Hartco Inc.

Hartco Inc.

April 16, 2015 12:11 ET

Hartco Enters into Agreement With Mr. Harry Hart

MONTREAL, CANADA--(Marketwired - April 16, 2015) - Hartco Inc. ("Hartco" or the "Company") (TSX:HCI) today announced that the Company, acting through a Special Committee of Hartco's Board of Directors comprised exclusively of independent directors, has entered into a letter agreement (the "Letter Agreement") with two companies controlled by Mr. Harry Hart under which the two companies have agreed (i) to make a take-over bid to acquire all of the issued and outstanding common shares of Hartco, other than shares held directly or indirectly by Mr. Hart and members of his immediate family, at a price of $3.40 in cash per share, representing total consideration of approximately $18.3 million, and (ii) to tender to or support any third party offer which constitutes a "Superior Proposal", as described below, which is not matched by Mr. Hart (the "Obligation to Tender").

Mr. Harry Hart is the founder, Executive Chairman and Chief Executive Officer of Hartco. To the Company's knowledge, Mr. Hart and members of his immediate family own, directly or indirectly, or exercise control or direction over, an aggregate of 8,358,400 common shares of Hartco, representing approximately 63.22% of Hartco's 13,222,104 issued and outstanding shares. As previously announced, Mr. Hart has advised the Company that he has entered into a Support and Voting Agreement with two institutional shareholders holding an aggregate of 2,422,000 Hartco shares, representing approximately 18.32% of Hartco's outstanding shares and approximately 49.80% of the shares not owned or controlled by Mr. Hart and members of his immediate family.

As announced on March 25, 2015, the Special Committee is not prepared to recommend that Hartco shareholders accept an offer of $3.40 in cash per share. This conclusion was reached after consultation by the Special Committee with its financial and external legal advisors. In particular, the Special Committee took into account the independent valuation of Hartco prepared by Burkman Capital Corporation which concluded that, subject to the analyses and assumptions set out in the valuation, the fair market value of Hartco's shares is in the range of $3.94 to $5.25 per share. However, the Special Committee believes that it is appropriate to enter into the Letter Agreement so that Hartco's shareholders benefit from the Obligation to Tender on the part of Mr. Hart and his associates.

Under the Letter Agreement, the two companies under Mr. Hart's control have agreed to make a take-over bid no later than April 30, 2015, conditional upon Hartco delivering by April 20, 2015 a copy of a formal valuation of Hartco's shares revised to take into account, among other things, the Letter Agreement, and to be prepared by Burkman Capital Corporation, the independent valuator selected by the Special Committee of the Board of Directors.

Under the Letter Agreement, Hartco has agreed not to solicit any other offers to acquire the Company. The undertaking by Hartco is subject to the Company's right to engage in discussions or negotiations and otherwise cooperate and facilitate and maintain discussions or negotiations with any person making an offer to acquire the Company if the Special Committee determines in good faith, after consultation with its financial advisors and external legal counsel, that the offer would, if completed in accordance with its terms, reasonably be expected to constitute a "Superior Proposal". The Letter Agreement defines "Superior Proposal", in effect, as an offer which would, if consummated in accordance with its terms, result in a transaction more favourable to Hartco's shareholders from a financial point of view than the offer from Mr. Hart's companies, and one in respect of which failure by the Special Committee to recommend such offer to Hartco's shareholders would be inconsistent with the Special Committee's fiduciary duties under applicable law.

The Letter Agreement further provides that if Hartco receives a "Superior Proposal", Mr. Hart's two companies will have a period of five business days in which they will have the right, but not the obligation, to offer to amend the terms of their offer so that the offer from the third party ceases to be a "Superior Proposal", in effect, a "right to match" on the part of Mr. Hart's companies.

The Letter Agreement also includes the Obligation to Tender, which provides that if Mr. Hart does not exercise his "right to match" and Hartco enters into a definitive, binding agreement with a third party regarding a "Superior Proposal", Mr. Hart, the companies under his control and the members of his immediate family will, if the "Superior Proposal" is to be completed by way of a take-over bid, unconditionally and irrevocably deposit all of their Hartco shares to such offer, or if the "Superior Proposal" is to be completed in a manner that requires approval of Hartco's shareholders, vote all of their Hartco shares in favour of the "Superior Proposal" at any meeting of Hartco shareholders.

Hartco can terminate the Letter Agreement if the companies under Mr. Hart's control do not commence the take-over bid and mail it to Hartco's shareholders by April 30, 2015, other than as a result of a default by Hartco under the Letter Agreement. The two companies under Mr. Hart's control can terminate the Letter Agreement in certain prescribed circumstances. However, the Letter Agreement does not provide for the payment by Hartco of a "break fee" to Mr. Hart's companies.

Hartco has filed a copy of the Letter Agreement under the Company's profile on SEDAR (www.sedar.com).

About Hartco Inc.

Hartco Inc. (TSX:HCI) has been a leader in the Canadian information technology business for more than thirty years and is the parent company of Metafore Technologies Inc. As one of Canada's leading IT solution providers, Metafore designs, supplies, installs and supports information technology solutions that contribute to improved productivity and overall business performance of private and public sector organizations of every size across Canada. For more information, please visit www.hartco.com or www.metafore.ca.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of applicable securities laws. Such forward-looking statements may include, without limitation, statements regarding the proposed take-over bid and other statements that are not historical facts. Such statements are subject to assumptions, risks and uncertainties, including those discussed in our filings on SEDAR. Actual results or events may vary materially from expected results or events. In particular, the timing and completion of the proposed take-over bid are expected to be subject to certain conditions, termination rights and other risks and uncertainties. Accordingly, there can be no assurance that the proposed take-over bid will occur, or that it will occur on the timetable or on the terms and conditions contemplated. We do not undertake any obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.

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