fair cash
value of the shares. A request under this paragraph, by the corporation is
not an admission by the corporation that the shareholder is entitled to
relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to
an agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the
surviving or new entity, within three months after the service of the
demand by the dissenting shareholder, may file a complaint in the court of
common pleas of the county in which the principal office of the corporation
that issued the shares is located or was located when the proposal was
adopted by the shareholders of the corporation, or, if the proposal was not
required to be submitted to the shareholders, was approved by the
directors. Other dissenting shareholders, within that three-month period,
may join as plaintiffs or may be joined as defendants in any such
proceeding, and any two or more such proceedings may be consolidated. The
complaint shall contain a brief statement of the facts, including the vote
and the facts entitling the dissenting shareholder to the relief demanded.
No answer to such a complaint is required. Upon the filing of such a
complaint, the court, on motion of the petitioner, shall enter an order
fixing a date for a hearing on the complaint and requiring that a copy of
the complaint and a notice of the filing and of the date for hearing be
given to the respondent or defendant in the manner in which summons is
required to be served or substituted service is required to be made in
other cases. On the day fixed for the hearing on the complaint or any
adjournment of it, the court shall determine from the complaint and from
such evidence as is submitted by either party whether the dissenting
shareholder is entitled to be paid the fair cash value of any shares and,
if so, the number and class of such shares. If the court finds that the
dissenting shareholder is so entitled, the court may appoint one or more
persons as appraisers to receive evidence and to recommend a decision on
the amount of the fair cash value. The appraisers have such power and
authority as is specified in the order of their appointment. The court
thereupon shall make a finding as to the fair cash value of a share and
shall render judgment against the corporation for the payment of it, with
interest at such rate and from such date as the court considers equitable.
The costs of the proceeding, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as
the court considers equitable. The proceeding is a special proceeding and
final orders in it may be vacated, modified, or reversed on appeal pursuant
to the Rules of Appellate Procedure and, to the extent not in conflict with
those rules, Chapter 2505 of the Revised Code. If, during the pendency of
any proceeding instituted under this section, a suit or proceeding is or
has been instituted to enjoin or otherwise to prevent the carrying out of
the action as to which the shareholder has dissented, the proceeding
instituted under this section shall be stayed until the final determination
of the other suit or proceeding. Unless any provision in division (D) of
this section is applicable, the fair cash value of the shares that is
agreed upon by the parties or fixed under this section shall be paid within
thirty days after the date of final determination of such value under this
division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a
holder of uncertificated securities entitled to such payment. In the case
of holders of shares represented by certificates, payment shall be made
only upon and simultaneously with the surrender to the corporation of the
certificates representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders
of the corporation, fair cash value as to those shareholders shall be
determined as of the day prior to the day on which the vote by the
shareholders was taken, and, in the case of a merger pursuant to section
1701.80 or 1701.801 of the Revised Code, fair cash value as to shareholders
of a constituent subsidiary corporation shall be determined as of the day
before the adoption of the agreement of merger by the directors of the
particular subsidiary corporation.
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67
The fair cash value of a share for the purposes of this section is the
amount that a willing seller who is under no compulsion to sell would be
willing to accept and that a willing buyer who is under no compulsion to
purchase would be willing to pay, but in no event shall the fair cash value
of a share exceed the amount specified in the demand of the particular
shareholder. In computing such fair cash value, any appreciation or
depreciation in market value resulting from the proposal submitted to the
directors or to the shareholders shall be excluded.
(D)(1) The right and obligation of a dissenting shareholder to receive
such fair cash value and to sell such shares as to which he seeks relief,
and the right and obligation of the corporation to purchase such shares and
to pay fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally
enjoined or prevented from carrying it out, or the shareholders rescind
their adoption, of the action involved;
(c) The dissenting shareholder withdraws his demand, with the
consent of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to
an agreement as to the fair cash value per share, and neither the
shareholder nor the corporation filed or joined in a complaint under
division (B) of this section within the period provided in that
division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the
corporation shall be taken by the general partners of a surviving or new
partnership or the comparable representatives of any other surviving or new
entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it
or the purchase of the shares by the corporation, all other rights accruing
from such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid
in money upon shares of such class or any dividend, distribution, or
interest is paid in money upon any securities issued in extinguishment of
or in substitution for such shares, an amount equal to the dividend,
distribution, or interest which, except for the suspension, would have been
payable upon such shares or securities, shall be paid to the holder of
record as a credit upon the fair cash value of the shares. If the right to
receive fair cash value is terminated other than by the purchase of the
shares by the corporation, all rights of the holder shall be restored and
all distributions which, except for the suspension, would have been made
shall be made to the holder of record of the shares at the time of
termination.
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68
CHEMI-TROL CHEMICAL COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
[CHEMI-TROL LOGO]
The undersigned hereby appoints ROBERT W. WOOLF and KEVIN D. LAUCK, as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all shares of common stock,
without par value, of Chemi-Trol Co. held of record by the undersigned on March
20, 1998 at the special meeting of shareholders to be held on April 22, 1998 and
any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 1.
PROPOSAL 1: To approve and adopt an Agreement and Plan of Merger dated as of
February 20, 1998, among Harsco Corporation, a Delaware corporation
("Harsco"), H-Chemi Acquisition Corp., a Pennsylvania corporation
("Acquisition Sub"). and Chemi-Trol Chemical Co., an Ohio
corporation ("Company") (the "Merger Agreement"). A copy of the
Merger Agreement is attached to the Proxy Statement as Appendix A.
If the Merger Agreement is approved, at the effective time (the
"Effective Time") of the merger: (i) Acquisition Sub shall be merged
with and into the Company (the "Merger") and the Company will become
a wholly owned subsidiary of Harsco and (ii) each share of common
stock, without par value, of the Company (each, a "Share") (the
holders of the Shares being hereinafter referred to as
"shareholders") that is issued and outstanding immediately prior to
the Effective Time will be converted into the right to receive
$23.00 in cash (without interest thereon), except those Shares owned
by shareholders, if any, who properly exercise their dissenters'
rights will not be so converted.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Proxies are authorized to use their discretion in voting upon such other
business as may properly come before the meeting.
69
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW.
Dated: , 1998
------------------
------------------------------
Signature
------------------------------
Signature, if held jointly
If Shares are held by joint
tenants, both should sign.
When signing as attorney, as
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 an authorized person.