<PAGE>
------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
SCHEDULE 14D-1
Tender Offer Statement
Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934
PROLER INTERNATIONAL CORP.
(Name of Subject Company)
PIC ACQUISITION CORPORATION
(Bidder)
COMMON STOCK, $1.00 PAR VALUE
(Including the associated rights)
(Title of Class of Securities)
743396
(CUSIP Number of Class of Securities)
ANTON U. PARDINI
SCHNITZER STEEL INDUSTRIES, INC.
3200 N.W. YEON AVENUE
PORTLAND, OREGON 97210
(503) 323-2807
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
COPY TO:
STUART W. CHESTLER
STOEL RIVES LLP
900 SW FIFTH AVENUE, SUITE 2300
PORTLAND, OREGON 97204-1268
------------------------
CALCULATION OF FILING FEE
<TABLE>
<S> <C>
Transaction Valuation* Amount of Filing Fee*
$35,404,125 $7,081
</TABLE>
* The transaction valuation assumes the purchase of 4,720,550 shares of Common
Stock together with the associated stock rights of Proler International
Corp. at $7.50 per share in cash, which is based on the number of shares of
Common Stock represented by the Company to be outstanding (4,717,356) and
the number of shares of Common Stock issuable under restricted stock awards
(3,194) as of September 15, 1996. The amount of the filing fee, calculated
in accordance with Rule 0-11(d) under the Securities Exchange Act of 1934,
equals 1/50 of one percent of the cash offered by the Bidder.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid:................... N/A
Form or Registration No.:................. N/A
Filing Party:............................. N/A
Date Filed:............................... N/A
</TABLE>
TOTAL OF SEQUENTIALLY NUMBERED PAGES:
EXHIBIT INDEX ON SEQUENTIALLY NUMBERED PAGE
<PAGE>
CUSIP No. 743396
14D-1
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------
1. Name of reporting person
SS or I.R.S. Identification No. of above person
PIC Acquisition Corp., I.R.S. No.: Applied For
- -------------------------------------------------------------------------------------------
2. Check the appropriate box if a member of a group (a) / /
(b) / /
- -------------------------------------------------------------------------------------------
3. SEC Use Only
- -------------------------------------------------------------------------------------------
4. Sources of Funds
AF
- -------------------------------------------------------------------------------------------
5. Check box if disclosure of legal proceedings is required pursuant to Items 2(e) /X/
OR 2(f)
- -------------------------------------------------------------------------------------------
6. Citizenship or place of organization
Delaware
- -------------------------------------------------------------------------------------------
7. Aggregate amount beneficially owned by each reporting person
None (0)
- -------------------------------------------------------------------------------------------
8. Check box if the aggregate amount in row (7) excludes certain shares. / /
- -------------------------------------------------------------------------------------------
9. Percent of class represented by amount in row (7)
None (0)
- -------------------------------------------------------------------------------------------
10. Type of reporting person
CO
- -------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Proler International Corp., a
Delaware corporation, (the "Company") and the address of its principal executive
offices is 4265 San Felipe, Suite 900, Houston, TX 77027.
(b) The class of securities to which this statement relates is the Common
Stock, par value $1.00 per share (the "Common Stock"), of the Company including
the associated stock purchase rights (the "Rights") issued pursuant to the
Rights Agreement dated as of February 28, 1996 (as amended effective September
15, 1996) between the Company and KeyCorp Shareholder Services, Inc., as Rights
Agent (the Common Stock and the Rights are referred to collectively herein as
the "Shares"). The information set forth in the Introductory Section and Section
1 of the Offer to Purchase (the "Offer to Purchase") annexed hereto as Exhibit
(a)1 is incorporated herein by reference.
(c) The information concerning the principal market in which the Shares are
traded and the high and low sales prices for the Shares in such principal market
is set forth in Section 6 ("Price Range of Shares; Cash Distributions") of the
Offer to Purchase which is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a) - (d) and (g) The name, principal business and address of the principal
office of PIC Acquisition Corporation, a Delaware corporation (the "Purchaser")
and Schnitzer Steel Industries, Inc., an Oregon corporation ("Schnitzer") is set
forth in Section 8 ("Certain Information Concerning the Purchaser") of the Offer
to Purchase, which is incorporated herein by reference. The name, citizenship,
business address, present principal occupation or employment of each director
and executive officer of Purchaser and Schnitzer and the name, principal
business and address of any corporation or other organization in which such
occupation or employment is conducted, and the material occupations, positions,
offices or employments of such persons during the last five years and the name,
principal business and address of any business corporation or other organization
in which such occupation, position, office or employment was carried on, is set
forth in Schedule I of the Offer to Purchase and is incorporated herein by
reference.
(e) and (f) During the last five years none of the Purchaser or Schnitzer
or, to the best knowledge of the Purchaser, any of the persons listed in
Schedule I to the Offer to Purchase has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors). During 1992, Mr. Ralph
R. Shaw, a director of Schnitzer, entered into a settlement agreement with the
Securities and Exchange Commission relating to alleged violations of Section
16(a) of the Securities Exchange Act of 1934 due to failure to report on a
timely basis transactions in the common stock of two public companies for which
he served as a director. As part of the settlement agreement, Mr. Shaw agreed to
the entry of an order by the Commission requiring him to permanently cease and
desist from any further violations of Section 16(a). Except for the foregoing,
none of the Purchaser or Schnitzer or, to the best knowledge of the Purchaser,
any of the persons listed in Schedule I to the Offer to Purchase was a party to
a civil proceeding of a judicial or administrative body of competent
jurisdiction and, as a result of such proceeding, was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of, or prohibiting activities subject to, federal or state securities laws or
finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) To the best of Purchaser's and Schnitzer's knowledge, there have been no
transactions with the Company required to be set forth in this Item.
(b) The information set forth in Section 10 ("Background of the Offer;
Contacts with the Company") of the Offer to Purchase is incorporated herein by
reference.
3
<PAGE>
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in Section 9 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a) - (e) The information set forth in the Introduction and Section 11
("Purpose of the Offer; The Merger Agreement; Plans for the Company") of the
Offer to Purchase is incorporated herein by reference.
(f) and (g) The information set forth in Section 13 ("Effect of the Offer on
the Market for the Shares; New York Stock Exchange Listing and Exchange Act
Registration") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in Section 8 ("Certain Information
Concerning the Purchaser") is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 9 ("Source and Amount
of Funds"), Section 10 ("Background of the Offer; Contacts with the Company"),
Section 11 ("Purpose of the Offer; The Merger Agreement; Plans for the
Company"), Section 15 ("Certain Legal Matters") and Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference. Except
as set forth in the Introduction and Sections 9, 10, 11, 15 and 16 of the Offer
to Purchase, neither the Purchasers nor, to the best knowledge of the
Purchasers, any of the persons listed in Schedule I to the Offer to Purchase,
has any contract, arrangement, understanding or relationship (whether or not
legally enforceable) with any other person with respect to any securities of the
Company (including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any such securities,
joint ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss, or the giving or withholding of proxies).
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 16 ("Fees and Expenses") of the Offer
to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 8 ("Certain Information Concerning the
Purchaser") of the Offer to Purchase is incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) None.
(b) - (d) The information set forth in the Introduction, Section 9 ("Source
and Amount of Funds") and Section 15 ("Certain Legal Matters") of the Offer to
Purchase is incorporated herein by reference.
(e) None.
4
<PAGE>
ITEM 10. ADDITIONAL INFORMATION. (CONTINUED)
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, to the extent not otherwise incorporated herein by reference, is
incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a) (1) Offer to Purchase, dated September 20, 1996.
(2) Letter of Transmittal.
(3) IRS Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(4) Form of Summary Advertisement, dated September 20, 1996.
(5) Form of Notice of Guaranteed Delivery.
(6) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(7) Form of Letter to Clients for Use by Brokers, Dealers, Commercial
Banks, Trust Companies and other Nominees.
(8) Press Release, dated September 16, 1996.
(b) Credit Agreement dated as of March 27, 1995, among Schnitzer, the
syndicate of lenders party thereto and The First National Bank of
Chicago, as Agent.
(c) (1) Agreement and Plan of Merger, dated September 15, 1996, among the
Purchaser, Schnitzer and the Company.
(2) Agreement with Depositary.
(3) Agreement with Information Agent.
(d) Not applicable.
(e) Not applicable.
(f) The Offer to Purchase and the Letter of Transmittal are incorporated
herein by reference.
5
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this Statement is true, complete and correct.
Date: September 20, 1996
------------------------
<TABLE>
<S> <C> <C> <C>
PIC ACQUISITION CORPORATION
By: /s/ ANTON U. PARDINI
-----------------------------------------
Name: Anton U. Pardini
-----------------------------------
Title: Assistant Secretary and General Counsel
-----------------------------------
</TABLE>
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
PROLER INTERNATIONAL CORP.
AT
$7.50 NET PER SHARE
BY
PIC ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
SCHNITZER STEEL INDUSTRIES, INC.
THE OFFER AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME, ON FRIDAY, OCTOBER 18, 1996
UNLESS THE OFFER IS EXTENDED
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION
1) THAT NUMBER OF SHARES THAT WOULD REPRESENT A MAJORITY OF ALL OUTSTANDING
SHARES OF THE COMPANY (DETERMINED ON A FULLY DILUTED BASIS) ON THE DATE OF
PURCHASE. SEE INTRODUCTION AND SECTION 14.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT (DESCRIBED HEREIN) AND THE MAKING OF THE OFFER BY THE PURCHASER, AND
HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN
THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER.
Any stockholder desiring to tender all or any portion of such stockholder's
Shares (including the associated Rights) should (A) complete and sign the Letter
of Transmittal (or a facsimile thereof) in accordance with the instructions in
the Letter of Transmittal, have such stockholder's signature thereon guaranteed
if required by Instruction 1 to the Letter of Transmittal, and mail or deliver
the Letter of Transmittal (or such facsimile) and any other required documents
to the Depositary, and either deliver, together with the certificates
representing the tendered Shares and any other required documents to the
Depositary, or tender such Shares pursuant to the procedure for book-entry
transfer set forth in Section 3 or (B) request such stockholder's broker,
dealer, bank, trust company or other nominee to effect the transaction for such
stockholder. Stockholders having Shares registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact such
broker, dealer, commercial bank, trust company or other nominee if they desire
to tender Shares so registered.
If a stockholder desires to tender Shares and such stockholder's
certificates for such Shares (or Rights, if applicable) are not immediately
available, or the procedures for book-entry transfer cannot be completed on a
timely basis, or time will not permit all documents to reach the Depositary
prior to the Expiration Date, such stockholder may tender such Shares by
following the procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent at the address and telephone numbers set forth on the back cover of this
Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent or from brokers, dealers, commercial banks or trust companies.
------------------------
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
September 20, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
INTRODUCTION............................................................................................... 3
1. TERMS OF THE OFFER; EXPIRATION DATE............................................................. 4
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES................................................... 6
3. PROCEDURE FOR TENDERING SHARES.................................................................. 7
4. WITHDRAWAL RIGHTS............................................................................... 10
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES......................................................... 11
6. PRICE RANGE OF SHARES; CASH DISTRIBUTIONS....................................................... 12
7. CERTAIN INFORMATION CONCERNING THE COMPANY...................................................... 12
8. CERTAIN INFORMATION CONCERNING THE PURCHASER.................................................... 15
9. SOURCE AND AMOUNT OF FUNDS...................................................................... 17
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.............................................. 17
11. THE PURPOSE OF THE OFFER; MERGER AGREEMENT; PLANS FOR THE COMPANY............................... 19
12. DIVIDENDS AND DISTRIBUTIONS..................................................................... 26
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, NEW YORK STOCK EXCHANGE LISTING AND EXCHANGE
ACT REGISTRATION.............................................................................. 26
14. CERTAIN CONDITIONS OF THE OFFER................................................................. 27
15. CERTAIN LEGAL MATTERS........................................................................... 28
16. FEES AND EXPENSES............................................................................... 29
17. MISCELLANEOUS................................................................................... 29
SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER AND
SCHNITZER.................................................................................. S-1
</TABLE>
2
<PAGE>
To the Holders of Common Stock (including the associated Rights)
of Proler International Corp.:
INTRODUCTION
PIC Acquisition Corporation, a Delaware corporation (the "Purchaser"), which
is a wholly owned subsidiary of Schnitzer Steel Industries, Inc., an Oregon
corporation ("Schnitzer"), hereby offers to purchase all outstanding shares of
common stock, $1.00 par value per share (the "Shares"), of Proler International
Corp., a Delaware corporation (the "Company"), together with the associated
stock rights (the "Rights") issued pursuant to a Rights Agreement (the "Rights
Agreement") dated as of February 28, 1996, as amended effective September 15,
1996, between the Company and KeyCorp Shareholder Services, Inc. (the "Rights
Agent"), at a purchase price of $7.50 per Share (and associated Right), net to
the seller in cash, upon the terms and subject to the conditions set forth in
this Offer to Purchase and in the related Letter of Transmittal (which, together
with any amendments or supplements hereto or thereto, collectively constitute
the "Offer"). Unless the context otherwise requires, all references in the Offer
to Shares shall include the associated Rights.
The purpose of the Offer is to enable Schnitzer to acquire the entire equity
interest in the Company. The Offer is being made pursuant to an Agreement and
Plan of Merger dated as of September 15, 1996 by and among the Purchaser,
Schnitzer and the Company (the "Merger Agreement"). The Merger Agreement
provides for, among other things, the Purchaser to commence a cash tender offer
to purchase all of the Shares of the Company for $7.50 per Share. As soon as
practicable following the consummation of the Offer, it is intended that the
Purchaser will merge into the Company (the "Merger") pursuant to the applicable
provisions of the Delaware General Corporation Law ("DGCL"). The purpose of the
Merger is to facilitate the acquisition of the Shares not tendered and purchased
pursuant to the Offer. Under the terms of the Merger Agreement, upon
consummation of the Merger each then outstanding Share (other than Shares owned
by the Company or any subsidiary of the Company, the Purchaser, Schnitzer or any
other subsidiary of Schnitzer and Shares held by stockholders who perfect any
available appraisal rights under the DGCL) would be converted into the right to
receive an amount in cash equal to the price per Share paid pursuant to the
Offer (the "Offer Price").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses of The Bank of New York, which is
acting as the depositary (the "Depositary"), and Georgeson & Company Inc., which
is acting as Information Agent (the "Information Agent"), incurred in connection
with the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MAKING OF THE OFFER BY THE PURCHASER, AND HAS DETERMINED THAT
THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF,
THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER.
THE COMPANY HAS INFORMED THE PURCHASER THAT EACH OF THE COMPANY'S EXISTING
DIRECTORS INTENDS TO TENDER HIS SHARES PURSUANT TO THE OFFER.
Each of J.C. Bradford & Co., LLC ("J.C. Bradford") and Chase Securities Inc.
("Chase Securities") has delivered to the Board of Directors of the Company its
opinion that the consideration to be received by the holders of Shares in the
Offer and the Merger is fair to such holders from a financial point of view.
Copies of the opinions of J.C. Bradford and Chase Securities are contained in
the Company's Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), which is being mailed to stockholders herewith.
As soon as possible after the consummation of the Offer, the Merger
Agreement provides that the Purchaser will be entitled to designate such number
of directors for the Company's Board of Directors as is
3
<PAGE>
equal to the product (rounded up to the next whole number) of the total number
of directors on the Company's Board of Directors multiplied by the percentage
that the aggregate number of Shares beneficially owned by the Purchaser and its
affiliates bears to the number of Shares outstanding. The Company has agreed to
either increase the size of the Company's Board of Directors and/or obtain the
resignations of such number of its current directors as is necessary to enable
the Purchaser's designees to be elected to the Company's Board of Directors.
THE OFFER IS CONDITIONED UPON THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN
PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION 1) THAT NUMBER OF SHARES
(THE "MINIMUM NUMBER OF SHARES") THAT WOULD REPRESENT A MAJORITY OF ALL
OUTSTANDING SHARES OF THE COMPANY (DETERMINED ON A FULLY DILUTED BASIS) ON THE
DATE OF PURCHASE (THE "MINIMUM TENDER CONDITION"). SUBJECT TO OBTAINING THE
CONSENT OF THE COMPANY AND THE APPLICABLE RULES AND REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), THE PURCHASER RESERVES
THE RIGHT, WHICH IT CURRENTLY HAS NO INTENTION OF EXERCISING, TO WAIVE OR REDUCE
THE MINIMUM TENDER CONDITION AND TO ELECT TO PURCHASE, PURSUANT TO THE OFFER,
FEWER THAN THE MINIMUM NUMBER OF SHARES. SEE SECTIONS 1 AND 14.
Certain other conditions to the Offer are described in Section 14. The
Purchaser reserves the right to waive any one or more of the conditions to the
Offer. See Sections 2 and 14.
According to the Company's Quarterly Report on Form 10-Q for the quarter
ended July 31, 1996 (the "Company's 1996 Form 10-Q"), as of September 13, 1996,
there were 4,717,356 Shares issued and outstanding. The Company has represented
to the Purchaser and Schnitzer that there were 140,845 Shares subject to options
and 3,194 Shares issuable under restricted stock awards as of September 15,
1996. The Company has agreed in the Merger Agreement to use its best efforts to
cancel such options prior to the effective date of the Merger in exchange for a
payment to the option holder equal to the Offer price less the exercise price of
such option, if applicable. Based on the foregoing, and assuming that no changes
occur prior to the date of purchase pursuant to the Offer, there would currently
be 4,861,395 Shares outstanding on a fully diluted basis and the Minimum Number
of Shares would be 2,430,698. However, the actual Minimum Number of Shares will
depend upon the facts as they exist on the date of purchase.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; EXPIRATION DATE.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of such extension or
amendment), the Purchaser will accept for payment and pay for all Shares that
are validly tendered prior to the Expiration Date and not withdrawn as permitted
by Section 4. The term "Expiration Date" means 12:00 Midnight, Eastern time, on
October 18, 1996, unless and until the Purchaser, in its sole discretion, shall
have extended the period during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, will expire.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM TENDER CONDITION,
THE EXPIRATION OR TERMINATION OF THE APPLICABLE WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE
REGULATIONS THEREUNDER (THE "HSR ACT") AND THE SATISFACTION OF THE OTHER
CONDITIONS SET FORTH IN SECTION 14.
If by 12:00 Midnight, Eastern time, on Friday, October 18, 1996 (or any date
and time then set as the Expiration Date), any or all of the conditions to the
Offer have not been satisfied or waived, the Purchaser
4
<PAGE>
reserves the right (but shall not be obligated), subject to the applicable rules
and regulations of the Commission, to (a) terminate the Offer and not accept for
payment or pay for any Shares and return all tendered Shares to tendering
stockholders, (b) waive all the unsatisfied conditions and accept for payment
and pay for all Shares validly tendered prior to the Expiration Date and not
theretofore withdrawn, (c) subject to the limitations in the Merger Agreement,
extend the Offer and, subject to the right of stockholders to withdraw Shares
until the Expiration Date, retain the Shares that have been tendered during the
period or periods for which the Offer is extended or (d) subject to the
limitations in the Merger Agreement, amend the Offer. See Section 11. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE FOR TENDERED SHARES,
WHETHER OR NOT THE PURCHASER EXERCISES ITS RIGHT TO EXTEND THE OFFER.
There can be no assurances that the Purchaser will exercise its right to
extend the Offer. Any extension, amendment or termination will be followed as
promptly as practicable by public announcement. In the case of an extension,
Rule 14e-1(d) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that the announcement be issued no later than 9:00
a.m., Eastern time, on the next business day after the previously scheduled
Expiration Date in accordance with the public announcement requirements of Rule
14d-4(c) under the Exchange Act. Subject to applicable law (including Rules
14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material
change in the information published, sent or given to stockholders in connection
with the Offer be promptly disseminated to stockholders in a manner reasonably
designed to inform stockholders of such change), and without limiting the manner
in which the Purchaser may choose to make any public announcement, the Purchaser
will not have any obligation to publish, advertise or otherwise communicate any
such public announcement other than by making a release to the Dow Jones News
Service. As used in this Offer to Purchase, "business day" has the meaning set
forth in Rule 14d-1 under the Exchange Act.
If the Purchaser extends the Offer or if the Purchaser is delayed in its
acceptance for payment of or payment (whether before or after its acceptance for
payment of Shares) for Shares or it is unable to pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser,
and such Shares may not be withdrawn except to the extent tendering stockholders
are entitled to withdrawal rights as described in Section 4. However, the
ability of the Purchaser to delay the payment for Shares that the Purchaser has
accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which
requires that a bidder pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or waives a material condition of the Offer,
the Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14c-1 under the
Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of an offer or information concerning an
offer, other than a change in the percentage of securities sought or a change in
price, will depend upon the facts and circumstances, including the relative
materiality of the changes or information.
If, prior to the Expiration Date, the Purchaser should increase or decrease
the percentage of Shares being sought, or increase or (with the prior written
consent of the Company) decrease the consideration offered pursuant to the Offer
to holders of Shares, such increase or decrease would be applicable to all
holders whose Shares are accepted for payment pursuant to the Offer and if, at
the time notice of any increase or decrease is first published, sent or given to
holders of Shares, the Offer is scheduled to expire at any time earlier than the
tenth business day from and including the date that such notice is first so
published, sent or given, the Offer would be extended at least until the
expiration of such ten business-day period. With respect to a change in price or
a change in the percentage of securities sought, a minimum period of ten
business days is generally required to allow for adequate dissemination to
stockholders and investor response.
5
<PAGE>
This Offer to Purchase and the related Letter of Transmittal is being mailed
to the record holders of Shares and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the Company's stockholder list or, if applicable,
who are listed as participants in a clearing agency's security position listing
for subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will accept for payment, and, promptly after the
Expiration Date, will pay for all Shares validly tendered prior to the
Expiration Date (and not properly withdrawn in accordance with Section 4). See
Sections 1 and 14. The Purchaser reserves the right, in its sole discretion, to
delay acceptance for payment of, or, subject to the requirements of Rule 14e-1
referred to in Section 1 above, payment for, Shares until the conditions to the
Offer have been satisfied and in order to comply in whole or in part with any
applicable law. Any such delays will be effected in compliance with Rule
14e-1(c) under the Exchange Act (relating to a bidder's obligation to pay for
and return tendered securities promptly after the termination or withdrawal of
such bidder's offer).
Schnitzer filed a Notification and Report Form with respect to the Offer
under the HSR Act on September 19, 1996. The waiting period under the HSR Act
with respect to the Offer will expire at 11:59 p.m., Eastern time, on October 4,
1996 unless early termination of the waiting period is granted. However, the
Antitrust Division of the Department of Justice (the "Antitrust Division") or
the Federal Trade Commission (the "FTC") may extend the waiting period by
requesting additional information or documentary material from Schnitzer or the
Company. If such a request is made, such waiting period will expire at 11:59
p.m., Eastern time, on the tenth day after substantial compliance by Schnitzer
or the Company with such request. See Section 15 hereof for additional
information concerning the HSR Act and the applicability of the antitrust laws
to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when the Purchaser gives oral or written notice to the Depositary of the
Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon
the terms and subject to the conditions of the Offer, payment for Shares
accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payments from the Purchaser
and transmitting such payments to stockholders whose Shares have been accepted
for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE OFFER PRICE FOR
TENDERED SHARES BE PAID, REGARDLESS OF ANY DELAY IN MAKING PAYMENT AFTER THE
EXPIRATION DATE.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
certificates for such Shares or timely confirmation (a "Book-Entry
Confirmation") of a book-entry transfer of such Shares into the Depositary's
account at The Depository Trust Company or the Philadelphia Depository Trust
Company (each a "Book-Entry Transfer Facility," and collectively the "Book-Entry
Transfer Facilities") pursuant to the procedures set forth in Section 3, (ii)
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees, and (iii) any other documents
required by the Letter of Transmittal. Notwithstanding the foregoing, if a
Distribution Date (as defined in Section 7) occurs and separate certificates
representing the Rights are distributed by the Company or the Rights Agent to
holders of Shares prior to the time a holder's Shares are tendered pursuant to
the Offer, certificates representing a number of Rights equal to the number of
Shares tendered must be delivered to the Depositary, or, if available, a
Book-Entry Confirmation received by the Depositary with respect thereto, in
order for such Shares to be validly tendered and accepted for payment.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares (or Rights) or Book-Entry Confirmations with
respect to Shares (or Rights, if available), are actually received by the
Depositary. See Section 3.
6
<PAGE>
If any tendered Shares are not accepted for payment for any reason,
certificates evidencing unpurchased Shares will be returned, without expense, to
the tendering stockholder (or, in the case of Shares tendered by book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility
pursuant to the procedures set forth in Section 3, such Shares will be credited
to an account maintained at such Book-Entry Transfer Facility), as promptly as
practicable following the expiration or termination of the Offer.
3. PROCEDURE FOR TENDERING SHARES.
In order for a holder of Shares validly to tender Shares pursuant to the
Offer, (i) the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, together with any required signature guarantees and
any other documents required by the Letter of Transmittal, must be received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase and either the certificates evidencing tendered Shares ("Share
Certificates") must be received by the Depositary at such address or such Shares
must be tendered pursuant to the procedures for book-entry transfer described
below and a Book-Entry Confirmation must be received by the Depositary, in each
case prior to the Expiration Date, or (ii) the tendering stockholder must comply
with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
As further described in Section 7, the Rights Agreement provides that until
the close of business on the Distribution Date (as defined in Section 7), the
Rights will be evidenced by the Share Certificates and may be transferred with
and only with the Shares. The Rights Agreement further provides that, as soon as
practicable following the Distribution Date, separate certificates representing
the Rights are to be mailed by the Company or the Rights Agent to holders of
record of Shares as of the close of business on the Distribution Date. In the
Merger Agreement, the Company represented that an amendment to the Rights
Agreement (the "Rights Agreement Amendment") has been duly authorized by the
Board of Directors of the Company and executed by the Company, which Rights
Agreement Amendment renders the Rights Agreement inapplicable to the Offer and
the Merger by providing, among other things, that the announcement and making of
the Offer and the execution of the Merger Agreement will not result in the
Purchaser or Schnitzer or any of their affiliates being considered an Acquiring
Person or cause the occurrence of a Distribution Date. ACCORDINGLY, UNLESS A
DISTRIBUTION DATE OCCURS, A TENDER OF SHARES WILL ALSO CONSTITUTE A TENDER OF
THE ASSOCIATED RIGHTS.
Notwithstanding the foregoing, if a Distribution Date occurs and separate
certificates representing the Rights are distributed by the Company or the
Rights Agent to holders of Shares prior to the time a holder's Shares are
tendered pursuant to the Offer, certificates representing a number of Rights
equal to the number of Shares tendered must be delivered to the Depositary, or,
if available, a Book-Entry Confirmation received by the Depositary with respect
thereto, in order for such Shares to be validly tendered. If the Distribution
Date occurs and separate certificates representing the Rights are not
distributed prior to the time Shares are tendered pursuant to the Offer, Rights
may be tendered prior to a stockholder receiving the certificates for Rights by
use of the guaranteed delivery procedures described below. A tender of Shares
constitutes an agreement by the tendering stockholder, in the event of the
occurrence of the Distribution Date, to deliver certificates representing a
number of Rights equal to the number of Shares tendered pursuant to the Offer to
the Depositary prior to expiration of the period permitted by such guaranteed
delivery procedures for delivery of certificates for, or a Book-Entry
7
<PAGE>
Confirmation with respect to, Rights (the "Rights Delivery Period"). However,
after expiration of the Rights Delivery Period, the Purchaser may elect to
reject as invalid a tender of Shares with respect to which certificates for, or
a Book-Entry Confirmation with respect to, an equal number of Rights have not
been received by the Depositary. Nevertheless, the Purchaser will be entitled to
accept for payment Shares tendered by a stockholder prior to receipt of the
certificates for the Rights required to be tendered with such Shares, or a
Book-Entry Confirmation with respect to such Rights, and either (a), subject to
complying with applicable rules and regulations of the Commission, withhold
payment for such Shares pending receipt of the certificates for, or a Book-Entry
Confirmation with respect to, such Rights or (b) make payment for Shares
accepted for payment pending receipt of the certificates for, or a Book-Entry
Confirmation with respect to, such Rights in reliance upon the agreement of a
tendering stockholder to deliver Rights and such guaranteed delivery procedures.
Any determination by the Purchaser to make payment for Shares in reliance upon
such agreement and such guaranteed delivery procedures or, after expiration of
the Rights Delivery Period, to reject a tender as invalid will be made in the
sole and absolute discretion of the Purchaser.
BOOK-ENTRY TRANSFER. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facilities for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of any Book-Entry Transfer
Facility may make book-entry delivery of Shares by causing such Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account at such
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer at a Book-Entry Transfer Facility,
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or an Agent's Message
(as defined below), and any other required documents must, in any case, be
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase prior to the Expiration Date, or the tendering
stockholder must comply with the guaranteed delivery procedures described below.
If a Distribution Date occurs, the Depositary also will make a request to
establish an account with respect to the Rights at each of the Book-Entry
Transfer Facilities, but no assurance can be given that book-entry delivery of
Rights will be available. If book-entry delivery of Rights is available, the
foregoing book-entry transfer procedures will also apply to Rights. If
book-entry delivery of Rights is not available and the Distribution Date occurs,
a tendering stockholder will be required to tender Rights by means of physical
delivery to the Depositary of certificates for Rights (in which event references
in this Offer to Purchase to Book-Entry Confirmations with respect to Rights
will be inapplicable). The confirmation of a book-entry transfer of Shares or
Rights into the Depositary's account at a Book-Entry Transfer Facility as
described above is referred to herein as a "Book-Entry Confirmation."
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEES. Signatures on Letters of Transmittal must be
guaranteed by a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or by a
bank or trust company having an office or correspondent in the United States
(each of the foregoing being referred to as an "Eligible Institution"), except
no signature guarantee is required where Shares are tendered (i) by a registered
holder of Shares who has not completed either the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" on the Letter
of Transmittal or (ii) for the account of an Eligible Institution. See
Instruction 1 of the Letter of Transmittal.
8
<PAGE>
If the Share Certificates are registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or Share
Certificates not accepted for payment or not tendered are to be returned, to a
person other than the registered holder(s), the Share Certificates, as the case
may be, must be endorsed or accompanied by appropriate stock powers, in either
case, signed exactly as the name(s) of the registered holder(s) appear on such
certificates, with the signature(s) on such certificates or stock powers
guaranteed as aforesaid. See Instructions 1 and 5 of the Letter of Transmittal.
A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL (OR A FACSIMILE
THEREOF) MUST ACCOMPANY EACH DELIVERY OF SHARE CERTIFICATES TO THE DEPOSITARY.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or such stockholder cannot deliver the Share Certificates and all
other required documents to the Depositary prior to the Expiration Date, or such
stockholder cannot complete the procedure for delivery by book-entry transfer on
a timely basis, such Shares may nevertheless be tendered, provided that all of
the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by the Purchaser, is received
by the Depositary, as provided below, on or prior to the Expiration
Date; and
(iii) the Share Certificates (or a Book-Entry Confirmation) representing all
tendered Shares, in proper form for transfer, in each case together
with the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees or
in the case of a book-entry transfer, an Agent's Message, and any other
required documents are received by the Depositary within (a) in the
case of Shares, three trading days after the date of execution of such
Notice of Guaranteed Delivery or (b) in the case of Rights, a period
ending on the later of (1) three trading days after the date of
execution of such Notice of Guaranteed Delivery or (2) three business
days (as defined above) after the date certificates for Rights are
distributed to stockholders by the Company or the Rights Agent. A
"trading day" is any day on which the New York Stock Exchange ("NYSE")
is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice of Guaranteed Delivery.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (a) certificates for
(or a timely Book-Entry Confirmation with respect to) such Shares and, if the
Distribution Date occurs, certificates for (or a timely Book-Entry Confirmation,
if available, with respect to) the associated Rights (unless the Purchaser
elects to make payment for such Shares pending receipt of the certificates for,
or a Book-Entry Confirmation with respect to, such Rights as described above),
(b) a Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and (c) any other documents required by
the Letter of Transmittal. Accordingly, tendering stockholders may be paid at
different times depending upon when certificates for Shares (or Rights) or
Book-Entry Confirmations with respect to Shares (or Rights, if available), are
actually received by the Depositary.
DETERMINATION OF VALIDITY. In order for any tender of Shares to be valid,
it must be in proper form. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Purchaser, in its sole discretion, which determination
shall be final and binding on all parties. The Purchaser reserves the absolute
right to reject any and all tenders determined by it not to be in proper form or
the acceptance for payment of which may, in the opinion of its counsel, be
unlawful. The Purchaser also reserves the absolute right to waive any defect or
irregularity in any tender of Shares of any particular stockholder whether or
not similar defects or irregularities are
9
<PAGE>
waived in the case of other stockholders. No tender of Shares will be deemed to
have been validly made until all defects and irregularities have been cured or
waived. None of the Purchaser, Schnitzer, the Depositary, the Information Agent
or any other person will be under any duty to give notification of any defects
or irregularities in tenders or incur any liability for failure to give any such
notification. The Purchaser's determinations with regard to compliance with the
terms and conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
OTHER REQUIREMENTS. By executing a Letter of Transmittal as set forth
above, the tendering stockholder irrevocably appoints designees of the Purchaser
as such stockholder's proxies, each with full power of substitution, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares or other securities issued or issuable in respect of such
Shares on or after September 15, 1996. Such appointment is effective when, and
only to the extent that, the Purchaser deposits the payment for such Shares with
the Depositary. Upon the effectiveness of such appointment, all prior proxies,
consents and powers of attorney given by such stockholder will be revoked, and
no subsequent proxies, consents and powers of attorney may be given (and, if
given, will not be deemed effective). The designees of the Purchaser will, with
respect to the Shares, Rights and other securities for which appointment is
effective, be empowered to exercise all voting and other rights of such
stockholder in respect of any annual, special or adjourned meeting of the
stockholders of the Company, actions by written consent in lieu of any such
meeting or otherwise as they, in their sole discretion, deem proper. The
Purchaser reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon the Purchaser's payment for such Shares, the
Purchaser must be able to exercise full voting rights with respect to such
Shares, Rights and other securities.
A valid tender of Shares pursuant to one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer. The Purchaser's acceptance for payment of Shares
tendered pursuant to the Offer will constitute a binding agreement between the
tendering stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
TO AVOID BACKUP WITHHOLDING OF FEDERAL INCOME TAX WITH RESPECT TO PAYMENT TO
CERTAIN STOCKHOLDERS OF THE OFFER PRICE FOR THE SHARES PURCHASED PURSUANT TO THE
OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S
CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH STOCKHOLDER IS NOT
SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE
FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 10 OF THE LETTER
OF TRANSMITTAL.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment by the Purchaser pursuant to the Offer,
may also be withdrawn at any time after November 19, 1996.
If the Purchaser extends the Offer, is delayed in the acceptance for payment
of Shares or is unable to purchase Shares validly tendered pursuant to the Offer
for any reason, then, without prejudice to the Purchaser's rights under the
Offer, the Depositary may nevertheless, on behalf of the Purchaser, retain
tendered Shares, and such Shares may not be withdrawn except to the extent that
tendering stockholders are entitled to withdrawal rights as described in this
Section 4. Any such delay will be by an extension of the Offer to the extent
required by law.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
notice of withdrawal must specify the name of the person who tendered the
10
<PAGE>
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If Share Certificates to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial number shown on such certificates must be submitted to
the Depositary and the signature(s) on the notice of withdrawal must be
guaranteed by an Eligible Institution unless such Shares have been tendered for
the account of any Eligible Institution. If Shares have been tendered pursuant
to the procedures for book-entry transfer as set forth in Section 3, any notice
of withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Shares and otherwise comply
with such Book-Entry Transfer Facility's procedures.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of the
Purchaser, Schnitzer, the Depositary, the Information Agent or any other person
will be under any duty to give notification of any defects or irregularities in
any notice of withdrawal or incur any liability for failure to give any such
notification.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following discussion summarizes the principal federal income tax
consequences under the Internal Revenue Code of 1986, as amended (the "Code"),
associated with the Offer, assuming that the Offer is consummated as
contemplated herein. This summary does not purport to be comprehensive, does not
describe all potentially relevant tax considerations and does not discuss state,
local or foreign tax laws.
The receipt of cash for Shares pursuant to the Offer will be a taxable
transaction for federal income tax purposes under the Code (and may also be a
taxable transaction under applicable state, local, foreign and other tax laws).
Generally, for federal income tax purposes, a tendering stockholder will
recognize gain or loss for federal income tax purposes equal to the difference
between the amount of cash received pursuant to the Offer or the Merger and the
holder's adjusted tax basis for the Shares sold pursuant to the Offer or
converted in the Merger. Such gain or loss will be capital gain or loss if such
holder held such Shares as a capital asset. If the Shares were held longer than
one year, the capital gain or loss will be long-term.
For noncorporate taxpayers, including individuals, estates and trusts, net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) currently is taxed at a maximum federal income tax rate of 28%.
Short-term capital gain is taxed at the same federal income tax rates as
ordinary income, currently at a maximum of 39.6%. Capital loss generally is
deductible only to the extent of capital gain plus $3,000. Net capital loss in
excess of $3,000 may be carried forward to subsequent taxable years.
For corporations, capital losses are allowed only to the extent of capital
gains, and net capital gain is taxed at the same rate as ordinary income.
Corporations generally may carry capital losses back up to three years and
forward up to five years.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES RECEIVED
PURSUANT TO THE EXERCISE OF STOCK OPTIONS OR OTHERWISE AS COMPENSATION OR WITH
RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL TAX TREATMENT UNDER THE
CODE, SUCH AS NON-U.S. PERSONS, INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS
AND FINANCIAL INSTITUTIONS, AND SECURITIES DEALERS, AND MAY NOT APPLY TO A
HOLDER OF SHARES IN LIGHT OF INDIVIDUAL CIRCUMSTANCES. HOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO
THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME
AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER.
11
<PAGE>
6. PRICE RANGE OF SHARES; CASH DISTRIBUTIONS.
The Shares are listed and traded principally on the NYSE. The following
table sets forth, for the quarters indicated, the high and low sales prices NYSE
for the Shares based on the Company's 1996 Annual Report on Form 10-K (the
"Company's 1996 Form 10-K"), the Dow Jones News Service and other publicly
available sources.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Year Ended January
31, 1995:
First Quarter..... $14 3/4 $ 7 1/2
Second Quarter.... 9 5/8 7 5/8
Third Quarter..... 10 1/4 6 7/8
Fourth Quarter.... 7 5/8 5 5/8
Year Ended January
31, 1996:
First Quarter..... $ 8 $ 6 3/8
Second Quarter.... 8 1/4 7 1/8
Third Quarter..... 8 7/8 7
Fourth Quarter.... 8 5/8 7
Year Ending January
31, 1997:
First Quarter..... $ 9 1/8 $ 7 3/8
Second Quarter.... 8 2 3/8
Third Quarter
(through
September 13)... 4 1/4 3 1/2
</TABLE>
On September 13, 1996, the last full trading day prior to the announcement
of the Offer, the closing sale price per Share reported on the NYSE was $3 7/8.
According to the Company's 1996 Form 10-K, the Company's Board of Directors
suspended the payment of dividends on the Company's Common Stock in fiscal 1992,
and the Company's credit agreements with a bank currently prohibit the payment
of dividends.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY.
The information concerning the Company contained in this Offer to Purchase,
including financial information, has been furnished by the Company or taken
from, or based upon, publicly available documents and records on file with the
Commission and other public sources. The summary information concerning the
Company in this Section 7 and elsewhere in this Offer to Purchase is derived
from the Company's 1996 Form 10-K, the Company's March 28, 1996 Proxy Statement
and the Company's 1996 Form 10-Q. The summary information set forth below is
qualified in its entirety by reference to such documents (which may be obtained
and inspected as described below) and should be considered in conjunction with
the more comprehensive financial and other information in such documents and
other publicly available reports and documents filed by the Company with the
Commission. The Purchaser assumes no responsibility for the accuracy or
completeness of the information contained in such documents and records, or for
any failure by the Company to disclose events that may have occurred and may
affect the significance or accuracy of any such information but which are not
known to the Purchaser.
GENERAL. The Company is a Delaware corporation, and, according to the
Company's 1996 Form 10-K, the Company is primarily involved in the recovery,
recycling and processing of metals and industrial wastes for use worldwide. The
Company reports having 20 operating locations, owned either through wholly owned
subsidiaries or through joint ventures, and providing raw materials, recycling
and energy services to industrial customers. The purchase, sale and processing
of scrap metals is conducted primarily
12
<PAGE>
through 50% or less-owned incorporated and unincorporated joint operations,
which primarily make export sales. In addition, Proler Recycling, Inc., a
subsidiary of the Company, operates three plants which collectively sell
precipitation iron, low residual steel, copper, tin and specialty chemicals in
the domestic market. Proler Environmental Services, Inc., another subsidiary,
has been engaged in efforts to develop and market the Company's patented
gasification technology.
RIGHTS AGREEMENT. On February 28, 1996, the Board of Directors of the
Company declared a distribution to its stockholders of record of one-third of
one Right for each outstanding share of Common Stock of the Company held by them
as of the record date. Each Right entitles the holder to purchase from the
Company one one-hundredth of one share of Series A Junior Participating
Preferred Stock, $1.00 par value (the "Preferred Stock"), at an exercise price
of $200.00 per one one-hundredth of a share (the "Purchase Price"). The
description and terms of the Rights are set forth in the Rights Agreement
between the Company and KeyCorp Shareholder Services, Inc., as Rights Agent.
The Rights are attached to the share certificates in respect of which the
Rights were issued, and no separate certificates representing the Rights have
been distributed. The Rights will separate from the Shares, upon the earlier of
(i) ten days following a public announcement by the Company, or by a person or
group of affiliated or associated persons (other than the Company, its
subsidiaries, or certain affiliates of the Company) that has acquired or
obtained the right to acquire beneficial ownership of 20% or more of the
outstanding Shares (an "Acquiring Person"), that a person or group of affiliated
or associated persons has become an Acquiring Person (the "Stock Acquisition
Date"), or (ii) ten business days following the commencement of a tender offer
or exchange offer that would result in a person or group beneficially owning 30%
of more of such outstanding Shares (the earlier of the date in (i) or (ii) being
the "Distribution Date"). Until the Distribution Date, (i) the Rights will be
evidenced by the Share Certificates and will be transferred with and only with
such Shares Certificates, (ii) Share Certificates issued after February 28, 1996
contain a notation incorporating the Rights Agreement by reference and (iii) the
surrender for transfer of any Share Certificates constitute the transfer of the
Rights associated with the Shares.
The Rights are not exercisable until the Distribution Date, and will expire
at the close of business on October 10, 1998, unless earlier redeemed by the
Company as described below.
As soon as practicable following a Distribution Date, certificates
representing the Rights ("Rights Certificates") will be mailed to holders of
record of the Rights as of the close of business on the Distribution Date and,
thereafter, the separate Rights Certificates alone will represent the Rights.
In the event that, at any time following a Distribution Date, (i) the
Company is the surviving corporation in a merger with an Acquiring Person, (ii)
a person becomes the beneficial owner of more than 30% of the then-outstanding
Shares (unless such Person first acquires 30% or more of the outstanding Shares
pursuant to a cash tender offer for all of the Shares (a) which offer increases
such person's beneficial ownership to 80% or more and is followed within 90 days
by completion of a business combination in which all remaining stockholders of
the Company receive cash consideration per share at least equal to the highest
price paid in connection with such offer, or (b) which is found by the Board of
Directors to be at a price and on terms that are fair and otherwise to be in the
best interests of the Company and its stockholders), (iii) an Acquiring Person
engages in one or more "self-dealing" transactions as set forth in the Rights
Agreement, or (iv) during such time as there is an Acquiring Person, certain
events occur which result in such Acquiring Person's ownership interest being
increased by more than 1% (e.g., a reverse stock split), each holder of a Right
will thereafter have the right to receive, upon exercise of the Right, Shares
(or, in certain circumstances, cash, property or other securities of the
Company) having a value equal to two times the exercise price of the Right.
Notwithstanding any of the foregoing, following the occurrence of any of the
events set forth in clauses (i), (ii), (iii) and (iv) of this paragraph, all
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void. However, Rights are not exercisable following the occurrence
13
<PAGE>
of any of the events set forth above until such time as the Rights are no longer
redeemable by the Company as set forth below.
In the event that, at any time following the Stock Acquisition Date, (i) the
Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation (other than a merger
following a tender offer of the type described in the parenthetical in clause
(ii) of the first sentence of the preceding paragraph), (ii) any person shall
consolidate with or merge into the Company, the Company is the surviving
corporation of the merger, and all or part of the Shares of the Company are
exchanged for stock or other securities of any other person or cash or any other
property, or (iii) 50% or more of the Company's assets or earning power is sold
or transferred, each holder of a Right (except Rights which previously have been
voided as set forth above) shall thereafter have the right to receive, upon
exercise, common stock of the acquiring company having a value equal to two
times the Purchase Price. The events set forth in this paragraph and in the
preceding paragraph are referred to as the "Triggering Events."
At any time until ten days following the Stock Acquisition Date, the Company
may redeem the Rights in whole, but not in part, at a price of $.01 per Right.
After the redemption period has expired, the Company's right of redemption may
be reinstated under certain circumstances. In addition, the Rights may be
redeemed by stockholder action at $.01 per Right when certain procedures are
complied with in connection with an acquisition proposal.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to any Distribution Date. In the Merger
Agreement, the Company represented that the Rights Agreement Amendment, which
renders the Rights Agreement inapplicable to the Offer and the Merger by
providing, among other things, that the announcement and making of the Offer and
the execution of the Merger Agreement will not result in the Purchaser or
Schnitzer or any of their affiliates being considered an Acquiring Person or
cause the occurrence of a Distribution Date, has been duly authorized and
executed by the Company.
The foregoing summary of the Rights Agreement does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement
filed on March 11, 1996 by the Company with the Commission as an exhibit to the
Company's Form 8-B (the "Company's Form 8-B"). The Company's Form 8-B should be
available for inspection and copies thereof should be obtainable in the manner
set forth below under "Available Information."
CERTAIN FINANCIAL INFORMATION. Set forth below is certain selected
consolidated financial data with respect to the Company and its subsidiaries,
which presents the Company's share of its joint operations using the equity
method of accounting, and was excerpted from the Company's 1996 Form 10-K and
the Company's 1996 Form 10-Q. More comprehensive financial information is
included in such reports (including management's discussion and analysis of
financial condition and results of operations) and other documents filed by the
Company with the Commission, and the following financial information is
qualified in its entirety by reference to such reports and other documents and
all of the financial information and notes contained therein. Such reports and
other documents may be examined and copies thereof may be obtained in the manner
set forth below under "Available Information".
14
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED JANUARY 31, ENDED JULY 31,
------------------------------- ---------------------
1996 1995 1994 1996 1995
--------- --------- --------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
Net Sales................................................ $ 13,432 $ 18,610 $ 43,706 $ 7,166 $ 6,464
Gross profit (loss)...................................... (652) 720 3,086 (838) 60
Operating Income (loss).................................. (9,172) (1,719) 804 (15,563) 1,175
Net income (loss)........................................ (9,044) 303 (2,262) (16,560) 1,129
Net income (loss) per average Share outstanding.......... (1.92) 0.06 (0.48) (3.51) .24
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31,
-------------------- JULY 31,
1996 1995 1996
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET
Total current assets......................................... $ 7,234 $ 9,342 $ 5,986
Total assets................................................. 66,772 65,439 70,182
Total current liabilities.................................... 3,732 4,317 33,477
Long-term debt............................................... 9,700 -- --
Stockholders' equity......................................... 49,464 58,480 32,888
</TABLE>
AVAILABLE INFORMATION. The Company is subject to the information filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file with the Commission periodic reports, proxy statements and other
information relating to its business, financial condition and other matters.
Information as of particular dates concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company is required to be disclosed in reports filed with
the Commission or in proxy statements distributed to the Company's stockholders
and filed with the Commission. Such reports, proxy statements and other
information may be inspected at the Commission's office at 450 Fifth Street,
N.W., Washington, D.C., 20549, and also should be available for inspection at
the regional offices of the Commission located in the Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois, and 7 World
Trade Center, 13th Floor, New York, New York. Copies of such materials should be
obtainable, upon payment of the Commission's customary charges, by writing to
the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.,
20549.
8. CERTAIN INFORMATION CONCERNING THE PURCHASER.
GENERAL. The Purchaser, a Delaware corporation and a wholly owned
subsidiary of Schnitzer, was recently organized to acquire the Company and has
not conducted any unrelated activities since its organization. The principal
office of the Purchaser is located at the principal office of Schnitzer. All
outstanding shares of capital stock of the Purchaser are owned by Schnitzer.
Schnitzer is an Oregon corporation with its principal office at 3200 NW Yeon
Avenue, Portland, Oregon 97210. Schnitzer operates one of the largest steel
scrap recycling businesses in the United States. Schnitzer supplies ferrous
scrap to Asian and domestic steel producers through its scrap collection,
processing, and deep water shipping facilities located in California, Oregon and
Washington. With the acquisition in March 1995 of Manufacturing Management, Inc.
("MMI"), Schnitzer increased its annual ferrous scrap volume by 50 percent to
approximately 1.5 million long tons. Schnitzer and its predecessors have
operated in the scrap business since 1908. Schnitzer also operates, through its
wholly owned subsidiary Cascade Steel Rolling Mills, Inc., a technologically
advanced steel mini-mill which it believes is
15
<PAGE>
the only mini-mill in the western United States with the ability to service all
of its scrap requirements internally.
CERTAIN FINANCIAL INFORMATION. Set forth below is certain selected
consolidated financial and operating information with respect to Schnitzer and
its subsidiaries, excerpted from the information contained in Schnitzer's 1995
Annual Report on Form 10-K ("Schnitzer's 1995 Form 10-K") and Schnitzer's
Quarterly Report on Form 10-Q for the quarter ended May 31, 1996 ("Schnitzer's
1996 Form 10-Q"). More comprehensive financial information is included in
Schnitzer's 1995 Form 10-K, Schnitzer's 1996 Form 10-Q and other documents filed
by Schnitzer with the Commission, and the following summary is qualified in its
entirety by reference to Schnitzer's 1995 Form 10-K, Schnitzer's 1996 Form 10-Q
and such other documents and all the financial information (including any
related notes) contained therein. Schnitzer's 1995 Form 10-K, Schnitzer's 1996
Form 10-Q and such other documents are available for inspection and copies
thereof at the office of the Depositary or may be inspected at the Commission's
office at 450 Fifth Street, N.W., Washington, D.C., 20549, and also should be
available for inspection at the regional offices of the Commission located in
the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois, and 7 World Trade Center, 13th Floor, New York, New York. Copies of
such materials should be obtainable, upon payment of the Commission's customary
charges, by writing to the Commission's principal office at 450 Fifth Street,
N.W., Washington, D.C., 20549.
SELECTED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED AUGUST 31, ENDED MAY 31,
------------------------------- --------------------
1995(1) 1994 1993 1996 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
Revenues....................................................... $ 330.7 $ 261.7 $ 204.9 $ 241.3 $ 226.0
Income (loss) from operations.................................. 32.5 16.6 5.4 24.8 22.1
Income (loss) before income taxes.............................. 34.0 16.5 3.7 22.6 22.7
Net income (loss).............................................. 22.2 10.7 2.1 15.0 14.4
Net income (loss) per share.................................... 2.8 1.5 0.4 1.7 1.8
Weighted average shares outstanding............................ 7.9 7.3 5.0 8.9 8.0
</TABLE>
<TABLE>
<CAPTION>
AUGUST 31,
-------------------- MAY 31,
1995 1994 1996
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET
Total assets................................................... $ 280.3 $ 164.1 $ 347.0
Short-term debt................................................ .2 1.9 .3
Long-term debt................................................. 64.7 2.8 54.0
Stockholders' equity........................................... 136.0 115.3 219.5
</TABLE>
- ------------------------
(1) Includes the results of operations of MMI from March 17, 1995, the date of
acquisition, through August 31, 1995.
Thirty-three Shares of the Company are held by the Leonard Schnitzer Family
Trust. Leonard Schnitzer, Chief Executive Officer and Chairman of the Board of
Schnitzer and a director of the Purchaser, serves as a trustee of this trust.
Except for such Shares, neither the Purchaser nor, to the best knowledge of the
Purchaser, any of the persons listed on Schedule I hereto or any associate of
the Purchaser, including Schnitzer, or any of the persons so listed,
beneficially owns or has a right to acquire directly or indirectly any
securities of the Company. Neither the Purchaser, nor Schnitzer, nor to the best
16
<PAGE>
knowledge of the Purchaser, any of the persons or entities referred to above, or
any of the respective executive officers, directors or subsidiaries of any of
the foregoing, has effected any transactions in the securities of the Company
during the past 60 days.
Except as set forth in this Offer to Purchase, neither the Purchaser nor
Schnitzer, nor to the best knowledge of the Purchaser, any of the persons listed
on Schedule I hereto, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, contracts, arrangements, understandings
or relationships concerning the transfer or voting of such securities, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies. Except as set
forth in this Offer to Purchase, neither the Purchaser nor Schnitzer, nor to the
best knowledge of the Purchaser, any of the persons listed on Schedule I hereto,
has had since September 1, 1993 any business relationships or transactions with
the Company or any of its executive officers, directors or affiliates that are
required to be reported under the rules and regulations of the Commission
applicable to the Offer. Except as set forth in this Offer to Purchase, since
September 1, 1993, there have been no contacts, negotiations or transactions
between the Purchaser, Schnitzer or, to the best knowledge of the Purchaser, any
of the persons listed in Schedule I hereto, on the one hand, and the Company or
its affiliates, on the other hand, concerning a merger, consolidation or
acquisition, a tender offer or other acquisition of securities, an election of
directors, or a sale or other transfer of a material amount of assets.
9. SOURCE AND AMOUNT OF FUNDS.
The Purchaser estimates that the total amount of funds required to purchase,
pursuant to the Offer, the number of Shares that are outstanding on a fully
diluted basis and to pay fees and expenses related to the Offer will be
approximately $35,650,000. The Purchaser plans to obtain all funds needed for
the Offer from Schnitzer. Schnitzer will make an unsecured advance to the
Purchaser prior to the consummation of the Offer.
Schnitzer intends to use its existing $100 million unsecured revolving
credit facility (the "Credit Facility") to fund its advance to the Purchaser.
The Credit Facility is provided pursuant to a Credit Agreement dated as of March
27, 1995, among Schnitzer, the syndicate of lenders party thereto and The First
National Bank of Chicago, as Agent. As of August 31, 1996, the full amount of
the facility was available.
Individual advances under the Credit Facility bear interest at floating
rates. Interest is payable upon maturity of each advance unless the term of the
advance exceeds three months, in which case interest is payable at three month
intervals. The Credit Facility matures in March 2000 at which time all
outstanding principal amounts under the Credit Facility are due. Schnitzer
intends to repay amounts due under the Credit Facility out of funds generated
from operations.
The Credit Facility contains customary financial covenants, including
covenants related to maintenance of net worth, and ratio of current assets to
current liabilities and ratio of debt to equity.
The foregoing description of the Credit Facility is qualified in its
entirety by reference to the text of the Credit Agreement, which has been filed
by the Purchaser as Exhibit (b) to the Tender Offer Statement on Schedule 14D-1
filed with the Commission in connection with the Offer (the "Schedule 14D-1")
and is incorporated herein by reference.
THE OFFER IS NOT CONDITIONED UPON THE PURCHASER OBTAINING FINANCING TO PURCHASE
SHARES PURSUANT TO THE OFFER. SEE INTRODUCTION AND SECTION 14.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
On April 16, 1996, the Company issued a press release indicating that it had
hired investment bankers, J.C. Bradford and Chase Securities, to assist in
evaluating a broad range of strategic alternatives to
17
<PAGE>
enhance stockholder value, including a potential sale of one, two or all of the
Company's businesses. Upon learning this news, Schnitzer contacted Chase
Manhattan Bank in New York, New York and Texas Commerce Bank in Houston, Texas
to obtain more information about the Company and its future plans.
On April 29, 1996, Robert W. Philip, President of Schnitzer, and Barry
Rosen, Vice President-Finance and Treasurer of Schnitzer, contacted Chase
Securities and expressed interest in a possible purchase of the Company's joint
operations interests. On June 14, 1996, Schnitzer executed a confidentiality
agreement with the Company dated as of June 11, 1996.
On July 22, 1996, Mr. Philip called Mr. Wilkinson to express further
interest in a possible transaction. On July 24, 1996, Mr. Wilkinson telephoned
Mr. Philip and the two men reached a tentative understanding to meet in person
or have another phone conversation.
On July 31, 1996, Bruce Wilkinson and Herman Proler, Chairman of the Board
of the Company, conducted an extended telephone conference with representatives
of Schnitzer, including Robert Philip, Barry Rosen, Leonard Schnitzer, Chairman
of Schnitzer's Board of Directors, Gary Schnitzer, Vice President - California
Scrap Operations of Schnitzer and Anton Pardini, General Counsel of Schnitzer.
During this conversation, the parties explored, among many topics, the potential
benefits to both companies of a merger.
On August 9, 1996, representatives of the Company and its financial advisors
met at the Company's offices with representatives of Schnitzer, who expressed
interest in the acquisition of the Company and pledged to respond shortly with a
specific proposal regarding their interest.
On August 15, 1996, Mr. Philip and Mr. Rosen advised Mr. Wilkinson that
Schnitzer was considering a cash tender offer to acquire all of the stock of the
Company. Mr. Philip and Mr. Rosen also described the due diligence that
Schnitzer would pursue as well as Schnitzer's evaluation process and
methodology. Mr. Wilkinson advised Schnitzer that, if Schnitzer were to propose
a value that Mr. Wilkinson could support, Mr. Wilkinson would take a written
offer to the Company's Board of Directors.
On August 20, 1996, Schnitzer submitted a written proposal to the Company to
acquire all of the Company's outstanding shares of Common Stock for $7.00 per
Share. (Proler's Common Stock closed at $3.75 per Share on August 20, 1996, up
$0.125 from the previous day's close.) After consulting with the Company's
financial advisors and members of the Company's Board of Directors, Mr.
Wilkinson telephoned Mr. Rosen on August 21, 1996 and stated, among other
things, reasons why the Company was worth more than the $7.00 per Share amount
that Schnitzer had offered on August 20, 1996. Mr. Wilkinson also informed Mr.
Rosen that Schnitzer would be expected to assume approximately $2.5 to $3.0
million more in liabilities (primarily consisting of deferred compensation
liabilities) than had been contemplated in Schnitzer's August 20, 1996 letter.
On August 22, 1996, Schnitzer communicated to Mr. Wilkinson in a telephone
conversation its agreement to increase its offer to $7.50 per Share and to
assume the additional deferred compensation liabilities identified by Mr.
Wilkinson on August 21. Mr. Wilkinson communicated this offer to the Board of
Directors and polled the members of the Board of Directors to obtain their
preliminary consensus on proceeding with discussions with Schnitzer.
Representatives of the Company and Schnitzer thereafter commenced a due
diligence investigation process, and legal counsel for the two companies began
negotiating and drafting documents for a potential definitive agreement.
On September 10, 1996, a draft of the proposed Merger Agreement was
distributed to the Board of Directors of the Company. On September 12, 1996, the
Board of Directors of the Company met with the Company's legal counsel and
representatives of J.C. Bradford and Chase Securities and conducted a thorough
discussion of the proposed Merger Agreement and other relevant issues. After an
extended meeting, Mr. Wilkinson and counsel telephoned representatives of
Schnitzer and its counsel to conduct further negotiations regarding certain
provisions of Schnitzer's proposed Merger Agreement that were not acceptable to
the Company's Board of Directors. These negotiations involved, among other
matters, the
18
<PAGE>
amount of the termination fee and the maximum amount of expenses for payment of
which the Company could be responsible, as well as the circumstances under which
such amounts could become payable by the Company. After discussion and
negotiation, these matters were resolved and the Merger Agreement was finalized
on the terms incorporated in the final form of Merger Agreement subsequently
approved and executed by the Company.
On September 15, 1996, the Company's Board of Directors met with legal
counsel and representatives of J.C. Bradford and Chase Securities. The Board of
Directors considered at length the detailed terms and provisions of the proposed
Merger Agreement, as revised subsequent to the Board of Directors' meeting on
September 12, 1996. In addition, the Board of Directors received detailed
written and oral presentations from J.C. Bradford and Chase Securities. The
Board of Directors also received written "fairness" opinions from each of J.C.
Bradford and Chase Securities with regard to the $7.50 consideration to be
received by stockholders of the Company pursuant to the Offer and the Merger as
contemplated by the Merger Agreement. The Board of Directors approved the Merger
Agreement, and the Merger Agreement was then executed and delivered by the
parties.
On September 16, 1996, prior to the commencement of trading of Shares on the
NYSE, the Company and Schnitzer issued a joint press release announcing the
execution of the Merger Agreement and the terms of the Offer and the Merger.
The Purchaser and Schnitzer expect to have continuing discussions with the
Company and its directors, officers and representatives during the Offer
concerning the status of the Offer and the operations and management of the
Company after consummation of the Merger.
11. THE PURPOSE OF THE OFFER; MERGER AGREEMENT; PLANS FOR THE COMPANY.
PURPOSE. The purpose of the Offer and the Merger is to enable Schnitzer to
acquire control of, and the entire equity interest in, the Company. In the
Merger Agreement, the Purchaser and the Company have agreed to effect the Merger
in accordance with the provisions of the Merger Agreement as promptly as
practicable following consummation of the Offer. Set forth below is a summary of
the material provisions of the Merger Agreement, a copy of which is filed as
Exhibit (c)(1) to the Schedule 14D-1. Such Exhibit should be available for
inspection and copies should be obtainable, in the manner set forth in Section 8
(except that it will not be available at the regional offices of the
Commission). The following summary is qualified in its entirety by reference to
the Merger Agreement.
THE OFFER. In the Merger Agreement, the Purchaser has agreed, subject to
certain conditions, to commence a cash tender offer to purchase all of the
Shares (including the associated Rights) for $7.50 per Share. The Merger
Agreement provides that, without the consent of the Company, the Purchaser will
not (a) decrease the purchase price so that it is less than $7.50 per Share, (b)
change the form of consideration payable in the Offer, (c) decrease the number
of Shares sought in the Offer, (d) add to or modify the conditions set forth in
Section 14 hereof, or (e) otherwise amend the Offer in any manner adverse to the
holders of Shares. Notwithstanding the foregoing, the Purchaser may, without the
consent of the Company (a) extend the Offer for an aggregate total of
twenty-five (25) business days from the original expiration date if any of the
conditions to the Purchaser's obligation to purchase the Shares shall not be
satisfied or waived, (b) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Commission and (c) extend the
Offer for no more than five (5) business days beyond the original expiration
date in the event that the Offer conditions have been satisfied but less than
ninety percent (90%) of the Shares have been tendered pursuant to the Offer.
THE MERGER. The Merger Agreement provides that, following the satisfaction
or waiver of the conditions set forth therein, the Purchaser will be merged with
and into the Company, with the Company continuing as the surviving corporation,
and each then outstanding Share (other than Shares held in the treasury of the
Company, Shares owned by Schnitzer, the Purchaser or any other subsidiary of
Schnitzer or of the Company, or Shares held by stockholders who properly
exercise their dissenters' rights under
19
<PAGE>
DGCL) will be converted into the right to the Offer Price in cash, without
interest. Except in the case of a "short-form" merger as described below, under
the DGCL the approval of the Company's Board of Directors and the affirmative
vote of holders of a majority of the outstanding Shares (including any Shares
owned by the Purchaser) will be required to approve the Merger.
The Merger Agreement provides that the Company will, if required by
applicable law, call and hold a special meeting of its stockholders as soon as
practicable following the consummation of the Offer for the purpose of approving
the Merger contemplated thereby and prepare and file with the Commission under
the Exchange Act a proxy statement with respect to the meeting of stockholders
described above (the "Proxy Statement"). The Company has agreed in the Merger
Agreement to use its best efforts to respond to any comments of the Commission
or its staff and to cause the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after responding to all such comments to
the satisfaction of the staff, and to keep Schnitzer informed of all its
correspondence with the Commission with respect to the Proxy Statement. Pursuant
to the Merger Agreement, the Company, through its Board of Directors, will
recommend to its stockholders that the Merger Agreement be approved.
The DGCL also provides that if a parent company owns at least 90% of each
class of stock of a subsidiary, the parent company can effect a "short-form"
merger with that subsidiary without a stockholder vote. Accordingly, if, as a
result of the Offer or otherwise, the Purchaser acquires or controls the voting
power of at least 90% of the outstanding Shares, the Purchaser will be able, and
intends, to effect the Merger without a stockholder vote.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains
representations and warranties by the Company with respect to, among other
things, its organization, its capitalization, its authority to enter into the
Merger Agreement, its filings with the Commission and its financial statements,
the absence of certain changes in its business, the information supplied by the
Company in connection with the Offer, the Company's employee benefit plans and
other compensation arrangements, the absence of certain litigation with respect
to the Company, compliance by the Company with applicable law, including
environmental laws, execution of an amendment to the Rights Agreement to render
it inapplicable to the Offer and the Merger, tax matters relating to the
Company, the inapplicability of state anti-takeover statutes, including Section
203 of the DGCL and intellectual property matters.
The Merger Agreement also contains representations and warranties by
Schnitzer with respect to, among other things, the organization of the Purchaser
and Schnitzer, their authority to enter into the Merger Agreement, the absence
of certain litigation with respect to Schnitzer or the Purchaser, the
information supplied by them in connection with the Offer and their ability to
purchase the Shares.
COVENANTS OF THE COMPANY. In the Merger Agreement, the Company has agreed,
until the effectiveness of the Merger, (a) to use its commercially reasonable
best efforts to, and to cause each direct or indirect subsidiary of the Company,
each of the Company's joint ventures (Hugo Neu Proler Company, Prolerized New
England Company, Prolerized Schiabo Neu Company, in each case together with such
joint venture's subsidiaries and any other entity used in connection with its
business) and any other entity in which the Company or any subsidiary has any
ownership interest (each, including the Company, a "Proler Entity," and,
collectively, the "Proler Entities") to, (i) keep the business and organization
of each Proler Entity intact and (ii) carry on the business of each Proler
Entity in its usual manner; (b) without the prior written consent of Schnitzer
(i) it will not declare, pay, or set aside for payment any dividend or other
distribution of money or property in respect of its capital stock, (ii) it will
not issue any shares of its capital stock, or issue or sell any securities
convertible into, or exchangeable for, or options, warrants to purchase, or
rights to subscribe to, any shares of its capital stock or subdivide or in any
way reclassify any shares of its capital stock, or repurchase, reacquire,
cancel, or redeem any such shares and (iii) it will use commercially reasonable
best efforts to ensure that (A) it, and each Proler Entity, preserves and
maintains in the ordinary course of business its assets, property and rights and
that no Proler Entity will encumber any of its material assets other than in
connection with certain existing credit arrangements and (B) it, and each
20
<PAGE>
Proler Entity, will pay all debts when due in the usual course of business; (c)
it will, and the Company will use its commercially reasonable best efforts to
ensure that each Proler Entity will, comply in all material respects with all
applicable laws; (d) it will, and the Company will use its commercially
reasonable best efforts to ensure that each Proler Entity will, maintain its
insurance; (e) it will not incur additional debt, incur or increase any
obligation or liability, except in the ordinary and usual course of its
business; and (f) it will not make any payment to discharge or satisfy any lien
or encumbrance or pay any obligation or liability (fixed or contingent) other
than current liabilities or payments under its revolving credit facility made in
the ordinary course of business and consistent with past practices.
The Company has further agreed, until the effectiveness of the Merger, it
will not and, without prior consultation with Schnitzer, will not take action to
cause any Proler Entity to: (a) acquire any assets other than assets acquired in
the ordinary and usual course of its business and consistent with past
practices; (b) purchase or otherwise acquire, or agree to purchase or otherwise
acquire, any debt or equity securities of any person other than equity
securities issued by a money market fund registered as an investment company
under the Investment Company Act of 1940; (c) enter into any transaction or
contract or make any commitment to do the same, except as disclosed to Schnitzer
and Purchaser in the Merger Agreement, or in the ordinary and usual course of
business except as expressly contemplated or when not requiring the payment in
any case of an amount in excess of $25,000 annually; (d) increase the wages,
salaries, compensation, pension, or other benefits payable, or to become payable
by it, to any of its officers, employees, or agents, including without
limitation any bonus payments or severance or termination pay, other than
increases in wages and salaries required by employment arrangements existing on
the execution date of the Merger Agreement or except as expressly contemplated
or otherwise in the ordinary and usual course of its business; (e) implement or
agree to any implementation of or amendment or supplement to any employee profit
sharing, stock option, stock purchase, pension, bonus, commission, incentive,
retirement, medical reimbursement, life insurance, deferred compensation, or any
other employee benefit plan or arrangement; (f) change its accounting methods,
policies or practices. In addition, the Company (a) will, and will use its
commercially reasonable best efforts to cause each Proler Entity to, when the
consent of any third party to the transactions contemplated by the Merger
Agreement is required under the terms of any contract to which any Proler Entity
is a party or by which it is bound, use its commercially reasonable best efforts
to obtain such consent; (b) will, and will use commercially reasonable best
efforts to cause each Proler Entity to, maintain its books and records in
accordance with past practices; (c) will, and will use commercially reasonable
best efforts to cause each Proler Entity to, pay and discharge all taxes,
assessments, governmental charges, and levies imposed upon it, its income or
profits, or upon any property belonging to it, and in all cases before the date
on which penalties attach thereto; and (d) will not amend its Certificate of
Incorporation or Bylaws.
PROHIBITION ON SOLICITATION. Pursuant to the Merger Agreement, the Company
has agreed that the Company and its officers, directors, employees,
representatives and agents will cease any discussions or negotiations with any
parties with respect to any Takeover Proposal (as defined below); and, unless
the Merger Agreement has been terminated in accordance with its terms and
provided that neither Schnitzer nor the Purchaser is in material violation of
the Merger Agreement, the Company will not authorize or permit any officer,
director or employee of, or any investment banker, financial advisor, attorney,
accountant or other representative retained by the Company or any of its
subsidiaries to (a) solicit, initiate, encourage or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal or (b) participate in
any discussions or negotiate regarding any Takeover Proposal.
The Merger Agreement provides that, notwithstanding the foregoing, if at any
time prior to the acceptance for payment of Shares pursuant to the Offer, the
Board of Directors of the Company determines in good faith, after consultation
with counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's stockholders under applicable law, the Company
may, in response to an unsolicited Takeover Proposal, (a) furnish information
with respect to the Company to any
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person pursuant to a confidentiality agreement in substantially the same form as
that entered into between the Company and Schnitzer and (b) participate in
negotiations regarding such Takeover Proposal.
The Merger Agreement provides further that, unless the Merger Agreement has
been termination in accordance with its terms and provided that neither
Schnitzer nor the Purchaser is in material violation of the Merger Agreement,
neither the Board of Directors of the Company nor any committee thereof will (a)
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Schnitzer, the approval or recommendation by such Board of Directors or such
committee of the Offer, the Merger Agreement or the Merger, (b) approve or
recommend, or propose to approve or recommend, any Takeover Proposal or (c)
cause the Company to enter into any agreement with respect to any Takeover
Proposal.
Notwithstanding the foregoing, in the event that prior to the time of
acceptance for payment of Shares in the Offer the Board of Directors of the
Company determines in good faith, after consultation with counsel, that it is
necessary to do so in order to comply with its fiduciary duties to the Company's
stockholders under applicable law, the Merger Agreement provides that the Board
of Directors of the Company may withdraw or modify its approval or
recommendation of the Offer, the Merger Agreement and the Merger, approve or
recommend a Superior Proposal (as defined below), or cause the Company to enter
into an agreement with respect to a Superior Proposal, but in each case only at
a time that is after the second business day following Schnitzer's receipt of
written notice advising Schnitzer that the Board of Directors of the Company has
received a Superior Proposal, specifying the material terms and conditions of
such Superior Proposal and identifying the person making such Superior Proposal.
Pursuant to the Merger Agreement, and in addition to the obligations of the
Company described above, the Company has agreed that (a) it will immediately
advise Schnitzer orally and in writing of any request for information or of any
Takeover Proposal, or any inquiry with respect to or which could lead to any
Takeover Proposal, the material terms and conditions of such request, Takeover
Proposal or inquiry and the identity of the person making such request, Takeover
Proposal or inquiry, (b) it will keep Schnitzer fully informed of the status and
details (including amendments or proposed amendments) of any such request,
Takeover Proposal or inquiry and (c) it will concurrently with entering into an
agreement with respect to any Takeover Proposal, pay, or cause to be paid, to
Schnitzer certain Expenses and the Termination Fee (each as defined below).
The Merger Agreement does not prohibit the Company from making any
disclosure to the Company's stockholders if, in the opinion of the Board of
Directors of the Company, after consultation with counsel, failure so to
disclose would be inconsistent with its fiduciary duties to the Company's
stockholders under applicable law, except that neither the Company nor its Board
of Directors nor any committee thereof may (other than as described above)
withdraw or modify, or propose to withdraw or modify, its position with respect
to the Offer or the Merger or approve or recommend, or propose to approve or
recommend, a Takeover Proposal.
The term "Takeover Proposal" means any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or purchase of a
substantial amount of assets of the Company or any other Proler Entity or of
more than 20% of any class of equity securities of the Company or any other
Proler Entity, or any tender offer or exchange offer that if consummated would
result in any person beneficially owning 20% or more of any class of equity
securities of the Company or any other Proler Entity, any merger, consolidation,
business combination, sale of substantially all the assets, recapitalization
(other than the transactions contemplated by the Merger Agreement), or any other
transactions the consummation of which could reasonably be expected to impede,
interfere with, prevent or materially delay the Offer or the Merger or which
would reasonably be expected to dilute materially the benefits to Schnitzer of
the transactions contemplated by the Merger Agreement. The term "Superior
Proposal" means any bona fide Takeover Proposal to acquire, directly or
indirectly, for consideration consisting of cash and/or securities, more than
50% of the shares of common stock of the Company then outstanding or all or
substantially all the assets of the Company and otherwise on terms which the
Board of Directors of the Company determines in its good faith judgment (after
consultation with J.C. Bradford or another financial advisor of
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nationally recognized reputation) to be more favorable to the Company's
stockholders than the Offer and the Merger.
ACCESS TO INFORMATION. Pursuant to the Merger Agreement, from the date of
the Merger Agreement to the effectiveness of the Merger, Proler will provide,
and cause each Proler Entity to provide, to Schnitzer and its authorized agents,
access to each Proler Entity's physical assets, facilities, financial
information, production records, contracts and other corporate records and
documents during normal working hours and Schnitzer will be allowed to meet with
each Proler Entity's management personnel, employees, and any outside
consultants of the Proler Entities, including auditors and accountants,
investment and other bankers, tax and financial advisors, and environmental
consultants.
COMMERCIALLY REASONABLE BEST EFFORTS. Subject to the terms and conditions
of the Merger Agreement, and to the fiduciary duties of the Board of Directors
of the Company, each party will use its commercially reasonable best efforts to
effect the transactions contemplated by the Merger Agreement and to fulfill the
conditions to the obligations of the parties set forth in the Merger Agreement.
The parties have agreed further that no party will take any action inconsistent
with its obligations under the Merger Agreement or that could hinder or delay
the consummation of the transactions contemplated by the Merger Agreement.
THE RIGHTS AGREEMENT. The Company has agreed in the Merger Agreement that
it will not redeem the Rights, amend the Rights Agreement (other than to delay
the Distribution Date or to render the Rights inapplicable to the Offer and the
Merger) or terminate the Rights Agreement prior to the effectiveness of the
Merger unless required to do so by order of a court of competent jurisdiction.
BOARD OF DIRECTORS. The Merger Agreement provides that, upon the
Purchaser's acceptance for payment and payment for Shares pursuant to the Offer,
the Purchaser will be entitled to designate such number of directors on the
Company's Board of Directors as is equal to the product (rounded up to the next
whole number) of the total number of directors on the Company's Board of
Directors multiplied by the percentage that the aggregate number of Shares
beneficially owned by the Purchaser and its affiliates bears to the number of
Shares outstanding. The Company will promptly, at the request of Schnitzer,
either increase the size of the Company's Board of Directors and/or obtain the
resignations of such number of its current directors as is necessary to enable
the Purchaser's designees to be elected to the Company's Board of Directors as
provided above.
Following the election or appointment of the Purchaser's designated
directors, the affirmative vote of a majority of the Directors then in office
who are not designees of the Purchaser will be required in connection with any
action with respect to the Merger Agreement or the transactions contemplated
therein.
TREATMENT OF STOCK OPTIONS; CERTAIN BENEFITS. Pursuant to the Merger
Agreement, the Company has agreed, prior to the consummation of the Merger, to
use its best efforts to obtain the cancellation of all stock options, vested and
unvested, outstanding under the Company's 1988 Stock Option Plan as amended (the
"1988 Plan") with an exercise price less than the amount of the Offer Price in
exchange for a payment to the optionee of an amount per option share equal to
the difference between the exercise price for such share and the amount of the
Offer Price. In accordance with the 1988 Plan and the Company's 1994 Non-
Employee Director Stock Option Plan (the "1994 Plan"), a holder of any options
outstanding as of the consummation of the Merger will be entitled to receive,
upon exercise of such options in accordance with the 1988 Plan or the 1994 Plan,
as the case may be, an amount equal to the Offer Price such holder would have
been entitled to receive in the Merger if he had been the holder of the shares
of Common Stock that he would otherwise have received upon exercise of the
options, and will have no right to receive any stock of the Company upon such
exercise. Before the consummation of the Merger, the Company will use its best
efforts to obtain the cancellation of all unvested rights to receive in the
future shares of Common Stock pursuant to the Company's 1995 Incentive
Compensation Plan in exchange for payment to the holders of such rights of an
amount per share equal to the Offer Price.
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INDEMNIFICATION AND INSURANCE. In the Merger Agreement, Schnitzer and the
Purchaser have agreed to indemnify the current directors of the Company to the
full extent provided in the Certificate of Incorporation or Bylaws of the
Company. Pursuant to the Merger Agreement, Schnitzer will cause the Company for
a period of six years from the effectiveness of the Merger to maintain in effect
the Company's current directors' liability insurance (provided the Company may
substitute policies of at least the same coverage containing terms and
conditions substantially equivalent) covering those persons who are currently
covered by the Company's directors' liability insurance policies.
GOVERNMENT CONSENTS. The parties have agreed in the Merger Agreement (a) to
pursue early termination of the applicable waiting period under the HSR Act, (b)
to file the premerger notification and report forms as required under the HSR
Act within five days after execution of the Merger Agreement, and (c) to file
all request for all other approvals or waivers that may be required from
governmental entities in connection with the transactions contemplated by the
Merger Agreement.
CONDITIONS TO MERGER. The respective obligation of each party to the Merger
Agreement to effect the Merger shall be subject to the satisfaction, prior to
the closing of the transactions contemplated by the Merger Agreement, of the
following conditions: (a) all required authorizations, consents, and approvals
of all governmental agencies and authorities shall have been obtained and the
waiting period under the HSR Act will have expired or been terminated early; (b)
if necessary under applicable law, the Merger shall have been approved by the
holders of at least a majority of the Shares of the Company; (c) no law,
statute, rule, regulation, decree, order, injunction or ruling by any
governmental entity remains in effect and prohibits, restrains, enjoins or
restricts the consummation of the Merger; (d) no action, suit or other
proceeding has been overtly threatened or is pending against any party to
prohibit, restrain, enjoin, restrict or otherwise prevent the consummation of
the Offer or the Merger; and (e) the Purchaser shall have previously accepted
(or shall have been required to accept) for payment and paid for Shares pursuant
to the Offer.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the effective time of the Merger (a) by mutual consent of Schnitzer, the
Purchaser and the Company; (b) by either Schnitzer or the Company if (A)
clearance under the HSR Act is not received within 120 days after the filing of
the premerger notification and report forms or (B) any governmental entity has
promulgated or issued a law, statute, rule, regulation, decree, order,
injunction, or ruling or taken any other action restraining, enjoining,
restricting or otherwise prohibiting the Offer or the Merger that has become
final and nonappealable or (C) the Offer is terminated or expires in accordance
with its terms as the result of failure of any of the conditions set forth in
Section 14 without Purchaser having purchased any Shares pursuant to the Offer
except that this right to terminate is not available to any party whose failure
to perform any of its covenants or agreements under the Merger Agreement results
in the failure of any condition; (c) by Schnitzer, if not then in default, upon
written notice to the Company if (A) the Company breaches in any material
respect any of its representations or warranties or defaults in the observance
or performance of any of its covenants or agreements except for breaches or
defaults which, individually or in the aggregate, would not have a material
adverse effect or materially impair the ability of the parties to consummate the
transactions contemplated by the Merger Agreement or (B) the Board of Directors
of the Company or any committee thereof has withdrawn or modified in a manner
adverse to Schnitzer or the Purchaser its approval or recommendation of the
Merger or the Merger Agreement or approved or recommended any Takeover Proposal,
or (C) the Company has entered into a definite agreement with respect to any
Superior Proposal; or (d) by the Company, if not then in default, upon written
notice to Schnitzer if (A) Schnitzer breaches in any material respect any of its
representations or warranties or defaults in the observance or performance of
any of its covenants or agreements, except for breaches or defaults which,
individually or in the aggregate, would not have a material adverse effect or
materially impair the ability of the parties to consummate the transactions
contemplated by the Merger Agreement or (B) in connection with the Company
entering into a definitive agreement with respect to a Superior Proposal,
provided the Company has complied with all the requirements in connection
therewith and that it makes simultaneous payment of certain Expenses and the
Termination Fee (as defined below).
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In the event of the termination of the Merger Agreement, the Merger
Agreement shall forthwith become void and there shall be no liability on the
part of any party thereto except as described under "Fees and Expenses" below;
provided, however, that nothing in the Merger Agreement will relieve any party
from liability for any breach thereof before termination.
FEES AND EXPENSES. The Merger Agreement provides that, except as provided
in the following paragraph, all fees and expenses incurred in connection with
the Offer, the Merger, the Merger Agreement and the transactions contemplated
thereby will be paid by the party incurring such fees or expenses, whether or
not the Offer or the Merger is consummated.
Under the Merger Agreement the Company will pay, or cause to be paid, to
Schnitzer the sum of (a) all of Schnitzer's out-of-pocket fees and expenses
incurred or paid by or on behalf of Schnitzer in connection with the Merger or
the consummation of any of the transactions contemplated by the Merger
Agreement, including all HSR Act filing fees, all fees and expenses of counsel,
commercial banks, investment banking firms, accountants, experts, environmental
consultants and other consultants to Schnitzer (the "Expenses") in an amount not
to exceed $1,000,000 and (b) $2,000,000 (the "Termination Fee") upon demand if
(i) Schnitzer terminates the Merger Agreement in accordance with the provisions
described in clause (c)(B) or (c)(C) under the heading "Termination" above or
(ii) the Company terminates the Merger Agreement in accordance with the
provisions described in clause (d)(B) under the heading "Termination" above. In
addition, the Company will pay, or cause to be paid, to Schnitzer, the Expenses
up to a maximum amount of $1,000,000 upon demand if (i) the Offer is not
consummated solely by reason of the nonsatisfaction of one of the conditions set
forth in Section 14 and (ii) it was within the power of the Company by its
action or inaction to avoid the nonsatisfaction of such condition and (iii) the
Merger Agreement was not terminated by the Company pursuant to the provisions
described in clause (d)(A) under the heading "Termination" above, and (iv)
within 12 months after termination of the Merger Agreement the Company
consummates (or enters into a definitive agreement with respect to and
subsequently consummates) a Takeover Proposal that was made before the
termination of the Merger Agreement.
AMENDMENT. The Merger Agreement may not be amended except by written
agreement of the parties thereto.
ASSIGNMENT. The Merger Agreement may not be assigned by any party thereto
without the prior written consent of Schnitzer and the Company, which consent
will not be unreasonably withheld.
OPERATIONS FOLLOWING CONSUMMATION OF THE OFFER. Following consummation of
the Offer, Schnitzer intends to consolidate management of the Company at
Schnitzer's headquarters in Portland, Oregon and to undertake a review of the
business and operations of the Company and the Proler Entities and, based on
such review, is likely to propose changes in the Company's assets (including
dispositions of certain assets), business, corporate structure, capitalization,
management and dividend policy.
APPRAISAL RIGHTS. Holders of Shares do not have appraisal rights as a
result of the Offer. However, if the Merger is consummated, holders of Shares at
the effective time of the Merger will have certain rights pursuant to the
provisions of Section 262 of the DGCL ("Section 262") to dissent and demand
appraisal of their Shares. Under Section 262, dissenting stockholders who comply
with the applicable statutory procedures will be entitled to receive a judicial
determination of the fair value of their Shares (exclusive of any element of
value arising from the accomplishment or expectation of the proposed Merger) and
to receive payment of such fair value in cash, together with a fair rate of
interest, if any. Any such judicial determination of the fair value of Shares
could be based upon factors other than, or in addition to, the price per Share
to be paid in the Merger or the market value of the Shares. The value so
determined could be more or less than the price per Share to be paid in the
Merger. The foregoing summary of Section 262 does not purport to be complete and
is qualified in its entirety by reference to Section 262.
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GOING PRIVATE TRANSACTIONS. The Commission has adopted Rule 13e-3 under the
Exchange Act which is applicable to certain "going private" transactions and
which may under certain circumstances be applicable to the Merger. However, Rule
13e-3 would be inapplicable if (a) the Shares are deregistered under the
Exchange Act prior to the Merger or (b) such Merger is consummated within one
year after the purchase of the Shares pursuant to the Offer and such Merger
provided for stockholders to receive cash for their Shares in an amount at least
equal to the Offer Price. If applicable, Rule 13e-3 requires, among other
things, that certain financial information concerning the fairness of the
proposed transaction and the consideration offered to minority stockholders in
such transaction be filed with the Commission and disclosed to stockholders
prior to the consummation of the Merger.
12. DIVIDENDS AND DISTRIBUTIONS.
Pursuant to the Merger Agreement, the Company has agreed not to declare, pay
or set aside any dividend or other distribution in cash or property in respect
of its capital stock or issue or sell any securities convertible into, or
exchangeable for, or options, warrants to purchase, or rights to subscribe for
any shares of its capital stock or subdivide or in any way reclassify any shares
of its capital stock, or repurchase, cancel, or redeem any such shares prior to
the consummation of the Merger.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, NEW YORK STOCK
EXCHANGE LISTING AND EXCHANGE ACT REGISTRATION.
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and the number of stockholders, which
could adversely affect the liquidity and market value of the remaining Shares
held by the public.
Depending upon the number of Shares acquired pursuant to the Offer and the
Shares accumulated by other parties, it is possible that the Shares will no
longer be eligible for listing on the NYSE. In that event, the market for the
Shares could be adversely affected.
The Shares are registered under the Exchange Act. Registration of the Shares
may be terminated upon application of the Company to the Commission if the
Shares are not listed on a national securities exchange and there are fewer than
300 holders of record of the Shares. The Company's 1996 10-K indicates that
there were approximately 356 stockholders of record as of April 26, 1996. The
termination of the registration of the Shares under the Exchange Act would
render inapplicable certain provisions of the Exchange Act, including
requirements that the Company furnish stockholders with proxy materials
regarding meetings of stockholders of the Company, the reporting and short-swing
profit liability provisions under Section 16 of the Exchange Act and the
requirements of Rule 13e-3 under the Exchange Act regarding "going private"
transactions.
The Shares are currently "margin securities" under the rules of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"). Among
other things, this status has the effect of allowing lenders to extend credit to
stockholders who wish to use the Shares as collateral. Depending upon factors
similar to those described above with respect to NYSE eligibility, following the
Offer the Shares might no longer constitute "margin securities" for purposes of
the Federal Reserve Board's margin regulations, in which event Shares could no
longer be used as collateral for margin loans made by brokers.
The Purchaser currently intends to cause the Company to make an application
for termination of registration of the Shares under the Exchange Act after
consummation of the Merger, and may cause such an application to be filed prior
to the consummation of the Merger if a sufficient number of Shares are purchased
pursuant to the Offer. If registration of the Shares under the Exchange Act were
terminated, the Shares would no longer be "margin securities" or eligible for
listing on the NYSE.
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14. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, the obligation of
Purchaser to accept for payment, and pay for, any tendered Shares will be
subject only to the conditions that:
(i) the Merger Agreement shall not have been terminated;
(ii) the Minimum Tender Condition shall have been satisfied;
(iii) there shall not have occurred (v) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange
or in the U.S. over-the-counter market, (w) a declaration of a banking
moratorium or any general suspension of payments in respect of banks in
the United States, (x) any material limitation (whether or not
mandatory) imposed by any governmental authority on the extension of
credit by banks or other financial institutions in the United States,
(y) commencement of war or armed hostilities between the United States
and any foreign power or any insurrection or armed conflict involving
the United States which makes it impracticable to conclude the
acquisition of the Company, or (z) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof;
(iv) the applicable waiting period under the HSR Act shall have expired or
been terminated;
(v) no statute, rule, regulation, judgment, order, decree, ruling,
injunction or other action shall have been entered, promulgated or
enforced by any governmental entity, and no action, proceeding or claim
by any governmental entity that has a reasonable likelihood of success
has been instituted, that purports, seeks, or threatens to (x)
challenge, prohibit, restrain, enjoin or restrict in a material manner
the purchase and sale of the Shares or the consummation of the Merger,
(y) impose material adverse terms or conditions (not set forth herein)
upon the purchase and sale of the Shares or the consummation of the
Merger, (z) prohibits or materially limits or seeks to prohibit or
materially limit the ownership or operation by Schnitzer or the
Purchaser of all or a material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or compels or seeks to
compel Schnitzer or Purchaser to dispose of or to hold separate all or a
material portion of the business or assets of the Company and its
subsidiaries, taken as a whole;
(vi) except as to matters disclosed in documents filed by the Company with
the Commission since December 31, 1994 or in the Merger Agreement,
there shall have been no change resulting in a material adverse effect
(or any development that, insofar as reasonably can be foreseen, is
reasonably likely to result in any material adverse effect) on the
Company and its subsidiaries, taken as a whole;
(vii) (x) neither the Board of Directors of the Company nor any committee
thereof shall have withdrawn or modified in a manner adverse to
Schnitzer or the Purchaser its approval or recommendation of the Offer,
the Merger or the Merger Agreement or approved or recommended any
Takeover Proposal and (y) the Company shall not have entered into any
agreement with respect to any Superior Proposal;
(viii) all representations and warranties of the Company shall be true and
correct, except (x) for those representations and warranties which
address matters only as of a particular date (which must remain true
and correct as of such date) and (y) for breaches of representations
and warranties which, individually or in the aggregate, would not have
a material adverse effect with respect to the Company or Schnitzer or
materially impair the ability of the parties to consummate the Merger;
(ix) the Company shall have not failed to perform any obligation or to
comply with any agreement or covenant of the Company to be performed or
complied with by it prior to consummation of the Offer, except for such
nonperformance or failure of compliance which, individually or in the
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aggregate, would not have a material adverse effect with respect to the
Company or Schnitzer or materially impair the ability of the parties to
consummate the Offer and the Merger.
The Purchaser and Schnitzer will not be required to consummate the Offer in the
event any of the foregoing conditions have not been satisfied, and such failure,
in the reasonable judgment of Schnitzer and the Purchaser, in any case and
regardless of the circumstances (other than a breach by Schnitzer or the
Purchaser) causing the failure of such condition(s) makes it inadvisable to
proceed with the Offer or its consummation.
15. CERTAIN LEGAL MATTERS.
Except as described below, the Purchaser is not aware of any approval or
other action by any federal, state or foreign governmental or administrative
agency that would be required for the acquisition of the Shares by the Purchaser
pursuant to this Offer. Should any approval or other action be required, it is
presently contemplated that such approval or action would be sought. However,
while there is no present intent to delay the purchase of the Shares tendered
pursuant to this Offer pending the outcome of any such matter, there can be no
assurance that any such approval or other action, if needed, could be obtained
without substantial delay or conditions, or at all. The Purchaser's obligation
under the Offer to accept for payment and pay for Shares is subject to certain
conditions, including conditions relating to the legal matters discussed in this
Section 15. See Section 14.
STATE TAKEOVER LAWS. Section 203 of the DGCL prohibits a Delaware
corporation such as the Company from engaging in a "Business Combination"
(defined as a variety of transactions, including mergers, as set forth below)
with an "Interested Stockholder" (defined generally as a person that is the
beneficial owner of 15% or more of a corporation's outstanding voting stock) for
a period of three years following the date that such person became an Interested
Stockholder unless (a) prior to the date such person became an Interested
Stockholder, the board of directors of the corporation approved either the
Business Combination or the transaction that resulted in the stockholder
becoming an Interested Stockholder, (b) upon consummation of the transaction
that resulted in the stockholder becoming an Interested Stockholder, the
Interested Stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding stock hold by
directors who are also officers of the corporation and employee stock ownership
plans that do not provide employees with the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer or (c) on or subsequent to the date such person became an Interested
Stockholder, the Business Combination is approved by the board of directors of
the corporation and authorized at a meeting of stockholders, and not by written
consent, by the affirmative vote of the holders of at least 66-2/3% of the
outstanding voting stock of the corporation not owned by the Interested
Stockholder. The Company's Bylaws provide that Section 203 is not applicable to
the Company.
PROVISIONS OF ARTICLES OF INCORPORATION. Article Fifteenth of the Company's
Articles of Incorporation ("Article XV"), also restricts the ability of an
"interested stockholder" to engage in any business combination with the Company
in a manner similar to the provisions of Delaware law discussed above. However,
because the Company's Board of Directors approved the Offer and the Merger
Agreement before commencement of the Offer, Article XV will not prevent the
Purchaser from effecting a business combination with the Company after
consummation of the Offer.
Except as described in this Offer to Purchase, Schnitzer and the Purchaser
have not complied with any state takeover laws. Should any government official
or third party seek to apply any state takeover law to the Offer other than
those described in this Offer to Purchase, Schnitzer and the Purchaser will take
such action as then appears desirable and currently anticipate that they will
contest the validity or applicability of such statute in appropriate court
proceedings.
If it is asserted that one or more state takeover laws other than those
described in this Offer to Purchase apply to the Offer and it is not determined
by all appropriate courts that such act or acts do not
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apply or are invalid as applied to the Offer, Schnitzer and the Purchaser might
be required to file certain information with, or receive approvals from, the
relevant state authorities. In addition, if enjoined, the Purchaser might be
unable to accept for payment any Shares tendered pursuant to the Offer, or be
delayed in consummating the Offer. In such case, the Purchaser may not be
obligated to accept for payment any Shares tendered. See Section 14.
ANTITRUST LAWS. The Antitrust Division and the FTC frequently scrutinize
the legality under the antitrust laws of transactions such as the proposed
acquisition of the Company by Schnitzer. At any time before or after the
Purchaser's acquisition of Shares pursuant to the Offer, the Antitrust Division
or the FTC could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or the consummation of the proposed Merger or
seeking the divestiture of Shares acquired by the Purchaser or the divestiture
of substantial assets of the Company or its subsidiaries or Schnitzer or its
subsidiaries. Private parties may also bring legal action under the antitrust
laws under certain circumstances. There can be no assurance that a challenge to
the Offer on antitrust grounds will not be made or, if such a challenge is made,
of the result thereof.
16. FEES AND EXPENSES.
The Purchaser has retained The Bank of New York to act as Depositary and
Georgeson & Company Inc. to serve as Information Agent in connection with the
Offer. The Purchaser will pay each of the Depositary and the Information Agent
reasonable and customary compensation for their services in connection with the
Offer, plus reimbursement for out-of-pocket expenses, and will indemnify each of
them against certain liabilities and expenses in connection therewith, including
certain liabilities under the federal securities laws.
Neither the Purchaser nor Schnitzer will pay any fees or commissions to any
broker or dealer or other person (other than the Information Agent) in
connection with the solicitation of tenders of Shares pursuant to the Offer.
Brokers, dealers, commercial banks and trust companies will be reimbursed by the
Purchaser for customary mailing and handling expenses incurred by them in
forwarding material to their customers.
17. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, the Purchaser may, in its sole discretion, take such
action as it may deem necessary to make the Offer in any such jurisdiction and
extend the Offer to holders of Shares in such jurisdiction.
Neither the Purchaser nor Schnitzer is aware of any jurisdiction in which
the making of the Offer or the acceptance of Shares in connection therewith
would not be in compliance with the laws of such jurisdiction. Consequently, the
Offer is currently being made to all holders of Shares. To the extent the
Purchaser or Schnitzer becomes aware of any law that would limit the class of
offers in the Offer, the Purchaser will amend the Offer and, depending on the
timing of such amendment, if any, will extend the Offer to provide adequate
dissemination of such information to holders of Shares prior to the expiration
of the Offer.
The Purchaser has filed with the Commission the Schedule 14D-1 (including
exhibits) pursuant to Rule 14d-3 under the Exchange Act, furnishing certain
additional information with respect to the Offer, and may file amendments
thereto. Such Schedule 14D-1 and any amendments thereto, including exhibits, may
be examined and copies may be obtained from the principal office of the
Commission in Washington, D.C. in the manner set forth in Section 8.
29
<PAGE>
No person has been authorized to give any information or make any
representation on behalf of the Purchaser not contained in this Offer to
Purchase or in the Letter of Transmittal and, if given or made, such information
or representation must not be relied upon as having been authorized.
PIC ACQUISITION CORPORATION
September 20, 1996
30
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER AND SCHNITZER
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER
The name, present principal occupation or employment and five-year
employment history of each of the directors and executive officers of the
Purchaser are set forth below. All such directors and executive officers listed
below are citizens of the United States. The business address of each director
or executive officer is 3200 N.W. Yeon Avenue, Portland, Oregon 97210.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATIONS OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
Leonard Schnitzer............................ director of Purchaser. See below.
Robert W. Philip............................. President and director of Purchaser. See below.
Dori Schnitzer............................... Secretary and director of Purchaser. See below.
Kenneth M. Novak............................. director of Purchaser. See below
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS OF SCHNITZER
The name, present principal occupation or employment and five-year
employment history of each of the directors and executive officers of Schnitzer
are set forth below. All such directors and executive officers listed below are
citizens of the United States. The business address of each such director and
executive officer is 3200 N.W. Yeon Avenue, Portland, Oregon.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATIONS OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
Leonard Schnitzer............................ has been the Chief Executive Officer of Schnitzer since August
1973, and became Chairman of the Board in March 1991.
Robert W. Philip............................. has been President of Schnitzer since March 1991. He had been a
Vice President of Schnitzer since 1984 with responsibility for
Schnitzer's Metra steel distribution division from 1984 to the
time of its sale in July 1990.
Gary Schnitzer*.............................. has been Executive Vice President in charge of Schnitzer's
California scrap operations since 1980 and a director since
September 1993.
Barry A. Rosen............................... has been Vice President-Finance and Treasurer of Schnitzer since
1982.
Kurt C. Zetzsche............................. joined Schnitzer in February 1993 as President of Cascade Steel
Rolling Mills, Inc. Mr. Zetzsche has been in the steel
manufacturing business since 1966. From 1990 to February 1993, he
was President of Tennessee Valley Steel, a mini-mill steel
producer. From 1976 to 1989, he was President of Knoxville Iron
Co., also a mini-mill steel producer.
Edgar C. Shanks.............................. joined Schnitzer in September 1991 as Vice President-Taxation.
From 1970 to 1991, he was a CPA with Price Waterhouse and was a
partner there from 1982 to 1991.
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATIONS OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
James W. Cruckshank.......................... has been the Controller of Schnitzer since May 1987. Except for a
brief period in 1986, he has been employed by Schnitzer in various
accounting positions since 1984. From 1978 to 1984, he was a CPA
with Price Waterhouse.
Kenneth M. Novack............................ is Executive Vice President of Schnitzer and President of
Schnitzer Investment Corp. and certain other Schnitzer Group
companies. From 1975 to 1980, he worked for Schnitzer as Vice
President and then Executive Vice President. Mr. Novack was also
President of Schnitzer Investment Corporation from 1978 to 1980.
From 1981 until April 1991, he was a partner in the law firm of
Ball, Janik & Novack.
Dori Schnitzer*.............................. has been the Secretary of Schnitzer since June 1987 and became a
director in March 1991. She also served as corporate counsel of
Schnitzer from October 1987 to May 1991 when she became Vice
President of Lasco Shipping Co.
Carol S. Lewis*.............................. became a director of Schnitzer in December 1987. She is currently
proprietor of Virginia Jacobs, a linen and home accessories store.
From 1991 until 1995, she worked as a marketing and fund raising
consultant. From 1981 until 1991 she worked for Oregon Public
Broadcasting, the nonprofit operator of public television and
radio in Oregon, most recently as President of the Oregon Public
Broadcasting Foundation.
Jean S. Reynolds............................. has been a director of Schnitzer since September 1993. She is
employed as consultant for FTA, a marketing and special events
coordinator.
Manuel Schnitzer............................. was a director of Schnitzer until December 1987. He became a
director again in March 1991.
Robert S. Ball............................... has been a director of Schnitzer since September 1993. Since 1982,
he has been a partner in the Portland, Oregon law firm of Ball
Janik LLP, formerly Ball, Janick & Novack.
William A. Furman............................ has been a director of Schnitzer since September 1993. Since 1981,
he has been the President and Chief Executive Officer of The
Greenbrier Companies of Portland, Oregon, a company with
subsidiaries, including Gunderson, Inc., engaged in manufacturing,
marketing and leasing of railcars and other equipment.
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATIONS OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
Ralph R. Shaw................................ has been a director of Schnitzer since September 1993. Mr. Shaw is
Co-Chairman of Shaw, Glasgow & Co., L.L.C., a financial services
and venture capital firm which in March 1995 succeeded to the
business of Shaw Management Company, Inc., of which Mr. Shaw had
been President since September 1980. He is also a director of TRM
Copy Centers Corporation. During 1992, Mr. Shaw entered into a
settlement agreement with the Commission relating to alleged
violations of Section 16(a) of the Exchange Act due to failure to
report on a timely basis transactions in the common stock of two
public companies for which he served as a director. As part of the
settlement agreement, Mr. Shaw agreed to the entry of an order by
the Commission requiring him to permanently cease and desist from
any further violations of Section 16(a).
</TABLE>
* Gary Schnitzer, Dori Schnitzer and Carol S. Lewis are each a trustee of the
Schnitzer Steel Industries, Inc. Voting Trust (the "Schnitzer Trust"), which
holds substantially all of the issued and outstanding shares of Class B
Common Stock, representing a majority of the combined voting power of all
outstanding shares of Common Stock of Schnitzer. The Schnitzer Trust is
divided into four separate groups, one for each of four branches of the
Schnitzer family. Each branch is represented by a trustee, and the four
trustees as a group have the power to vote the shares held in the Schnitzer
Trust. Action by the four trustees generally requires approval of trustees
with votes equal to at least 52.5% of the number of shares held in the
Schnitzer Trust; certain actions require each trustee to obtain the approval
of holders of a majority of the voting trust certificates held by his or her
branch of the family. The Schnitzer Trust terminates on March 31, 2001
unless terminated sooner by agreement of holders of trust certificates
representing two-thirds of the shares held by each branch of the family.
S-3
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal, Share Certificates and any other required documents should be
sent by each stockholder of the Company or his or her broker, dealer, commercial
bank, trust company or other nominee to the Depositary as follows:
THE DEPOSITARY FOR THE OFFER IS:
The Bank of New York
BY MAIL:
TENDER & EXCHANGE DEPARTMENT
P.O. BOX 11248
CHURCH STREET STATION
NEW YORK, NEW YORK 10286-1248
FACSIMILE TRANSMISSION:
(FOR ELIGIBLE INSTITUTIONS ONLY)
(212) 815-6213
BY HAND OR OVERNIGHT COURIER:
TENDER & EXCHANGE DEPARTMENT
101 BARCLAY STREET
RECEIVE AND DELIVER WINDOW
NEW YORK, NEW YORK 10286
FOR INFORMATION TELEPHONE:
(800) 507-9357
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TO A NUMBER OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
Questions or requests for assistance may be directed to the Information
Agent at the address and telephone number set forth below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and other tender offer
materials may be obtained from the Information Agent as set forth below, and
will be furnished promptly at the Purchaser's expense. Stockholders may also
contact their brokers, dealers, commercial banks or trust companies or other
nominees for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
Wall Street Plaza
New York, New York 10005
(212) 509-6240 (collect)
Banks and Brokers call collect (212) 440-9800
Call Toll Free: 1-800-223-2064
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
PROLER INTERNATIONAL CORP.
PURSUANT TO THE OFFER TO PURCHASE DATED SEPTEMBER 20, 1996
BY
PIC ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
SCHNITZER STEEL INDUSTRIES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, EASTERN TIME, ON FRIDAY, OCTOBER 18, 1996
UNLESS THE OFFER IS EXTENDED
THE DEPOSITARY FOR THE OFFER IS:
The Bank of New York
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
TENDER & EXCHANGE DEPT. (FOR ELIGIBLE INSTITUTIONS ONLY) TENDER & EXCHANGE DEPT.
P.O. BOX 11248 (212)815-6213 101 BARCLAY STREET
CHURCH STREET STATION TO CONFIRM RECEIPT: RECEIVE AND DELIVER WINDOW
NEW YORK, NY 10286-1248 (800)507-9357 NEW YORK, NY 10286
</TABLE>
Your bank or broker can assist you in completing this Letter of Transmittal.
The instructions enclosed with this Letter of Transmittal must be followed and
should be read carefully. Questions and requests for additional copies of the
Offer to Purchase (as defined below) and this Letter of Transmittal may be
directed to the Information Agent as indicated in Instruction 8.
Delivery of this Letter of Transmittal to an address other than as set forth
above, or transmission of instructions via facsimile transmission or telex
number other than as set forth above, will not constitute valid delivery.
This Letter of Transmittal is to be completed by stockholders if
certificates for Shares (as defined below) are to be forwarded herewith or if
tenders of Shares are to be made by book-entry transfer into the account of The
Bank of New York as Depositary (the "Depositary") at The Depository Trust
Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC") (each a
"Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer
Facilities") pursuant to the procedures set forth in Section 3 of the Offer to
Purchase. Stockholders who tender Shares by book-entry transfer are referred to
herein as "Book-Entry Stockholders." Holders of Shares whose certificates for
such Shares (the "Share Certificates") are not immediately available or who
cannot deliver their Share Certificates and all other required documents to the
Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase), or who cannot complete the procedure for book-entry transfer on a
timely basis, must tender their Shares according to the guaranteed
<PAGE>
delivery procedure set forth in Section 3 of the Offer to Purchase. See
Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
Name(s) & Address(es) of Registered Holder(s) Share Certificate(s) and Share(s)
(Please fill in, if blank, exactly as Tendered (Attach additional
name(s) appear(s) on certificate(s)) signed list if necessary)
Total Number
Shares of Shares Number
Certificate(s) Represented By of Shares
Number(s)* Certificate(s)* Tendered**
Total Shares
* Need not be completed by Book-Entry Stockholders.
** Unless otherwise indicated, all Shares represented by certificates delivered to the Depositary will be deemed
to have been tendered. See Instruction 4.
</TABLE>
<TABLE>
<S> <C>
/ / CHECK HERE IF SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY
THE DEPOSITARY WITH ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
Check Box of Applicable Book-Entry Transfer Facility (check one):
/ / DTC / / PDTC
Account Number
Transaction Code Number
/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT
TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Names(s) of Registered Holder(s)
Window Ticket Number (if any)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution which Guaranteed Delivery
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to PIC Acquisition Corporation, a Delaware
corporation, (the "Purchaser"), the above-described shares of common stock,
$1.00 par value (the "Shares," which term includes associated stock rights
issued pursuant to a Rights Agreement between the Company and KeyCorp
Shareholder Services, Inc. dated as of February 28, 1996 as amended effective
September 15, 1996), of Proler International Corp., a Delaware corporation (the
"Company"), at a purchase price of $7.50 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated September 20, 1996 and any amendments or supplements thereto (the "Offer
to Purchase"), and in this Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer"), receipt
of which is hereby acknowledged. The undersigned understands that the Purchaser
reserves the right, with the written consent of the Company, to transfer or
assign, in whole or from time to time in part, the right to purchase all or any
portion of the Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment for the Shares
tendered herewith in accordance with the terms and conditions of the Offer, the
undersigned hereby sells, assigns and transfers to, or upon the order of, the
Purchaser all right, title and interest in and to all of the Shares (including
the associated Rights) that are being tendered hereby and any and all noncash
dividends, distributions (including additional Shares) or rights declared, paid
or issued with respect to the tendered Shares on or after September 15, 1996 and
payable or distributable to the undersigned on a date prior to the transfer to
the name of the Purchaser or a nominee or transferee of the Purchaser on the
Company's stock transfer records of the Shares tendered herewith (a
"Distribution"). The undersigned hereby appoints the Depositary the true and
lawful agent and attorney-in-fact of the undersigned with respect to such Shares
(and any Distribution) with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest) to (a) deliver
such Share Certificates (as defined herein) (and any Distribution) or transfer
ownership of such Shares (and any Distribution) on the account books maintained
by a Book-Entry Transfer Facility, together in either case with appropriate
evidence of transfer and authenticity, to the Depositary for the account of the
Purchaser, (b) present such Shares (and any Distribution) for transfer on the
books of the Company, and receive all benefits and otherwise exercise all rights
of beneficial ownership of such Shares (and any Distribution), all in accordance
with the terms and subject to the conditions of the Offer.
The undersigned irrevocably appoints designees of the Purchaser as such
stockholder's proxy, each with full power of substitution to the full extent of
such stockholder's rights with respect to the shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
Distribution. Such appointment will be effective when, and only to the extent
that, the Purchaser accepts such Shares for payment. Upon such acceptance for
payment, all prior proxies given by such stockholder with respect to such Shares
(and, if applicable, such other shares and securities) will be revoked without
further action, and no subsequent proxies may be given nor any subsequent
written consents executed (and if given or executed, will not be deemed
effective). The designees of the Purchaser will be empowered to exercise all
voting and other rights of such stockholder as they in their sole discretion may
deem proper at any annual or special meeting of the
<PAGE>
Company's stockholders or any adjournment or postponement thereof, by written
consent in lieu of any such meeting or otherwise. The Purchaser reserves the
right to require that, in order for Shares to be deemed validly tendered,
immediately upon the Purchaser's payment for such Shares, the Purchaser must be
able to exercise full voting rights with respect to such Shares.
The undersigned hereby represents and warrants that (a) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any Distribution) and (b) when the Shares are accepted for
payment by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title to such Shares (and any Distribution), free and clear of all
liens, restrictions, charges and encumbrances, and the same will not be subject
to any adverse claim. The undersigned, upon request, will execute and deliver
any additional documents deemed by the Depositary or the Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby (and any Distribution). In addition, the undersigned
shall promptly remit and transfer to the Depositary for the account of the
Purchaser any and all Distributions in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer, and pending such
remittance or appropriate assurance thereof, the Purchaser will be, subject to
applicable law, entitled to all rights and privileges as owner of such
Distribution and may withhold the entire purchase price or deduct from the
purchase price the amount or value thereof, as determined by the Purchaser in
its sole discretion.
All authority herein conferred or agreed to be conferred shall not be
affected by and shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, executors, administrators, successors and assigns of
the undersigned.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by the Purchaser
pursuant to the Offer, may also be withdrawn at any time after November 19. See
Section 4 of the Offer to Purchase.
The undersigned understands that tenders of Shares pursuant to any of the
procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions set forth in the
Offer, including the undersigned's representations that the undersigned owns the
Shares being tendered.
Unless otherwise indicated herein under "Special Payment Instructions,"
please mail the check for the purchase price and/or issue or return any
certificate(s) for Shares not tendered or not accepted for payment (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing under "Description of Shares Tendered." In the event that
both the Special Delivery Instructions and Special Payment Instructions are
completed, please issue the check for the purchase price and/or issue or return
any certificate(s) for Shares not tendered or accepted for payment in the name
of, and deliver such check and/or such certificate to, the person or persons so
indicated.
The undersigned recognizes that the Purchaser has no obligation, pursuant to
the Special Payment Instructions, to transfer any Shares from the name(s) of the
registered holder(s) thereof if the Purchaser does not accept for payment any of
the Shares so tendered.
<TABLE>
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) To be completed ONLY if certificate(s) for
for Shares not tendered or not accepted Shares not tendered or not accepted for
for payment and/or the check for the payment and/or the check for the purchase
purchase price of Shares accepted for price of Shares accepted for payment are
payment are to be issued in the name of to be mailed to someone other than the
someone other than the undersigned. undersigned, or to the undersigned at an
address other than that shown above.
Issue / / check Mail / / check
/ / certificate(s) to: / / certificate(s) to:
Name Name
(Please Print) (Please Print)
Address Address
(Include Zip Code) (Include Zip Code)
(Tax Identification or Social Security (Tax Identification or Social Security
No.) No.)
(See Substitute Form W-9 included herein) (See Substitute Form W-9 included herein)
</TABLE>
<PAGE>
SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN
________________________________________________________________________________
________________________________________________________________________________
(Signature(s) of Holder(s))
Date: ____________________________________________________________________, 1996
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or another acting in a fiduciary or
representative capacity, please set forth full title and see Instruction 5).
Name(s) ________________________________________________________________________
________________________________________________________________________________
(Please Type or Print)
Capacity (full title) __________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _________________________________________________
Tax Identification or Social Security No. ______________________________________
COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTION 1 AND 5)
Authorized Signature ___________________________________________________________
Name ___________________________________________________________________________
(Please Type or Print)
Title __________________________________________________________________________
Name of Firm ___________________________________________________________________
Address ________________________________________________________________________
Dated ____________________________________________________________________, 1996
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder(s) of Shares (which term, for purposes of this document, shall
include any participant in a Book-Entry Transfer Facility whose name appears on
a security position listing as the owner of Share(s)), unless such holder has
completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" included herein or (ii) if such Shares
are tendered for the account of a firm which is a member of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc. or by a commercial bank or trust company having an office or
correspondent in the United States (each of the foregoing being referred to as
an "Eligible Institution"). In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed either if certificates are to be forwarded
herewith or if tenders are to be made pursuant to the procedure for tender by
book-entry transfer set forth in Section 3 of the Offer to Purchase. Share
Certificates, or timely confirmation (a "Book-Entry Confirmation") of a
book-entry transfer of such Shares into the Depositary's account at a Book-Entry
Transfer Facility, as well as this Letter of Transmittal (or a facsimile
hereof), properly completed and duly executed, with any required signature
guarantees and any other documents required by this Letter of Transmittal, must
be received by the Depositary at one of its addresses set forth herein prior to
the Expiration Date. Stockholders whose Share Certificates are not immediately
available, or who cannot deliver their Share Certificates and all other required
documents to the Depositary prior to the Expiration Date, or who cannot complete
the procedure for delivery by book-entry transfer on a timely basis, may tender
their Shares by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedure set forth in Section 3 of
the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made
by or through an Eligible Institution; (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form made available
by the Purchaser (with any required signature guarantees) must be received by
the Depositary prior to the Expiration Date; and (iii) the Share Certificates
(or a Book-Entry Confirmation) representing all tendered Shares, in proper form
for transfer, in each case together with the Letter of Transmittal (or a
facsimile hereof), properly completed and duly executed, with any required
signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or a facsimile thereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space herein is inadequate, the certificate
numbers and/or the number of Shares should be listed on a separate signed
schedule attached hereto.
4. PARTIAL TENDERS. (NOT APPLICABLE TO BOOK-ENTRY-STOCKHOLDERS.) If fewer
than all the Shares evidenced by any Share Certificate submitted are to be
tendered, fill in the number of Shares which are to be tendered in the box
entitled "Number of Shares Tendered." In such cases, new Share Certificates for
the Shares that were evidenced by your old Share Certificates, but were not
tendered by you, will be sent to you, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as soon as practicable after the
purchase of Shares pursuant to the Offer. All Shares represented by Share
Certificates delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificate without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificate or stock power is signed by
a trustee, executor, administrator, attorney-in-fact, officer of a corporation
or another acting in a fiduciary or representative capacity, such person should
so indicate when signing, and proper evidence satisfactory to the Purchasers of
such person's authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment of the purchase price for
Shares is to be made to or certificates for Shares not tendered or purchased are
to be issued in the name of a person other than the registered holder(s).
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the certificate(s).
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
6. STOCK TRANSFER TAXES. Except as provided in this Instruction 6, the
Purchaser will pay any stock transfer taxes with respect to the transfer and
sale of the purchased Shares pursuant to the Offer. If, however, payment of the
purchase price is to be made to, or (in the circumstances permitted hereby and
if applicable) if certificates for Shares not tendered or purchased are to be
registered in the name of, any person other than the registered holder, or if
tendered certificates are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of stock transfer taxes
(whether imposed on the registered holder or such person) payable on account of
the transfer to such person will be deducted from the purchase price if
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
not submitted. Except as provided in this Instruction 6, it will not be
necessary for transfer tax stamps to be affixed to the certificate(s) listed in
this Letter of Transmittal.
<PAGE>
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name of, and/or certificates for Shares not tendered or not accepted for
payment are to be issued or returned to, a person other than the signer of this
Letter of Transmittal, or if a check and/or such certificates are to be mailed
to a person other than the signer of this Letter of Transmittal or to an address
other than that shown in this Letter of Transmittal, the appropriate boxes on
this Letter of Transmittal should be completed.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance may be directed to the Information Agent at the addresses and
telephone number set forth below. Additional copies of the Offer to Purchase,
this Letter of Transmittal and the Notice of Guaranteed Delivery may also be
obtained from the Information Agent or brokers, dealers, commercial banks or
trust companies.
9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by the
Purchaser in whole or in part at any time and from time to time in its sole
discretion. See Section 14 of the Offer to Purchaser.
10. SUBSTITUTE FROM W-9. The tendering stockholder generally is required
to provide the Depositary with a correct Taxpayer Identification Number ("TIN"),
generally the stockholder's social security or federal employer identification
number, on Substitute Form W-9 contained herein. Failure to provide the
information on the form may subject the tendering stockholder to 31% federal
income tax withholding on the payment of the purchase price for Shares. The box
in Part I of the Substitute Form W-9 may be checked if the stockholder has not
been issued a TIN and has applied for a number or intends to apply for a number
in the near future. If the box in Part I is checked and the Depositary is not
provided with a TIN within 60 days, the Depositary will thereafter withhold 31%
of any purchase price payment made for Shares before a TIN is provided to the
Depositary.
IMPORTANT TAX INFORMATION
Under federal income tax law, a tendering stockholder whose tendered shares
are accepted for purchase generally is required by law to provide the Depositary
(as payer) with such stockholder's correct TIN on Substitute Form W-9 contained
herein. If such stockholder is an individual, the TIN is such stockholder's
social security number. If the Depositary is not provided with the correct TIN,
the stockholder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, payments that are made to any stockholder with respect to
Shares pursuant to the Offer may be subject to backup withholding.
Certain stockholders (including, among others, corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements can be
obtained from the Depositary. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments of the purchase price for Shares,
each tendering stockholder generally is required to notify the Depositary of his
or her correct TIN by completing the Substitute Form W-9 contained herein,
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
stockholder is awaiting a TIN), and that (1) such stockholder has not been
notified by the Internal Revenue Service that such stockholder is subject to
backup withholding as a result of a failure to report all interest or dividends,
or (2) the Internal Revenue Service has notified such stockholder that such
stockholder is no longer subject to backup withholding (see Part II of
Substitute From W-9).
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares. If
the Shares are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidance on which number to report.
IMPORTANT: IF A STOCKHOLDER DESIRES TO ACCEPT THE OFFER, THIS LETTER OF
TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER WITH CERTIFICATES OR CONFIRMATION
OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS, OR THE NOTICE OF
GUARANTEED DELIVERY, MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION
DATE.
For additional information, please contact:
ABCDEF
Wall Street Plaza
New York, New York 10005
(212)509-6240(collect)
Banks and Brokers call collect (212)440-9800
Call Toll Free: 1-800-223-2064
<PAGE>
PAYER'S NAME: THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
PART I -- Taxpayer Identification
Number
Please enter your correct number
in the appropriate box. NOTE: If
the account is more
Your Social Security Number
SUBSTITUTE than one name, see the chart on Or
Form W-9 the enclosed form, Guidelines for
Certification of Taxpayer Employer Identification
Identification on Substitute Form Number
W-9, for guidance on which number
to enter.
If you do not have a TIN, see the instructions "How to Get a TIN" and
Department of the Treasury, check the box below.
Internal Revenue Service TIN Applied For / /
PAYER'S REQUEST FOR TAXPAYER PART II -- For Payees Exempt from Backup Withholding (See instructions)
IDENTIFICATION NUMBER
AND CERTIFICATION
PART III CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a
number to be issued to me), and
(2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have
not been notified by the Internal notified me that I am no longer subject to backup withholding.
(3) Please indicate the taxpayer's name associated with the TIN if other than the first name appearing in
the registration.
Certification Instructions: You must cross out Item (2) above if you have been notified by IRS that you are
subject to backup withholding because of underreporting interest on dividends on your tax return. However,
if after notified by IRS that you were subject to backup withholding you received another notification from
IRS that you are no longer subject to backup withholding, do not cross out Item (2) above.
(X)
(Please Print)
Please Sign (X) Signature(s) Date
(Signature(s) of Registered Owner(s) or Authorized Agent) Your signature is both acknowledgment of the
exchange and certification of your taxpayer identification number.)
</TABLE>
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF
ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
NAME.If you are an individual, you must generally enter the name shown on your
social security card. However, if you have changed your last name, for instance,
due to marriage, without informing the Social Security Administration of the
name change, please enter your first name, the last name shown on your social
security card, and your new last name.
<TABLE>
<CAPTION>
- --------------------------------------------------
<S> <C>
GIVE THE NAME AND
FOR THIS TYPE OF EMPLOYER IDENTIFICATION
ACCOUNT: NUMBER OF--
<CAPTION>
- --------------------------------------------------
<S> <C>
1. Individual The individual
2. Two or more The actual owner of the
individuals (joint account or, if combined
account) funds, the first
individual on the
account (1)
3. Custodian account of The minor (2)
a minor (Uniform Gift
to Minors Act)
4. a. The usual The grantor-trustee(1)
revocable savings
trust (grantor is
also trustee)
b. So-called trust The actual owner (1)
account that is not
a legal or valid
trust under state
law
5. Sole proprietorship The owner (3)
<CAPTION>
- --------------------------------------------------
GIVE THE NAME AND
FOR THIS TYPE OF EMPLOYER IDENTIFICATION
ACCOUNT: NUMBER OF--
- --------------------------------------------------
<S> <C>
6. Sole Proprietorship The owner (3)
7. A valid trust, Legal entity (4)
estate, or pension
trust
8. Corporate The corporation
9. Association, club, The organization
religious,
charitable,
educational, or other
tax-exempt
organization
10. Partnership The partnership
11. A broker or The broker or nominee
registered nominee
12. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
- --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use your social security number or
employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless the
legal entity itself is not designated in the account title).
NOTE:If no name is circled when there is more than one name is listed, the
number will be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Section references are to the Internal Revenue Code.
PURPOSE OF FORM.-- A person who is required to file an information return with
the IRS must get your correct TIN to report income paid to you, real estate
transactions, mortgage interest you paid, the acquisition or abandonment of
secured property, cancellation of debt, or contributions you made to an IRA. Use
Form W-9 to give your correct TIN to the requester (the person requesting your
TIN) and, when applicable, (1) to certify the TIN you are giving is correct (or
you are waiting for a number to be issued), (2) to certify you are not subject
to backup withholding, or (3) to claim exemption from backup withholding if you
are an exempt payee. Giving your correct TIN and making the appropriate
certifications will prevent certain payments from being subject to backup
withholding.
NOTE:If a requesteer gives you a form other than a W-9 to request your TIN, you
must use the requester's form if it is substantially similar to Form W-9.
WHAT IS BACKUP WITHHOLDING?-- Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions. This
is called "backup withholding." Payments that could be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee pay, and certain payments from
fishing boat operators. Real estate transactions are not subject to backup
withholding.
If you give the requester your correct TIN, make the proper certifications, and
report all your taxable interest and dividends on your tax return, your payments
will not be subject to backup withholding. Payments you receive will be subject
to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS tells the requester that you furnished an incorrect TIN, or
3. The IRS tells you that you are subject to backup withholding because you
did not report all your interest and dividends on your tax return (for
reportable interest and dividends only), or
4. You do not certify to the requster that you are not subject to backup
withholding under 3 above (for reportable interest and dividend accounts opened
after 1983 only), or
5. You do not certify your TIN.
Certain payees and payments are exempt from backup withholding and information
reporting. See below.
HOW TO GET A TIN:If you do not have a TIN, apply for one immediately. To apply,
get Form SS-5, Application for a Social Security Number Card (for individuals),
from your local office of the Social Security Administration, or Form SS-4,
Application for Employer Identification Number (for businesses and all other
entities), from your local IRS office.
If you do not have a TIN, check the box titled "Applied For" in the space for
the TIN, sign and date the form, and give it to the requester. Generally, you
will then have 60 days to get a TIN and give it to the requester. If the
requester does not receive your TIN within 60 days, backup withholding, if
applicable, will begin and continue until you furnish your TIN.
NOTE:CHECKING THE BOX TITLED "APPLIED FOR" ON THE FORM MEANS THAT YOU HAVE
ALREADY APPLIED FOR A TIN OR THAT YOU INTEND TO APPLY FOR ONE SOON.
As soon as you receive your TIN, complete another Form W-9, include your TIN,
sign and date the form, and give it to the requester.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Individuals (including sole proprietors) are not exempt from backup
withholding. Corporations are exempt from backup withholding for certain
payments, such as interest and dividends.
If you are exempt from backup withholding, you should still complete this form
to avoid possible erroneous backup withholding. Enter your correct TIN in Part
1, write "Exempt" in Part II, and sign and date the form. If you are a
nonresident alien or a foreign entity not subject to backup withholding, give
the requester a completed Form W-8, Certificate of Foreign Status.
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in (1)
through (13) and a person registered under the Investment Advisers Act of 1940
who regularly acts as a broker are exempt. Payments subject to reporting under
sections 6041 and 6041A are generally exempt from backup withholding only if
made to payees described in items (1) through (7), except a corporation that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (2) through (6) are exempt from backup
withholding for barter exchange transactions, patronage dividends, and payments
by certain fishing boat operators. (1) A corporation. (2) An organization exempt
from tax under section 501(a), or an IRA, or a custodial account under section
403(b)(7). (3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities. (5) A foreign government
or any of its political subdivisions, agencies, or instrumentalities. (6) An
international organization or any of its agencies or instrumentalities. (7) A
foreign central bank of issue. (8) A dealer in securities or commodities
required to register in the United States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures Trading
Commission. (10) A real estate investment trust. (11) An entity registered at
all times during the tax year under the Investment Company Act of 1940. (12) A
common trust fund operated by a bank under section 584(a). (13) A financial
institution. (14) A middleman known in the investment community as a nominee or
listed in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List. (15) A trust exempt from tax under section 664
or described in section 4947. Payments of dividends and patronage dividends not
generally subject to backup withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- Payments of patronage dividends is not paid in money.
- Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct TIN to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
<PAGE>
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
Payments that are not subject to information reporting are also not subject to
backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045,
6049, 6050A, and 6050N, and their regulations.
PRIVACY ACT NOTICE.--Section 6109 requires you to give your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, cancellation of debt, or
contributions you made to an IRA. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. You must provide
your TIN whether or not you are required to file a tax return. Payers must
generally withhold 31% of taxable interest, dividend, and certain other payments
to a payee who does not give a TIN to a payer. Certain penalties may also apply.
PENALTIES
(1) FAILURE TO FURNISH TIN.--If you fail to furnish your TIN to a requester, you
are subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
(4) MISUSE OF TINS.--If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE>
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER
TO SELL SHARES. THE OFFER IS BEING MADE SOLELY BY THE OFFER TO PURCHASE DATED
SEPTEMBER 20, 1996 AND THE RELATED LETTER OF TRANSMITTAL, AND ANY AMENDMENTS AND
SUPPLEMENTS THERETO, AND IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM
OR ON BEHALF OF, HOLDERS OF SHARES TENDERING IN ANY JURISDICTION IN WHICH THE
MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE SECURITIES, BLUE SKY OR OTHER LAWS OF SUCH JURISDICTION.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
PROLER INTERNATIONAL CORP.
AT
$7.50 NET PER SHARE
BY
PIC ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
SCHNITZER STEEL INDUSTRIES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, EASTERN TIME, ON FRIDAY, OCTOBER 18, 1996,
UNLESS THE OFFER IS EXTENDED.
PIC Acquisition Corporation, a Delaware corporation (the "Purchaser"), which
is a wholly owned subsidiary of Schnitzer Steel Industries, Inc., an Oregon
corporation ("Schnitzer"), is offering to purchase all of the outstanding shares
of common stock, $1.00 par value (the "Shares"), of Proler International Corp.,
a Delaware corporation (the "Company"), together with the associated rights (the
"Rights") issued pursuant to a Rights Agreement dated as of February 28, 1996
(as amended effective September 15, 1996) between the Company and KeyCorp
Shareholder Services, Inc., at a purchase price of $7.50 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated September 20, 1996 (the "Offer to Purchase") and in the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"). Unless the context
otherwise requires, all references herein to Shares shall include the Rights.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW), THAT
NUMBER OF SHARES THAT WOULD REPRESENT A MAJORITY OF ALL OUTSTANDING SHARES
(DETERMINED ON A FULLY DILUTED BASIS) ON THE DATE OF PURCHASE. CERTAIN OTHER
CONDITIONS TO THE OFFER ARE DESCRIBED IN SECTION 14 OF THE OFFER TO PURCHASE.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
September 15, 1996 (the "Merger Agreement") by and among Schnitzer, the
Purchaser and the Company, pursuant to which, after the expiration of the Offer
and the satisfaction of the conditions contained in the Merger Agreement, the
Purchaser will be merged into the Company (the "Merger") and each outstanding
Share, other than Shares held by the Purchaser, Schnitzer or any other
subsidiary of Schnitzer and Shares held by stockholders who perfect any
available appraisal rights under Delaware law, would be converted into the right
to receive an amount in cash equal to the price per Share paid pursuant to the
Offer.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MAKING OF THE OFFER BY THE PURCHASER, AND HAS DETERMINED THAT
THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF,
THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER.
The term "Expiration Date" means 12:00 Midnight, Eastern time, on Friday,
October 18, 1996, unless and until the Purchaser, in its sole discretion, shall
have extended the period during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when the Purchaser gives oral or written notice to The Bank of New York,
which is acting as the depositary (the "Depositary"), of the Purchaser's
acceptance for payment of such Shares pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payments from the Purchaser and transmitting such payments
to stockholders whose Shares have been accepted for payment. Under no
circumstances will interest on the purchase price for tendered Shares be paid,
regardless of any delay in making the payment after the Expiration Date.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
certificates representing such Shares ("Share Certificates"), or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility,"
and collectively the "Book-Entry Transfer Facilities") pursuant to the
procedures set forth in Section 3 of the Offer to Purchase, (ii) the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees, and (iii) any other documents required by the
Letter of Transmittal.
If by 12:00 Midnight, Eastern time, on Friday, October 18, 1996 (or any date
and time then set as the Expiration Date), any or all of the conditions to the
Offer have not been satisfied or waived, the Purchaser reserves the right (but
shall not be obligated), subject to the applicable rules and regulations of the
Securities and Exchange Commission ("Commission"), to (a) terminate the Offer
and not accept for payment or pay for any Shares and return all tendered Shares
to tendering stockholders, (b) waive all the unsatisfied conditions and accept
for payment and pay for all Shares validly tendered prior to the Expiration Date
and not theretofore withdrawn, (c) subject to the limitations in the Merger
Agreement, extend the Offer and, subject to the right of stockholders to
withdraw Shares until the Expiration Date, retain the Shares that have been
tendered during the period or periods for which the Offer is extended or (d)
subject to the limitations in the Merger Agreement, amend the Offer. See
Section 11 of the Offer to Purchase. Under no circumstances will interest be
paid on the purchase price for tendered Shares, whether or not the Purchaser
exercises its right to extend the Offer. Any extension, amendment or
termination will be followed as promptly as practicable by public announcement
thereof, such announcement to be no later than 9:00 a.m., Eastern time, on the
next business day after the previously scheduled expiration date of the Offer.
Except as described below and in Section 4 of the Offer to Purchase, tenders
of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant
to the Offer may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by the Purchaser pursuant to the Offer,
may also be withdrawn at any time after November 19, 1996. For a withdrawal to
be effective, a written, telegraphic, telex or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses set
forth on the back cover of the Offer to Purchase. Any notice of withdrawal must
specify the name of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the registered holder, if
different from that of the person who tendered such Shares. If Share
Certificates to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the serial
number shown on such certificates must be submitted to the Depositary and the
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution (as defined in Section 3 of the Offer to Purchase) unless such
Shares have been tendered for the account of any Eligible Institution. If
Shares have been tendered pursuant to the procedure for book-entry transfer as
set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares and otherwise comply with such Book-
Entry Transfer Facility's procedures. All questions as to the form and validity
(including the time of receipt) of any notice of withdrawal will be determined
by the Purchaser, in its sole discretion, whose determination will be final and
binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of the Shares. The Offer to Purchase and the related Letter of
Transmittal are being mailed to the record holders of Shares whose names
appear on the Company's stockholder list and will be furnished to brokers,
dealers, commercial banks, trust companies and similar persons whose names,
or the names of whose nominees, appear on the stockholder list or, if
applicable, who are listed as participants in a clearing agency's security
position listing for subsequent transmittal to beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH HOLDERS OF SHARES SHOULD READ BEFORE MAKING ANY DECISION WITH
RESPECT TO THE OFFER.
Questions and requests for copies of the Offer to Purchase and the related
Letter of Transmittal and all other tender offer materials may be directed to
the Information Agent as set forth below, and copies will be furnished promptly
at the Purchaser's expense. The Purchaser will not pay any fees or commissions
to any broker or dealer or any other person (other than the Information Agent)
for soliciting tenders of Shares pursuant to the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
GEORGESON
& COMPANY INC.
Wall Street Plaza
88 Pine Street, 30th Floor
New York , NY 10005
Bankers and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
SEPTEMBER 20, 1996
<PAGE>
NOTICE OF GUARANTEED DELIVERY
TO
TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
PROLER INTERNATIONAL CORP.
As set forth in Section 3 of the Offer to Purchase (as defined below), this
instrument or one substantially equivalent hereto must be used to accept the
Offer (as defined below) if certificates for Shares (as defined below) are not
immediately available or the certificates for Shares and all other required
documents cannot be delivered to the Depositary prior to the Expiration Date (as
defined in Section 1 of the Offer to Purchase) or if the procedure for delivery
by book-entry transfer cannot be completed on a timely basis. This instrument
may be delivered by hand or transmitted by telegram, telex, facsimile
transmission or mail to the Depositary.
THE DEPOSITARY FOR THE OFFER IS:
<TABLE>
<S> <C> <C>
The Bank of New York
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR
OVERNIGHT
COURIER:
(FOR ELIGIBLE INSTITUTIONS
ONLY)
TENDER & EXCHANGE DEPARTMENT (212) 815-6213 TENDER &
EXCHANGE
DEPARTMENT
P.O. BOX 11248 101 BARCLAY
STREET
CHURCH STREET STATION RECEIVE AND
DELIVER WINDOW
NEW YORK, NY 10286-1248 NEW YORK, NY
10286
TO CONFIRM RECEIPT:
(800) 507-9357
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OR TELEX NUMBER OTHER
THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tenders to PIC Acquisition Corporation, a Delaware
corporation (the "Purchaser"), upon the terms and subject to the conditions set
forth in the Offer to Purchase dated September 20, 1996 (the "Offer to
Purchase") and in the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer"), receipt
of which is hereby acknowledged, the number of shares of common stock, $1.00 par
value (the "Shares," which term includes associated stock rights issued pursuant
to a Rights Agreement dated as of February 28, 1996 as amended effective
September 15, 1996), indicated below of Proler International Corp., a Delaware
corporation, pursuant to the guaranteed delivery procedure set forth in Section
3 of the Offer to Purchase.
<TABLE>
<S> <C>
Signature(s) Address(es) --------------------------------
--------------------------------
Name(s) ----------------------------------- -------------------------------------------
Zip Code
Area Code and Tel. No(s).
-------------------
- -------------------------------------------
Please Type or Print
Number of Shares --------------------------
Certificate Nos. (If Available) (Check one if Shares will be tendered by
book-entry transfer)
/ / The Depository Trust Company
- -------------------------------------------
/ / Philadelphia Depository Trust Co.
- -------------------------------------------
Dated -------------------------------------
</TABLE>
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States, guarantees delivery to the Depositary of either the certificates
evidencing all tendered Shares, in proper form for transfer, or delivery of
Shares pursuant to the procedure for book-entry transfer into the Depositary's
account at The Depository Trust Company or the Philadelphia Depository Trust
Company (each a "Book-Entry Transfer Facility"), in either case together with
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees and any other required
documents, all within three New York Stock Exchange trading days after the date
hereof.
<TABLE>
<S> <C>
- -------------------------------------------
Name of Firm -------------------------------------------
Authorized Signature
- -------------------------------------------
Address Name -------------------------------------
Please Type or Print
Title --------------------------------------
- -------------------------------------------
Zip Code
Area Code and Tel. No. --------------------- Dated -------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS FORM--CERTIFICATES ARE TO BE
DELIVERED WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
PROLER INTERNATIONAL CORP.
AT
$7.50 NET PER SHARE
BY
PIC ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
SCHNITZER STEEL INDUSTRIES, INC.
THE OFFER AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME, ON FRIDAY, OCTOBER 18, 1996
UNLESS THE OFFER IS EXTENDED
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We are asking you to contact your clients for whom you hold shares of common
stock, $1.00 par value (the "Shares", which term includes associated stock
rights issued pursuant to a Rights Agreement dated as of February 28, 1996 as
amended effective September 15, 1996 of Proler International Corp., a Delaware
corporation (the "Company"). Please bring to their attention as promptly as
possible the offer being made by PIC Acquisition Corporation (the "Purchaser"),
a Delaware corporation and a wholly owned subsidiary of Schnitzer Steel
Industries, Inc. ("Schnitzer"), to purchase all of the outstanding Shares, at a
purchase price of $7.50 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated September 20,
1996 (the "Offer to Purchase") and in the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer").
Enclosed for your information and for forwarding to your clients, for whose
account you hold Shares registered in your name or in the name of your nominee,
or who hold Shares registered in their own names, are copies of the following
documents:
1. The Offer to Purchase dated September 20, 1996;
2. The Letter of Transmittal to be used in accepting the Offer.
Facsimile copies of the Letter of Transmittal may be used to accept
the Offer;
3. A printed form of letter which may be sent to your clients for whose
account you hold Shares in your name or in the name of your nominee,
with space provided for obtaining such clients' instructions with regard to
the Offer;
4. A Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available or if the
procedure for book-entry transfer cannot be completed on a timely basis;
<PAGE>
5. Letter from Proler International Corp. with attached Schedule 14D-9
(without exhibits);
6. Guidelines of the Internal Revenue Service for certification of
Taxpayer Identification Number on Substitute Form W-9; and
7. Return envelope addressed to The Bank of New York, the Depositary.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT (AS DESCRIBED IN THE OFFER TO PURCHASE) AND THE MAKING OF THE OFFER BY
THE PURCHASER, AND HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE
FAIR TO, AND IN THE BEST INTEREST OF, THE COMPANY'S STOCKHOLDERS AND RECOMMENDS
THAT THE STOCKHOLDERS ACCEPT THE OFFER.
We are asking you to contact your clients for whom you hold Shares
registered in your name (or in the name of your nominee) or who hold Shares
registered in their own names. Please bring the Offer to their attention as
promptly as possible. The Purchaser will not pay any fees or commissions to any
broker or dealer or any other person (other than the Information Agent) for
soliciting tenders of Shares pursuant to the Offer. You will be reimbursed by
the Purchaser for customary mailing expenses incurred by you in forwarding any
of the enclosed materials to your clients. The Purchaser will pay or cause to be
paid any stock transfer taxes payable on the sale and transfer of Shares to it
or its order, except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME, ON FRIDAY, OCTOBER 18, 1996 UNLESS THE
OFFER IS EXTENDED.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal and, if necessary, any other required documents
should be sent to the Depositary and (ii) either certificates representing the
tendered Shares should be delivered to the Depositary, or such Shares should be
tendered by book-entry transfer into the Depositary's account at one of the
Book-Entry Transfer Facilities (as described in the Offer to Purchase), all in
accordance with the instructions set forth in the Letter of Transmittal and the
Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents to the Depositary prior
to the expiration of the Offer or to comply with the book-entry transfer
procedures on a timely basis, a tender may be effected by following the
guaranteed delivery procedures specified in Section 3 of the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed to
the Information Agent at the address and telephone number set forth on the back
cover page of the Offer to Purchase.
Additional copies of the above documents may be obtained from the
Information Agent, at the address and telephone number set forth on the back
cover of the Offer to Purchase.
Very truly yours,
PIC ACQUISITION CORPORATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON THE AGENT OF THE PURCHASER, SCHNITZER, THE COMPANY OR THE
DEPOSITARY, OR AS AGENT OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO, OR
USE ANY DOCUMENT IN CONNECTION WITH, THE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY
MADE IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL AND THE DOCUMENTS
INCLUDED HEREWITH.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
PROLER INTERNATIONAL CORP.
AT
$7.50 NET PER SHARE
BY
PIC ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
SCHNITZER STEEL INDUSTRIES, INC.
THE OFFER AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME, ON FRIDAY, OCTOBER 18, 1996
UNLESS THE OFFER IS EXTENDED.
To our Clients:
Enclosed for your consideration is an Offer to Purchase dated September 20,
1996 (the "Offer to Purchase") and the related Letter of Transmittal relating to
an offer by PIC Acquisition Corporation, a Delaware corporation (the
"Purchaser"), and a wholly owned subsidiary of Schnitzer Steel Industries, Inc.,
to purchase all of the outstanding shares of common stock, $1.00 par value (the
"Shares," which term includes associated stock rights issued pursuant to a
Rights Agreement dated as of February 28, 1996 as amended effective September
15, 1996), of Proler International Corp., a Delaware corporation (the
"Company"), at a purchase price of $7.50 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
and in the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"). We are the holder of
record of Shares held by us for your account. A tender of such Shares can be
made only by us as the holder of record and pursuant to your instructions. The
Letter of Transmittal is furnished to you for your information only and cannot
be used by you to tender Shares held by us for your account.
We request instructions as to whether you wish to have us tender on your
behalf any or all of such Shares held by us for your account, pursuant to the
terms and conditions set forth in the Offer to Purchase.
Your attention is invited to the following:
1. The tender price is $7.50 per Share, net to you in cash.
2. The Offer is being made for all of the outstanding Shares.
3. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the expiration of the
Offer a majority of the outstanding shares of Common Stock of the Company
(on a fully-diluted basis).
<PAGE>
4. The Offer and withdrawal rights will expire at 12:00 Midnight,
Eastern time, on Friday, October 18, 1996 unless the Offer is
extended.
5. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer.
The Offer is not being made to, nor will tenders be accepted from, or on
behalf of holders of Shares residing in any jurisdiction in which the making or
acceptance thereof would not be in compliance with the laws of such
jurisdiction.
If you wish to have us tender any or all of the Shares held by us for your
account, please instruct us by completing, executing and returning to us the
instruction form contained in this letter. If you authorize us to tender your
Shares, all such Shares will be tendered unless otherwise specified in such
instruction form. Your instruction should be forwarded to us in ample time to
permit us to submit a tender on your behalf prior to the expiration of the
Offer.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
PROLER INTERNATIONAL CORP.
The undersigned acknowledge(s) receipt of your letter enclosing the Offer to
Purchase dated September 20, 1996 (the "Offer to Purchase") and the related
Letter of Transmittal pursuant to an offer by PIC Acquisition Corporation, a
Delaware corporation, to purchase all of the outstanding shares of common stock,
$1.00 par value (the "Shares," which term includes associated stock rights
issued pursuant to a Rights Agreement dated as of February 28, 1996 as amended
effective September 15, 1996), of Proler International Corp., a Delaware
corporation.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares which are held by you for the
account of the undersigned), upon the terms and subject to the conditions set
forth in the Offer to Purchase and in the related Letter of Transmittal
furnished to the undersigned.
<TABLE>
<S> <C>
Number of Shares SIGN HERE
to be tendered
- -------------- Shares --------------------------------------------
--------------------------------------------
Signature
--------------------------------------------
Please print name(s)
--------------------------------------------
Address
--------------------------------------------
Area Code and Telephone Number
--------------------------------------------
Tax Identification or Social Security
Number(s)
</TABLE>
<PAGE>
Monday September 16 8:50 AM EDT
SCHNITZER STEEL INDUSTRIES, INC. TO ACQUIRE PROLER INTERNATIONAL CORP. THROUGH
CASH TENDER OFFER
PORTLAND, ORE. --(BUSINESS WIRE)--Sept. 16, 1996--SCHNITZER STEEL INDUSTRIES,
INC and PROLER INTERNATIONAL CORP today announced the signing of a definitive
agreement for the acquisition of Proler by Schnitzer.
The agreement calls for Schnitzer, through a subsidiary, to commence a cash
tender offer for all of the outstanding shares of Proler within five days at a
cash price of $7.50 per share. Upon completion of the tender offer, Proler will
become a wholly owned Schnitzer subsidiary through a cash merger at the same
price per share. Proler has approximately 4.7 million shares outstanding,
making the value of the merger about $35 million.
Schnitzer's tender offer will be conditioned on at least a majority of Proler's
outstanding shares, on a fully diluted basis, being validly tendered and not
withdrawn prior to expiration of the offer. The expiration date of the offer
will be twenty business days following the commencement, unless the offer is
extended. The tender offer and merger are subject to expiration or termination
of the applicable waiting period under the Hart-Scott Rodino Antitrust
Improvement Acts of 1976 and other customary conditions. The tender offer and
merger are not contingent upon financing.
"We are excited about this transaction," stated Robert Philip, president of
Schnitzer. "This merger continues our strategy to grow the company through
selective, additive acquisitions. Proler through its joint ventures, is one of
the nation's largest exporters of ferrous scrap. We believe that this
combination of our talents and operations will benefit not only both of the
companies but the scrap industry as well. The Schnitzer and Proler families
have know each other for many years; we are pleased that the Prolers have
entrusted us to carry on their proud tradition of being a leader in scrap
recycling."
"We have given this transaction thorough and careful consideration," said Herman
Proler, chairman of the board of Proler, "and the Proler board of directors
shares my belief that it is in the best interest of the Company and the
Company's shareholders. The Schnitzers have always been very good operators,
and we have great respect for their team."
Proler is being advised by J.C. Bradford & Co. and Chase Securities, Inc.
Schnitzer operates one of the largest scrap recycling business in the Western
United States. The Company supplies ferrous scrap to Asian and domestic steel
producers through its scrap collection, processing and deep water facilities
located in Oakland, California; Portland, Oregon; and Tacoma, Washington. The
Company also operates collection and processing facilities in Eugene, Bend,
White City and Grants Pass, Oregon; and Sacramento and Fresno, California.
Schnitzer's subsidiary, Cascade Steel Rolling Mills, Inc. (Steel Operations),
<PAGE>
operates the only vertically integrated mini-mill in the Western United States
which can obtain its entire scrap requirements from its own scrap operations.
Cascade's steel mini-mill in McMinnville, Oregon manufactures rebar, merchant
bar, fence posts, special sections and grape stakes. In addition, Cascade
maintains mill depots in Union City and El Monte, California.
Proler is an environmental services company involved in the recovery and
recycling of scrap metal and industrial wastes to produce high-quality,
commercial products. Through joint ventures, Proler exports ferrous scrap to
predominantly foreign markets from scrap collection, processing and deep water
facilities located in Los Angeles, California; Providence, Rhode Island;
Everett, Massachusetts; and Jersey City, New Jersey. Proler's joint ventures
operate additional scraps collection and processing facilities in Colton,
Lynwood, Irwindale, Pomona and Sun Valley, California; Phoenix, Arizona;
Manchester, New Hampshire; Portland, Maine; and Springfield and Worcester,
Massachusetts
CONTACT: Schnitzer Steel Industries, Inc.
Tom Zelenka, 503/323-2821
or
Proler International Corp.
Michael Loy, 713/963-5904
<PAGE>
AMENDMENT NO. 1 TO CREDIT AGREEMENT
This Amendment No. 1 (the "Amendment") is dated as of March 7, 1996 among
Schnitzer Steel Industries, Inc. (the "Borrower"), the undersigned Lenders and
The First National Bank of Chicago, as agent for the Lenders (the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower, the Lenders and the Agent are parties to that
certain Credit Agreement dated as of March 27, 1995 (the "Agreement"); and
WHEREAS, the Borrower the undersigned Lenders and the Agent desire to amend
the Agreement as more fully described hereinafter;
NOW, THEREFORE, in consideration of the premises herein contained, and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Capitalized terms used herein and not otherwise
defined shall have their meanings as attributed to such terms in the Agreement.
2. AMENDMENTS TO THE AGREEMENT. The sentence immediately preceding the
table contained in Section 2.9 of the Agreement is hereby amended to read as
follows:
The adjustment, if any, in the Applicable Margin and Applicable
Facility Fee Rate shall be effective beginning on the date the Agent
receives such Compliance Certificate; provided, however, that the
Applicable Margin which applies to a Fixed Rate Loan or Fixed Rate
Advance shall be the Applicable Margin in effect on the first day of
the Interest Period relating thereto, and there shall be no adjustment
to the rate applicable to any Fixed Rate Loan or Fixed Rate Advance
which is outstanding on the date the Agent receives such Compliance
Certificate during the remainder of the Interest Period applicable
thereto.
3. REPRESENTATIONS AND WARRANTIES. In order to induce the Agent and the
undersigned Lenders to enter into this Amendment the Borrower represents and
warrants that:
3.1. The representations and warranties set forth in Article V of the
Agreement, as hereby amended, are true, correct and complete on the
date hereof as if made on and as of the date hereof and that there
exists no Default or Unmatured Default on the date hereof.
3.2. The execution and delivery by the Borrower of this Amendment have been
duly authorized by proper corporate proceedings of the Borrower and
this Amendment, and the Agreement, as amended by this Amendment,
constitute the valid and binding obligations of the Borrower.
<PAGE>
4. EFFECTIVE DATE. This Amendment shall become effective as of the date
above first written upon receipt by the Agent of counterparts of this Amendment
duly executed by the Borrower and the Required Lenders. Any change to the
interest rate applicable to a Fixed Rate Advance or a Fixed Rate Loan which
results from the adjustment to the Applicable Margin shall be determined in
accordance with the Agreement, as amended hereby, whether or not the Compliance
Certificate giving rise to the adjustment was delivered before or after the
effective date of this Amendment.
5. RATIFICATION. The Agreement, as amended hereby, is hereby ratified,
approved and confirmed in all respects.
6. REFERENCE TO AGREEMENT. From and after the effective date hereof,
each reference in the Agreement to "this Agreement", "hereof", or "hereunder" or
words of like import, and all references to the Agreement in any and all
agreements, instruments, documents, notes, certificates and other writings of
every kind and nature shall be deemed to mean the Agreement, as amended by this
Amendment.
7. COSTS AND EXPENSES. The Borrower agrees to pay all costs, fees, and
out-of-pocket expenses (including attorneys' fees and time charges of attorneys
for the Agent, which attorneys may be employees of the Agent) incurred by the
Agent in connection with the preparation, execution and enforcement of this
Amendment.
8. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
9. CHOICE OF LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS.
IN WITNESS WHEREOF, the Borrower, the undersigned Lenders and the Agent
have executed this Amendment as of the date first above written.
SCHNITZER STEEL INDUSTRIES, INC.
By:
------------------------------------
Title:
---------------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
individually as a Lender and as Agent
By:
------------------------------------
Title:
---------------------------------
2
<PAGE>
THE CHASE MANHATTAN BANK, N.A.
By:
------------------------------------
Title:
--------------------------------
FIRST INTERSTATE BANK OF OREGON, N.A.
By:
------------------------------------
Title:
---------------------------------
SEATTLE -FIRST NATIONAL BANK
By:
------------------------------------
Title:
---------------------------------
<PAGE>
CREDIT AGREEMENT
by and among
SCHNITZER STEEL INDUSTRIES, INC.,
THE LENDERS PARTY HERETO
and
THE FIRST NATIONAL BANK OF CHICAGO,
AS AGENT
dated as of March 27, 1995
<PAGE>
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . .Page 1
ARTICLE II - THE FACILITY. . . . . . . . . . . . . . . . . . . . . . . . Page 12
2.1. The Facility.. . . . . . . . . . . . . . . . . . . . Page 12
2.1.1. Description of Facility . . . . . . . . . . . . . Page 12
2.1.2. Facility Amount . . . . . . . . . . . . . . . . . Page 12
2.1.3. Availability of Facility. . . . . . . . . . . . . Page 12
2.2. Ratable Advances . . . . . . . . . . . . . . . . . . Page 12
2.2.1. Ratable Advances. . . . . . . . . . . . . . . . . Page 12
2.2.2. Ratable Advance Rate Options. . . . . . . . . . . Page 12
2.2.3. Method of Selecting Rate Options and Interest
Periods for New Ratable Advances. . . . . . . . . Page 12
2.2.4. Conversion and Continuation of Outstanding
Ratable Advances. . . . . . . . . . . . . . . . . Page 13
2.3. Competitive Bid Advances.. . . . . . . . . . . . . . Page 13
2.3.1. Competitive Bid Option. . . . . . . . . . . . . . Page 13
2.3.2. Competitive Bid Quote Request.. . . . . . . . . . Page 14
2.3.3. Invitation for Competitive Bid Quotes . . . . . . Page 14
2.3.4. Submission and Contents of Competitive Bid Quotes Page 14
2.3.5. Notice to Borrower. . . . . . . . . . . . . . . . Page 15
2.3.6. Acceptance and Notice by Borrower . . . . . . . . Page 16
2.3.7. Allocation by Agent.. . . . . . . . . . . . . . . Page 16
2.4. Facility Fees. . . . . . . . . . . . . . . . . . . . Page 16
2.5. General Facility Terms.. . . . . . . . . . . . . . . Page 17
2.5.1. Method of Borrowing . . . . . . . . . . . . . . . Page 17
2.5.2. Minimum Amount of Each Advance. . . . . . . . . . Page 17
2.5.3. Payment on Last Day of Interest Period. . . . . . Page 17
2.5.4. Optional Principal Payments. . . . . . . . . . . Page 17
2.5.5. Interest Periods. . . . . . . . . . . . . . . . . Page 17
2.5.6. Rate after Default. . . . . . . . . . . . . . . . Page 17
2.5.7. Interest Payment Dates; Interest Basis. . . . . . Page 17
2.5.8. Method of Payment.. . . . . . . . . . . . . . . . Page 18
2.5.9. Notes; Telephonic Notices.. . . . . . . . . . . . Page 18
2.5.10. Notification of Advances, Interest
Rates and Prepayments. . . . . . . . . . . . . . .Page 18
2.5.11. Non-Receipt of Funds by the Agent. . . . . . . . Page 19
2.5.12. Cancellation. . . . . . . . . . . . . . . . . . Page 19
2.6. Lending Installations. . . . . . . . . . . . . . . . Page 19
2.7. Withholding Tax Exemption. . . . . . . . . . . . . . Page 19
2.8. Extension of Facility Termination Date. . . . . . . Page 20
2.9. Interest Rates.. . . . . . . . . . . . . . . . . . . Page 20
ARTICLE III - CHANGE IN CIRCUMSTANCES. . . . . . . . . . . . . . . . . . Page 21
3.1. Yield Protection . . . . . . . . . . . . . . . . . . Page 21
3.2. Changes in Capital Adequacy Regulations. . . . . . . Page 21
3.3. Availability of Types of Advances. . . . . . . . . . Page 22
3.4. Funding Indemnification. . . . . . . . . . . . . . . Page 22
Page i
<PAGE>
3.5. Lender Statements; Survival of Indemnity . . . . . . Page 22
3.6. Removal of Lenders.. . . . . . . . . . . . . . . . . Page 22
ARTICLE IV - CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . Page 23
4.1. Initial Advance. . . . . . . . . . . . . . . . . . . Page 23
4.2. MMI Acquisition. . . . . . . . . . . . . . . . . . . Page 24
4.3. Each Advance . . . . . . . . . . . . . . . . . . . . Page 24
ARTICLE V - REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . Page 24
5.1. Corporate Existence and Standing . . . . . . . . . . Page 25
5.2. Authorization and Validity . . . . . . . . . . . . . Page 25
5.3. No Conflict; Government Consent. . . . . . . . . . . Page 25
5.4. Financial Statements . . . . . . . . . . . . . . . . Page 25
5.5. Material Adverse Change. . . . . . . . . . . . . . . Page 25
5.6. Taxes. . . . . . . . . . . . . . . . . . . . . . . . Page 25
5.7. Litigation and Contingent Obligations. . . . . . . . Page 26
5.8. Subsidiaries . . . . . . . . . . . . . . . . . . . . Page 26
5.9. ERISA. . . . . . . . . . . . . . . . . . . . . . . . Page 26
5.10. Accuracy of Information. . . . . . . . . . . . . . . Page 26
5.11. Regulation U . . . . . . . . . . . . . . . . . . . . Page 26
5.12. Material Agreements. . . . . . . . . . . . . . . . . Page 26
5.13. Compliance With Laws . . . . . . . . . . . . . . . . Page 26
5.14. Ownership of Properties. . . . . . . . . . . . . . . Page 27
5.15. Investment Company Act . . . . . . . . . . . . . . . Page 27
5.16. Public Utility Holding Company Act . . . . . . . . . Page 27
5.17. Environmental Matters. . . . . . . . . . . . . . . . Page 27
5.18. Post-Retirement Benefits . . . . . . . . . . . . . . Page 27
5.19. Insurance. . . . . . . . . . . . . . . . . . . . . . Page 27
ARTICLE VI - COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . Page 27
6.1. Financial Reporting. . . . . . . . . . . . . . . . . Page 28
6.2. Use of Proceeds. . . . . . . . . . . . . . . . . . . Page 29
6.3. Notice of Default. . . . . . . . . . . . . . . . . . Page 29
6.4. Conduct of Business. . . . . . . . . . . . . . . . . Page 29
6.5. Taxes. . . . . . . . . . . . . . . . . . . . . . . . Page 29
6.6. Insurance. . . . . . . . . . . . . . . . . . . . . . Page 29
6.7. Compliance with Laws . . . . . . . . . . . . . . . . Page 29
6.8. Maintenance of Properties. . . . . . . . . . . . . . Page 29
6.9. Inspection . . . . . . . . . . . . . . . . . . . . . Page 29
6.10. Dividends. . . . . . . . . . . . . . . . . . . . . . Page 30
6.11. Subsidiary Indebtedness. . . . . . . . . . . . . . . Page 30
6.12. Merger . . . . . . . . . . . . . . . . . . . . . . . Page 30
6.13. Sale of Assets . . . . . . . . . . . . . . . . . . . Page 31
6.14. Sale of Accounts . . . . . . . . . . . . . . . . . . Page 31
6.15. Sale and Leaseback . . . . . . . . . . . . . . . . . Page 31
6.16. Investments and Acquisitions . . . . . . . . . . . . Page 31
6.17. Contingent Obligations . . . . . . . . . . . . . . . Page 32
6.18. Liens. . . . . . . . . . . . . . . . . . . . . . . . Page 32
Page ii
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6.19. Affiliates . . . . . . . . . . . . . . . . . . . . . Page 33
6.20. Consolidated Leverage Ratio. . . . . . . . . . . . . Page 33
6.21. Consolidated Net Worth.. . . . . . . . . . . . . . . Page 33
6.22. Consolidated Fixed Charge Coverage Ratio . . . . . . Page 34
ARTICLE VII - DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . Page 34
ARTICLE VIII - ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES. . . . . . Page 36
8.1. Acceleration . . . . . . . . . . . . . . . . . . . . Page 36
8.2. Amendments . . . . . . . . . . . . . . . . . . . . . Page 37
8.3. Preservation of Rights . . . . . . . . . . . . . . . Page 37
ARTICLE IX - GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . Page 37
9.1. Survival of Representations. . . . . . . . . . . . . Page 37
9.2. Governmental Regulation. . . . . . . . . . . . . . . Page 38
9.3. Taxes. . . . . . . . . . . . . . . . . . . . . . . . Page 38
9.4. Headings . . . . . . . . . . . . . . . . . . . . . . Page 38
9.5. Entire Agreement . . . . . . . . . . . . . . . . . . Page 38
9.6. Several Obligations; Benefits of this Agreement. . . Page 38
9.7. Expenses; Indemnification. . . . . . . . . . . . . . Page 38
9.8. Numbers of Documents . . . . . . . . . . . . . . . . Page 38
9.9. Accounting . . . . . . . . . . . . . . . . . . . . . Page 39
9.10. Severability of Provisions . . . . . . . . . . . . . Page 39
9.11. Nonliability of Lenders. . . . . . . . . . . . . . . Page 39
9.12. CHOICE OF LAW. . . . . . . . . . . . . . . . . . . . Page 39
9.13. CONSENT TO JURISDICTION. . . . . . . . . . . . . . . Page 39
9.14. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . Page 39
9.15. Confidentiality. . . . . . . . . . . . . . . . . . . Page 39
9.16. Nonreliance. . . . . . . . . . . . . . . . . . . . . Page 40
ARTICLE X - THE AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . Page 40
10.1. Appointment. . . . . . . . . . . . . . . . . . . . . Page 40
10.2. Powers . . . . . . . . . . . . . . . . . . . . . . . Page 40
10.3. General Immunity . . . . . . . . . . . . . . . . . . Page 40
10.4. No Responsibility for Loans, Recitals, etc.. . . . . Page 40
10.5. Action on Instructions of Lenders. . . . . . . . . . Page 40
10.6. Employment of Agents and Counsel . . . . . . . . . . Page 41
10.7. Reliance on Documents; Counsel . . . . . . . . . . . Page 41
10.8. Agent's Reimbursement and Indemnification. . . . . . Page 41
10.9. Rights as a Lender . . . . . . . . . . . . . . . . . Page 41
10.l0. Lender Credit Decision . . . . . . . . . . . . . . . Page 42
10.11. Successor Agent. . . . . . . . . . . . . . . . . . . Page 42
10.12. Agent's Fee. . . . . . . . . . . . . . . . . . . . . Page 42
ARTICLE XI - SETOFF; RATABLE PAYMENTS. . . . . . . . . . . . . . . . . . Page 42
11.1. Setoff . . . . . . . . . . . . . . . . . . . . . . . Page 42
11.2. Ratable Payments . . . . . . . . . . . . . . . . . . Page 43
Page iii
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ARTICLE XII - BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS. . . . . Page 43
12.1. Successors and Assigns . . . . . . . . . . . . . . . Page 43
12.2. Participations . . . . . . . . . . . . . . . . . . . Page 43
12.2.1 Permitted Participants; Effect. . . . . . . . . . Page 43
12.2.2. Voting Rights. . . . . . . . . . . . . . . . . . Page 44
12.2.3. Benefit of Setoff. . . . . . . . . . . . . . . . Page 44
12.3. Assignments. . . . . . . . . . . . . . . . . . . . . Page 44
12.3.1. Permitted Assignments. . . . . . . . . . . . . . Page 44
12.3.2. Effect; Effective Date . . . . . . . . . . . . . Page 44
12.4. Dissemination of Information . . . . . . . . . . . . Page 45
12.5. Tax Treatment. . . . . . . . . . . . . . . . . . . . Page 45
ARTICLE XIII - NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . Page 45
13.1. Giving Notice. . . . . . . . . . . . . . . . . . . . Page 45
13.2. Change of Address. . . . . . . . . . . . . . . . . . Page 45
ARTICLE XIV - COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . Page 45
EXHIBITS
EXHIBIT "A" - RATABLE NOTE . . . . . . . . . . . . . . . . . . . . . . . Page 48
EXHIBIT "B" - COMPETITIVE BID LOAN NOTE. . . . . . . . . . . . . . . . . Page 50
EXHIBIT "C" - COMPETITIVE BID QUOTE REQUEST. . . . . . . . . . . . . . . Page 52
EXHIBIT "D" - INVITATION FOR COMPETITIVE BID QUOTES. . . . . . . . . . . Page 53
EXHIBIT "E" - COMPETITIVE BID QUOTE. . . . . . . . . . . . . . . . . . . Page 54
EXHIBIT "F" - SUBSIDIARY GUARANTY. . . . . . . . . . . . . . . . . . . . Page 56
EXHIBIT "G" - FORM OF OPINION. . . . . . . . . . . . . . . . . . . . . . Page 63
EXHIBIT "H" - COMPLIANCE CERTIFICATE . . . . . . . . . . . . . . . . . . Page 65
EXHIBIT "I" - ASSIGNMENT AGREEMENT . . . . . . . . . . . . . . . . . . . Page 69
EXHIBIT "J" - LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION . . . . . . Page 78
SCHEDULES
SCHEDULE "1" - SUBSIDIARIES AND OTHER INVESTMENTS. . . . . . . . . . . . Page 79
SCHEDULE "1(a)" - MMI SUBSIDIARIES . . . . . . . . . . . . . . . . . . . Page 80
Part iv
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SCHEDULE "2" - INDEBTEDNESS AND LIENS. . . . . . . . . . . . . . . . . . Page 81
SCHEDULE "3" - LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . Page 82
Page v
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CREDIT AGREEMENT
This Agreement, dated as of March 27, 1995, is among Schnitzer Steel
Industries, Inc., the Lenders and The First National Bank of Chicago, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Absolute Rate" means, with respect to an Absolute Rate Loan made by a
given Lender for the relevant Absolute Rate Interest Period, the rate of
interest per annum (rounded to the nearest 1/100 of 1%) offered by such Lender
and accepted by the Borrower.
"Absolute Rate Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Absolute Rate Loans made by some or all of the
Lenders to the Borrower at the same time and for the same Interest Period.
"Absolute Rate Auction" means a solicitation of Competitive Bid Quotes
setting forth Absolute Rates pursuant to Section 2.3.
"Absolute Rate Interest Period" means, with respect to an Absolute
Rate Advance, a period of not less than 14 and not more than 360 days commencing
on a Business Day selected by the Borrower pursuant to this Agreement. If such
Absolute Rate Interest Period would end on a day which is not a Business Day,
such Absolute Rate Interest Period shall end on the next succeeding Business
Day.
"Absolute Rate Loan" means a Loan which bears interest at the Absolute
Rate.
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Borrower or any of its Subsidiaries (i) acquires any going business or all or
substantially all of the assets of any firm, corporation or division thereof,
whether through purchase of assets, merger or otherwise or (ii) directly or
indirectly acquires (in one transaction or as the most recent transaction in a
series of transactions) at least a majority (in number of votes) of the
securities of a corporation which have ordinary voting power for the election of
directors (other than securities having such power only by reason of the
happening of a contingency) or a majority (by percentage or voting power) of the
outstanding partnership interests of a partnership.
"Advance" means a borrowing hereunder consisting of the aggregate
amount of the several Loans made by some or all of the Lenders to the Borrower
on the same Borrowing Date, of the same Type (or on the same interest basis in
the case of Competitive Bid Advances) and for the same Interest Period and
includes a Competitive Bid Advance.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
A Person shall be deemed to control another Person if the controlling Person
owns 10% or more of any class of voting securities (or other ownership
interests) of
<PAGE>
the controlled Person or possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies of the
controlled Person, whether through ownership of stock, by contract or
otherwise. Notwithstanding the foregoing, this definition of 'Affiliate' does
not include Persons who are parties to the voting trust agreement(s)
pertaining to the Borrower's Class B common stock, except for any such
Persons who are actively engaged in senior management of the Borrower.
"Agent" means The First National Bank of Chicago in its capacity as
agent for the Lenders pursuant to Article X, and not in its individual capacity
as a Lender, and any successor Agent appointed pursuant to Article X.
"Aggregate Commitment" means the aggregate of the Commitments of all
the Lenders, as reduced from time to time pursuant to the terms hereof.
"Agreement" means this credit agreement, as it may be amended or
modified and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time, applied in a manner consistent with
that used in preparing the financial statements referred to in Section 5.4.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum
of Federal Funds Effective Rate for such day plus 1/2% per annum.
"Applicable Facility Fee Rate" is defined in Section 2.9.
"Applicable Margin" is defined in Section 2.9.
"Article" means an article of this Agreement unless another document
is specifically referenced.
"Assessment Rate" means, for any CD Interest Period, the assessment
rate per annum (rounded upwards to the next higher multiple of 1/100 of 1% if
the rate is not such a multiple) payable to the Federal Deposit Insurance
Corporation (or any successor) by a member of the Bank Insurance Fund which is
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.3(e) (or any successor provision) for the insurance of time
deposits at the offices of such institution in the United States, as estimated
by First Chicago on the first day of such Interest Period.
"Authorized Officer" means any of the Chairman, President, Treasurer,
any Vice President or any Assistant Treasurer of the Borrower, acting singly.
"Borrower" means Schnitzer Steel Industries, Inc., an Oregon
corporation, and its successors and assigns.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Business Day" means (i) with respect to any borrowing, payment or
rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday)
on which banks generally are open in Chicago and
Page 2
<PAGE>
New York for the conduct of substantially all of their commercial lending
activities and on which dealings in United States dollars are carried on in
the London interbank market and (ii) for all other purposes, a day (other
than a Saturday or Sunday) on which banks generally are open in Chicago for
the conduct of substantially all of their commercial lending activities.
"Capitalized Lease" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"Cascade" means Cascade Steel Rolling Mills, Inc., an Oregon
corporation.
"CD Interest Period" means, with respect to a Fixed CD Rate Advance, a
period of 30, 60, 90, 180 or 360 days commencing on a Business Day selected by
the Borrower pursuant to this Agreement. If such CD Interest Period would end
on a day which is not a Business Day, such CD Interest Period shall end on the
next succeeding Business Day.
"Change in Control" means the acquisition by any Person, or two or
more Persons acting in concert, of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock
of the Borrower, excluding, however, shares owned or subject to the provisions
of the Schnitzer Steel Industries, Inc. Voting Trust.
"Code" means the Internal Revenue Code of 1986, as amended, reformed
or otherwise modified from time to time.
"Commitment" means, for each Lender, the obligation of such Lender to
make Loans not exceeding the amount set forth opposite its signature below or as
set forth in any Notice of Assignment relating to any assignment that has become
effective pursuant to Section 12.3.2, as such amount may be modified from time
to time pursuant to the terms hereof.
"Competitive Bid Advance" means a borrowing hereunder consisting of
the aggregate amount of the several Competitive Bid Loans made by some or all of
the Lenders to the Borrower at the same time and for the same Interest Period.
"Competitive Bid Borrowing Notice" is defined in Section 2.3.6.
"Competitive Bid Loan" means a Eurodollar Bid Rate Loan or an Absolute
Rate Loan, or both, as the case may be.
"Competitive Bid Margin" means the margin above or below the
applicable Eurodollar Base Rate offered for a Eurodollar Bid Rate Loan,
expressed as a percentage (rounded to the nearest 1/100 of 1%) to be added or
subtracted from such Eurodollar Base Rate.
Page 3
<PAGE>
"Competitive Bid Note" means a promissory note in substantially the
form of Exhibit "B" hereto, with appropriate insertions, duly executed and
delivered to the Agent by the Borrower for the account of a Lender and payable
to the order of such Lender, including any amendment, modification, renewal or
replacement of such promissory note.
"Competitive Bid Quote" means a Competitive Bid Quote substantially in
the form of Exhibit "E" hereto completed and delivered by a Lender to the Agent
in accordance with Section 2.3.4.
"Competitive Bid Quote Request" means a Competitive Bid Quote Request
substantially in the form of Exhibit "C" hereto completed and delivered by the
Borrower to the Agent in accordance with Section 2.3.2.
"Compliance Certificate" means a Compliance Certificate substantially
in the form of Exhibit "H" hereto executed by an Authorized Officer of the
Borrower and delivered to the Agent in accordance with Section 6.1(iii).
"Condemnation" is defined in Section 7.8.
"Consolidated" means a calculation or determination to be made for the
Borrower and its Subsidiaries in accordance with Agreement Accounting
Principles, including principles of consolidation.
"Consolidated Capitalization" means the sum of (i) Consolidated
Funded Indebtedness and (ii) Consolidated Net Worth.
"Consolidated EBITDA" means, for any period, the sum (without
duplication) of (i) Consolidated Net Income for such period, plus (ii) to the
extent any of the following shall have been taken into account in determining
Consolidated Net Income for such period, (A) all income taxes of the Borrower
and its Subsidiaries paid or accrued for such period, Consolidated interest
expense, amortization expense and depreciation expense and (B) other non-cash
items (other than non-cash interest) reducing Consolidated Net Income for such
period other than any non-cash charge constituting an extraordinary item of
loss, less (iii) (A) non-cash items increasing Consolidated Net Income for such
period and (B) all cash payments during such period relating to non-cash charges
that were added back in determining Consolidated EBITDA in any prior period.
"Consolidated Fixed Charge Coverage Ratio" means the ratio of (i)
Consolidated EBITDA plus (ii) Consolidated Rentals to (x) Consolidated Fixed
Charges plus (y) Consolidated Scheduled Principal Payments.
"Consolidated Fixed Charges" means all interest and all amortization
of debt discount and expense on all Indebtedness of the Borrower and its
Subsidiaries and all Consolidated Rentals, determined on a Consolidated basis
for the Borrower and the Subsidiaries.
"Consolidated Funded Indebtedness" means all Indebtedness of the
Borrower or any Subsidiary except Indebtedness as described in clauses (vi) and
(vii) of that definition.
"Consolidated Leverage Ratio" means the ratio of Consolidated Funded
Indebtedness to Consolidated Capitalization.
Page 4
<PAGE>
"Consolidated Net Income" means, for any period, the net income (or
loss) for such period taken as a single accounting period; provided that there
shall be excluded (i) the income (or loss) of any Affiliate of the Borrower or
other Person (other than a Subsidiary of the Borrower) in which any Person
(other than the Borrower or any of its Subsidiaries) has a joint interest,
except to the extent of the amount of dividends or other distributions actually
paid to the Borrower, or any of its Subsidiaries by such Affiliate or other
Person during such period, (ii) the income (or loss) of any Person accrued prior
to the date it becomes a Subsidiary of the Borrower or is merged into or
consolidated with the Borrower or any of its Subsidiaries or that Person's
assets are acquired by the Borrower or any of its Subsidiaries, and (iii) the
income of any Subsidiary of the assets are acquired by the Borrower to the
extent that the declaration or payment of dividends or similar distributions by
that Subsidiary of that income is not at the time permitted by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary.
"Consolidated Net Worth" means at any date the Consolidated common
stockholders' equity of the Borrower and its Subsidiaries.
"Consolidated Rentals" means the aggregate fixed amounts payable by
the Borrower or any Subsidiary determined on a Consolidated basis under any
lease of Property having an original term (including any required renewals or
any renewals at the option of the lessor or lessee) of one year or more but does
not include any amounts payable under Capitalized Leases.
"Consolidated Scheduled Principal Payments" means, for any period, all
regularly-scheduled or mandatory payments of principal on Indebtedness occurring
during the period determined on a Consolidated basis.
"Contingent Obligation" of a Person means any agreement, undertaking
or arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract, or application for a Letter of Credit.
"Conversion/Continuation Notice" is defined in Section 2.2.4.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"Corporate Base Rate" means a rate per annum equal to the corporate
base rate of interest announced by First Chicago from time to time, changing
when and as said corporate base rate changes.
"Default" means an event described in Article VII.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
(i) the environment, (ii) the effect of the environment on human health, (iii)
emissions, discharges or releases of pollutants, contaminants, hazardous
substances or wastes into surface water, ground water or land, or
Page 5
<PAGE>
(iv) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, hazardous
substances or wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of l974, as
amended from time to time, and any rule or regulation issued thereunder.
"Eurodollar Advance" means an Advance which bears interest at a
Eurodollar Rate.
"Eurodollar Auction" means a solicitation of Competitive Bid Quotes
setting forth Competitive Bid Margins pursuant to Section 2.3.
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for
the relevant Eurodollar Interest Period, the applicable London interbank offered
rate for deposits in U.S. dollars appearing on Telerate Page 3750 as of 11:00
a.m. (London time) two Business Days prior to the first day of such Eurodollar
Interest Period, and having a maturity equal to such Period. If no London
interbank offered rate of such maturity then appears on Telerate Page 3750, then
the Base Eurodollar Rate shall be equal to the London interbank offered rate for
deposits in U.S. dollars maturing immediately before or immediately after such
maturity, whichever is higher, as determined by the Agent from Telerate Page
3750. If Telerate Page 3750 is not available, the applicable Base Eurodollar
Rate for the relevant Eurodollar Interest Period shall be the rate determined by
the Agent to be the rate at which deposits in U.S. dollars are offered by First
Chicago to first-class banks in the London interbank market at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Eurodollar Interest Period, in the approximate amount of First Chicago's
relevant portion of the Eurodollar Advance and having a maturity approximately
equal to such Eurodollar Interest Period.
"Eurodollar Bid Rate" means, with respect to a Eurodollar Bid Rate
Loan made by a given Lender for the relevant Eurodollar Interest Period, the sum
of (i) the Eurodollar Base Rate and (ii) the Competitive Bid Margin offered by
such Lender and accepted by the Borrower.
"Eurodollar Bid Rate Advance" means a Competitive Bid Advance which
bears interest at a Eurodollar Bid Rate.
"Eurodollar Bid Rate Loan" means a Loan which bears interest at the
Eurodollar Bid Rate.
"Eurodollar Interest Period" means, with respect to a Eurodollar
Advance, a period of one, two, three, six or twelve months commencing on a
Business Day selected by the Borrower pursuant to this Agreement. Such
Eurodollar Interest Period shall end on (but exclude) the day which corresponds
numerically to such date one, two, three, six or twelve months thereafter,
provided, however, that if there is no such numerically corresponding day in
such next, second, third, sixth or twelfth succeeding month, such Eurodollar
Interest Period shall end on the last Business Day of such next, second, third,
sixth or twelfth succeeding month. If a Eurodollar Interest Period would
otherwise end on a day which is not a Business Day, such Eurodollar Interest
Period shall end on the next succeeding Business Day, provided, however, that if
said next succeeding Business Day falls in a new calendar month, such Eurodollar
Interest Period shall end on the immediately preceding Business Day.
"Eurodollar Loan" means a Loan which bears interest at a Eurodollar
Rate.
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"Eurodollar Ratable Advance" means an Advance which bears interest at
a Eurodollar Rate requested by the Borrower pursuant to Section 2.2.
"Eurodollar Ratable Loan" means a Loan which bears interest at a
Eurodollar Rate requested by the Borrower pursuant to Section 2.2.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Eurodollar Interest Period, the sum of (i) the quotient of (a) the
Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided by
(b) one minus the Reserve Requirement (expressed as a decimal) applicable to
such Eurodollar Interest Period, plus (ii) the Applicable Margin. The Eurodollar
Rate shall be rounded to the next higher multiple of 1/16 of 1% if the rate is
not such a multiple.
"Extension Date" is defined in Section 2.8.
"Extension Request" is defined in Section 2.8.
"Facility Termination Date" means March 27, 2000, or any later date as
may be specified by the Agent as the Facility Termination Date in accordance
with Section 2.8.
"Federal Funds Effective Rate" means, for any day, an interest rate
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"First Chicago" means The First National Bank of Chicago in its
individual capacity, and its successors.
"Fixed CD Base Rate" means, with respect to a Fixed CD Rate Advance
for the relevant CD Interest Period, the rate determined by the Agent to be the
arithmetic average of the prevailing bid rates quoted to the Agent at or before
noon (Chicago time) on the first day of such CD Interest Period by three New
York or Chicago certificate of deposit dealers of recognized standing selected
by the Agent in its sole discretion for the purchase at face value of
certificates of deposit of First Chicago in the approximate amount of First
Chicago's relevant Fixed CD Rate Loan and having a maturity approximately equal
to such CD Interest Period.
"Fixed CD Rate" means, with respect to a Fixed CD Rate Advance for the
relevant CD Interest Period, a rate per annum equal to the sum of (i) the
quotient of (a) the Fixed CD Base Rate applicable to such CD Interest Period,
divided by (b) one minus the Reserve Requirement (expressed as a decimal)
applicable to such CD Interest Period, plus (ii) the Assessment Rate applicable
to such CD Interest Period, plus (iii) the Applicable Margin. The Fixed CD Rate
shall be rounded to the next higher multiple of 1/100 of 1% if the rate is not
such a multiple.
"Fixed CD Rate Advance" means an Advance which bears interest at a
Fixed CD Rate.
"Fixed CD Rate Loan" means a Loan which bears interest at a Fixed CD
Rate.
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"Fixed Rate" means the Fixed CD Rate, the Eurodollar Rate, the
Eurodollar Bid Rate, or the Absolute Rate.
"Fixed Rate Advance" means an Advance which bears interest at a Fixed
Rate.
"Fixed Rate Loan" means a Loan which bears interest at a Fixed Rate.
"Floating Rate" means, for any day, a rate per annum equal to the
Alternate Base Rate for such day.
"Floating Rate Advance" means an Advance which bears interest at the
Floating Rate.
"Floating Rate Loan" means a Loan which bears interest at the Floating
Rate.
"Guarantor" means each of Cascade and MMI.
"Guaranty" means that certain Guaranty in substantially the form of
Exhibit "F" hereto dated as of March 27, 1995 executed by each Guarantor in
favor of the Agent, for the ratable benefit of the Lenders, as it may be amended
or modified and in effect from time to time.
"Indebtedness" of a Person means such Person's (i) obligations for
borrowed money, (ii) obligations representing the deferred purchase price of
Property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade), (iii)
obligations, whether or not assumed, secured by Liens or payable out of the
proceeds or production from property now or hereafter owned or acquired by such
Person, (iv) obligations which are evidenced by notes, acceptances, or other
instruments, (v) Capitalized Lease Obligations, and (vi) net liabilities under
interest rate swap, exchange or cap agreements, and (vii) Contingent
Obligations.
"Interest Period" means a CD Interest Period, a Eurodollar Interest
Period or an Absolute Rate Interest Period.
"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade), deposit account or contribution of capital by such Person to any other
Person or any investment in, or purchase or other acquisition of, the stock,
notes, debentures or other securities of any other Person made by such Person.
"Invitation for Competitive Bid Quotes" means an Invitation for
Competitive Bid Quotes substantially in the form of Exhibit "D" hereto,
completed and delivered by the Agent to the Lenders in accordance with Section
2.3.3.
"Lenders" means the lending institutions listed on the signature pages
of this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the Agent,
any office, branch, subsidiary or affiliate of such Lender or the Agent.
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"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
"Loan" means, with respect to a Lender, such Lender's portion of any
Advance.
"Loan Documents" means this Agreement and the Notes.
"MMI" means Manufacturing Management, Inc., an Oregon corporation.
"MMI Acquisition Agreement" means the Stock Purchase Agreement dated
as of October 17, 1994 by and among the Borrower, MMI and the shareholders of
MMI.
"Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of operations,
or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the
ability of the Borrower to perform its obligations under the Loan Documents, or
(iii) the validity or enforceability of any of the Loan Documents or the rights
or remedies of the Agent or the Lenders thereunder.
"Material Indebtedness" means Indebtedness of the Borrower and its
Subsidiaries in an amount equal to or in excess of $5,000,000 in the aggregate
for the Borrower and the Subsidiaries.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"Notes" means the Ratable Notes and the Competitive Bid Notes.
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower to the Lenders
or to any Lender, the Agent or any indemnified party hereunder arising under the
Loan Documents.
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last day of each February, May, August and
November.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
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"Person" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, trust or other entity or organization, or
any government or political subdivision or any agency, department or
instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code as to which the Borrower or any member of the Controlled Group may
have any liability.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.
"Purchasers" is defined in Section 12.3.1.
"Ratable Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Ratable Loans made by the Lenders to the
Borrower at the same time, of the same Type and for the same Interest Period.
"Ratable Borrowing Notice" is defined in Section 2.2.3.
"Ratable Loan" means a Loan made by a Lender pursuant to Section 2.2
hereof.
"Ratable Note" means a promissory note, in substantially the form of
Exhibit "A" hereto, duly executed by the Borrower and payable to the order of a
Lender in the amount of its Commitment, including any amendment, modification,
renewal or replacement of such promissory note.
"Rate Hedging Obligations" of a Person means any and all obligations
of such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (ii) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within
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30 days of the occurrence of such event, provided, however, that a failure
to meet the minimum funding standard of Section 412 of the Code and of
Section 302 of ERISA shall be a Reportable Event regardless of the issuance
of any such waiver of the notice requirement in accordance with either
Section 4043(a) of ERISA or Section 412(d) of the Code.
"Required Lenders" means Lenders in the aggregate having at least
66 2/3% of the Aggregate Commitment or, if the Aggregate Commitment has been
terminated, Lenders in the aggregate holding at least 66 2/3% of the aggregate
unpaid principal amount of the outstanding Advances.
"Reserve Requirement" means, with respect to a CD Interest Period or a
Eurodollar Interest Period, the maximum aggregate reserve requirement (including
all basic, supplemental, marginal and other reserves) which is imposed under
Regulation D on new non-personal time deposits of $100,000 or more with a
maturity equal to that of such CD Interest Period (in the case of Fixed CD Rate
Advances) or on Eurocurrency liabilities (in the case of Eurodollar Advances).
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"Subsidiary" of a Person means (i) any corporation more than 50% of
the outstanding securities having ordinary voting power of which shall at the
time be owned or controlled, directly or indirectly, by such Person or by one or
more of its Subsidiaries or by such Person and one or more of its Subsidiaries,
or (ii) any partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a
Subsidiary of the Borrower.
"Substantial Portion" means, with respect to the Property of the
Borrower and its Subsidiaries, Property which represents more than 20% of the
consolidated assets of the Borrower and its Subsidiaries shown in the annual
audited consolidated financial statements of the Borrower and its Subsidiaries
most recently delivered to the Lenders prior to the date on which such
determination is made.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a Floating
Rate Advance, Eurodollar Advance or Fixed CD Rate Advance.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested nonforfeitable benefits under all Single Employer Plans
exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one
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or more Wholly-Owned Subsidiaries of such Person, or by such Person and one
or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership,
association, joint venture or similar business organization 100% of the
ownership interests having ordinary voting power of which shall at the time
be so owned or controlled.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
ARTICLE II
THE FACILITY
2.1. THE FACILITY.
2.1.1. DESCRIPTION OF FACILITY. The Lenders grant to the
Borrower a revolving credit facility pursuant to which, and upon the terms and
subject to the conditions herein set out:
(i) each Lender severally agrees to make Ratable Loans to the
Borrower in accordance with Section 2.2; and
(ii) each Lender may, in its sole discretion, make bids to make
Competitive Bid Loans to the Borrower in accordance with Section 2.3.
2.1.2. FACILITY AMOUNT. In no event may the aggregate principal
amount of all outstanding Advances (including both the Ratable Advances and the
Competitive Bid Advances) exceed the Aggregate Commitment. The original
Aggregate Commitment hereunder is $100,000,000.
2.1.3. AVAILABILITY OF FACILITY. Subject to the terms hereof
the facility is available from the date hereof to the Facility Termination
Date. Subject to the terms of this Agreement, the Borrower may borrow, repay
and reborrow at any time prior to the Facility Termination Date.
2.2. RATABLE ADVANCES.
2.2.1. RATABLE ADVANCES. Each Ratable Advance hereunder shall
consist of borrowings made from the several Lenders ratably in proportion to the
amounts of their respective Commitments. The aggregate outstanding amount of
Competitive Bid Advances shall reduce each Lender's Commitment ratably in the
proportion such Lender's Commitment bears to the Aggregate Commitment regardless
of which Lender or Lenders make such Competitive Bid Advances. Ratable Advances
shall be evidenced by the Ratable Notes.
2.2.2. RATABLE ADVANCE RATE OPTIONS. The Ratable Advances may be
Floating Rate Advances, Fixed CD Rate Advances or Eurodollar Ratable Advances,
or a combination thereof, selected by the Borrower in accordance with Section
2.2.3. No Ratable Advance may mature after the Facility Termination Date.
2.2.3. METHOD OF SELECTING RATE OPTIONS AND INTEREST PERIODS FOR
NEW RATABLE ADVANCES. The Borrower shall select the Type and Interest Period
applicable to each Ratable Advance from time to time.
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The Borrower shall give the Agent irrevocable notice (a "Ratable Borrowing
Notice") not later than noon (Chicago time) on the Borrowing Date of each
Floating Rate Advance, one Business Day before the Borrowing Date of each
Fixed CD Rate Advance and three Business Days before the Borrowing Date for
each Eurodollar Ratable Advance. Notwithstanding the foregoing, a Ratable
Borrowing Notice for a Floating Rate Advance may be given not later than 15
minutes after the time which the Borrower is required to reject one or more
bids offered in connection with an Absolute Rate Auction pursuant to Section
2.3.6 and a Ratable Borrowing Notice for a Eurodollar Ratable Advance may be
given not later than 15 minutes after the time the Borrower is required to
reject one or more bids offered in connection with a Eurodollar Auction
pursuant to Section 2.3.6. A Ratable Borrowing Notice shall specify:
(i) the Borrowing Date, which shall be a Business Day, of such
Ratable Advance,
(ii) the aggregate amount of such Ratable Advance,
(iii) the Type selected for such Ratable Advance, and
(iv) in the case of each Fixed Rate Advance, the Interest
Period applicable thereto (which may not end after the
Facility Termination Date).
2.2.4. CONVERSION AND CONTINUATION OF OUTSTANDING RATABLE
ADVANCES. A Ratable Fixed Rate Advance shall be automatically converted into a
Floating Rate Advance on the last day of the Interest Period applicable thereto
unless the Borrower shall have given the Agent a Conversion/Continuation Notice
requesting that, at the end of such Interest Period, such Ratable Fixed Rate
Advance either continue as a Ratable Fixed Rate Advance of such Type for the
same or another Interest Period or be converted into a Ratable Advance of
another Type. The Borrower shall give the Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of a Ratable Advance or
continuation of a Ratable Fixed Rate Advance not later than noon (Chicago time)
at least one Business Day, in the case of a conversion into a Floating Rate
Advance or Fixed CD Rate Advance or a continuation of a Fixed CD Rate Advance,
or three Business Days, in the case of a conversion into or continuation of a
Eurodollar Ratable Advance, prior to the date of the requested conversion or
continuation, specifying:
(i) the requested date which shall be a Business Day, of such
conversion or continuation,
(ii) the aggregate amount and Type of the Ratable Advance which
is to be converted or continued, and
(iii) the amount and Type(s) of Advance(s) into which such
Ratable Advance is to be converted or continued and, in
the case of a conversion into or continuation of a Ratable
Fixed Rate Advance, the duration of the Interest Period
applicable thereto.
2.3. COMPETITIVE BID ADVANCES.
2.3.1. COMPETITIVE BID OPTION. In addition to Ratable Advances
pursuant to Section 2.2, but subject to the terms and conditions of this
Agreement (including, without limitation, the limitation set forth in Section
2.1.2 as to the maximum aggregate principal amount of all outstanding Advances
hereunder), the Borrower may, as set forth in this Section 2.3, request the
Lenders, prior to the Facility
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Termination Date, to make offers to make Competitive Bid Advances to the
Borrower. Each Lender may, but shall have no obligation to, make such offers
and the Borrower may, but shall have no obligation to, accept any such offers
in the manner set forth in this Section 2.3. Competitive Bid Advances shall
be evidenced by the Competitive Bid Notes.
2.3.2. COMPETITIVE BID QUOTE REQUEST. When the Borrower wishes
to request offers to make Competitive Bid Loans under this Section 2.3, it shall
transmit to the Agent by telex or telecopy a Competitive Bid Quote Request so as
to be received no later than (i) 10:00 a.m. (Chicago time) at least four
Business Days prior to the Borrowing Date proposed therein, in the case of a
Eurodollar Auction or (ii) 9:00 a.m. (Chicago time) at least one Business Day
prior to the Borrowing Date proposed therein, in the case of an Absolute Rate
Auction specifying:
(a) the proposed Borrowing Date, which shall be a Business
Day, for the proposed Competitive Bid Advance,
(b) the aggregate principal amount of such Competitive Bid
Advance,
(c) whether the Competitive Bid Quotes requested are to set
forth a Eurodollar Bid Rate or an Absolute Rate, or both, and
(d) the Interest Period applicable thereto (which may not end
after the Facility Termination Date).
The Borrower may request offers to make Competitive Bid Loans for more than one
Interest Period in a single Competitive Bid Quote Request. No Competitive Bid
Quote Request shall be given within 5 Business Days (or such other number of
days as the Borrower and the Agent may agree) of any other Competitive Bid Quote
Request. A Competitive Bid Quote Request that does not conform substantially to
the format of Exhibit "C" hereto shall be rejected, and the Agent shall promptly
notify the Borrower of such rejection by telex or telecopy.
2.3.3. INVITATION FOR COMPETITIVE BID QUOTES. Promptly and in
any event before the close of business on the same Business Day of receipt of a
Competitive Bid Quote Request that is not rejected pursuant to Section 2.3.2,
the Agent shall send to each of the Lenders by telex or telecopy an Invitation
for Competitive Bid Quotes hereto, which shall constitute an invitation by the
Borrower to each Lender to submit Competitive Bid Quotes offering to make the
Competitive Bid Loans to which such Competitive Bid Quote Request relates in
accordance with this Section 2.3.
2.3.4. SUBMISSION AND CONTENTS OF COMPETITIVE BID QUOTES. (i)
Each Lender may, in its sole discretion, submit a Competitive Bid Quote
containing an offer or offers to make Competitive Bid Loans in response to any
Invitation for Competitive Bid Quotes. Each Competitive Bid Quote must comply
with the requirements of this Section 2.3.4 and must be submitted to the Agent
by telex or telecopy at its offices specified in or pursuant to Article XIII not
later than (a) 9:00 a.m. (Chicago time) at least three Business Days prior to
the proposed Borrowing Date, in the case of a Eurodollar Auction or (b) 9:00
a.m. (Chicago time) on the proposed Borrowing Date, in the case of an Absolute
Rate Auction (or, in either case upon reasonable prior notice to the Lenders,
such other time and date as the Borrower and the Agent may agree); PROVIDED that
Competitive Bid Quotes submitted by First Chicago may only be submitted if the
Agent or First Chicago notifies the Borrower of the terms of the offer or offers
contained therein not later than 15 minutes prior to the latest time at which
the relevant Competitive Bid Quotes must be
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submitted by the other Lenders. Subject to Articles IV and VIII, any
Competitive Bid Quote so made may not be revoked by the quoting Lender except
with the written consent of the Agent given on the instructions of the
Borrower.
(ii) Each Competitive Bid Quote shall specify:
(a) the proposed Borrowing Date, which shall be the same as
that set forth in the applicable Invitation for Competitive Bid
Quotes,
(b) the principal amount of the Competitive Bid Loan for which
each such offer is being made, which principal amount (1) may be
greater than, less than or equal to the Commitment of the quoting
Lender, (2) must be at least $5,000,000 and an integral multiple of
$1,000,000, and (3) may not exceed the principal amount of Competitive
Bid Loans for which offers were requested,
(c) in the case of a Eurodollar Auction, the Competitive Bid
Margin offered for each such Competitive Bid Loan,
(d) the minimum amount, if any, of the Competitive Bid Loan
which may be accepted by the Borrower,
(e) in the case of an Absolute Rate Auction, the Absolute Rate
offered for each such Competitive Bid Loan, and
(f) the identity of the quoting Lender.
(iii) The Agent shall reject any Competitive Bid Quote that:
(a) is not substantially in the form of Exhibit "E" hereto or
does not specify all of the information required by this Section
2.3.4(ii),
(b) contains qualifying, conditional or similar language,
other than any such language contained in Exhibit "E" hereto,
(c) proposes terms other than or in addition to those set
forth in the applicable Invitation for Competitive Bid Quotes, or
(d) arrives after the time set forth in Section 2.3.4(i).
If any Competitive Bid Quote shall be rejected pursuant to this Section
2.3.4(iii), then the Agent shall notify the relevant Lender of such rejection as
soon as practical.
2.3.5. NOTICE TO BORROWER. The Agent shall promptly notify the
Borrower of the terms (i) of any Competitive Bid Quote submitted by a Lender
that is in accordance with Section 2.3.4 and (ii) of any Competitive Bid Quote
that amends, modifies or is otherwise inconsistent with a previous Competitive
Bid Quote submitted by such Lender with respect to the same Competitive Bid
Quote Request. Any such subsequent Competitive Bid Quote shall be disregarded
by the Agent unless such subsequent Competitive Bid Quote specifically states
that it is submitted solely to correct a manifest error in such former
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Competitive Bid Quote. The Agent's notice to the Borrower shall specify the
aggregate principal amount of Competitive Bid Loans for which offers have been
received for each Interest Period specified in the related Competitive Bid Quote
Request and the respective principal amounts and Eurodollar Bid Rates or
Absolute Rates, as the case may be, so offered.
2.3.6. ACCEPTANCE AND NOTICE BY BORROWER. Not later than (i)
10:00 a.m. (Chicago time) at least three Business Days prior to the proposed
Borrowing Date, in the case of a Eurodollar Auction or (ii) 10:00 a.m. (Chicago
time) on the proposed Borrowing Date, in the case of an Absolute Rate Auction
(or, in either case upon reasonable prior notice to the Lenders, such other time
and date as the Borrower and the Agent may agree), the Borrower shall notify the
Agent of its acceptance or rejection of the offers so notified to it pursuant to
Section 2.3.5; PROVIDED, HOWEVER, that the failure by the Borrower to give such
notice to the Agent shall be deemed to be a rejection of all such offers. In
the case of acceptance, such notice (a "Competitive Bid Borrowing Notice") shall
specify the aggregate principal amount of offers for each Interest Period that
are accepted. The Borrower may accept any Competitive Bid Quote in whole or in
part (subject to the terms of Section 2.3.4(ii)(d)); PROVIDED that:
(a) the aggregate principal amount of each Competitive Bid
Advance may not exceed the applicable amount set forth in the related
Competitive Bid Quote Request,
(b) acceptance of offers may only be made on the basis of
ascending Eurodollar Bid Rates or Absolute Rates, as the case may be,
and
(c) the Borrower may not accept any offer that is described in
Section 2.3.4(iii) or that otherwise fails to comply with the
requirements of this Agreement.
2.3.7. ALLOCATION BY AGENT. If offers are made by two or more
Lenders with the same Eurodollar Bid Rates or Absolute Rates, as the case may
be, for a greater aggregate principal amount than the amount in respect of which
offers are accepted for the related Interest Period, the principal amount of
Competitive Bid Loans in respect of which such offers are accepted shall be
allocated by the Agent among such Lenders as nearly as possible (in such
multiples, not greater than $1,000,000, as the Agent may deem appropriate) in
proportion to the aggregate principal amount of such offers. Notwithstanding
the foregoing, no Lender shall be allocated a portion of any Competitive Bid
Advance which is less than the minimum amount which such Lender has indicated
that it is willing to accept. If a Lender's bid is rejected by operation of the
immediately preceding sentence, the amount of such Competitive Bid Loan shall be
reallocated to the next ascending bid, if any, pursuant to Section 2.3.6. The
Agent shall endeavor, but shall not be required to, notify a Lender that its bid
is rejected because of this minimum amount and give the Lender the opportunity
to waive the required minimum amount. Allocations by the Agent of the amounts
of Competitive Bid Loans shall be conclusive in the absence of manifest error.
The Agent shall promptly, but in any event on the same Business Day, notify each
Lender of its receipt of a Competitive Bid Borrowing Notice and the aggregate
principal amount of such Competitive Bid Advance allocated to each participating
Lender.
2.4. FACILITY FEES.
The Borrower hereby agrees to pay to the Agent for the account of each
Lender a facility fee at the Applicable Facility Fee Rate per annum on such
Lender's Commitment (whether used or unused) for the period from March 27, 1995
to and including the Facility Termination Date (or such earlier date on which
the Aggregate Commitment shall terminate or be cancelled), payable in arrears on
each Payment
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Date hereafter and on the Facility Termination Date (or such earlier date on
which the Aggregate Commitment shall terminate or be cancelled) for any
period then ending for which such fee shall not have been theretofore
paid.
2.5. GENERAL FACILITY TERMS.
2.5.1. METHOD OF BORROWING. Not later than 12:00 p.m. (Chicago
time) on each Borrowing Date, each Lender shall make available its Loan or Loans
in funds immediately available in Chicago, to the Agent at its address specified
pursuant to Article XIII. The Agent shall deposit the funds so received from
the Lenders in the Borrower's account at the Agent's main office in Chicago.
Notwithstanding the foregoing provisions of this Section 2.5.1, to the extent
that a Loan made by a Lender matures on the Borrowing Date of a requested Loan,
such Lender shall apply the proceeds of the Loan it is then making to the
repayment of principal of the maturing Loan.
2.5.2. MINIMUM AMOUNT OF EACH ADVANCE. Each Advance shall be in
the minimum amount of $5,000,000 (and in integral multiples of $1,000,000 if in
excess thereof); PROVIDED, HOWEVER, that any Floating Rate Advance may be in the
aggregate amount of the unused Aggregate Commitment.
2.5.3. PAYMENT ON LAST DAY OF INTEREST PERIOD. Each Advance
shall be paid in full by the Borrower on the last day of the Interest Period
applicable thereto or, in the case of a Ratable Advance, converted or continued
as a Ratable Advance pursuant to Section 2.2.4.
2.5.4. OPTIONAL PRINCIPAL PAYMENTS. The Borrower may from time
to time pay all outstanding Floating Rate Advances, or, in a minimum aggregate
amount of $5,000,000 (and in multiples of $1,000,000 if in excess thereof), any
portion of the outstanding Floating Rate Advances upon one Business Day's prior
notice to the Agent. The Borrower may from time to time pay all of a Ratable
Fixed Rate Advance, or, in a minimum aggregate amount of $5,000,000 (and in
multiples of $1,000,000 if in excess thereof), any portion thereof upon five
Business Days' prior notice to the Agent, subject to payment of the
indemnification amounts required pursuant to Section 3.4. A Competitive Bid
Advance may not be paid prior to the last day of the applicable Interest Period.
2.5.5. INTEREST PERIODS. Subject to the provisions of Section
2.5.6, each Advance shall bear interest from and including the first day of the
Interest Period applicable thereto to (but not including) the last day of such
Interest Period at the interest rate determined as applicable to such Advance.
The Borrower shall not request a Fixed Rate Advance if, after giving effect to
the requested Fixed Rate Advance, more than 15 separate Fixed Rate Advances
would be outstanding.
2.5.6. RATE AFTER DEFAULT. During the continuance of any
Default, each Floating Rate Advance shall bear interest until paid in full at a
rate per annum equal to the Floating Rate plus 2% per annum. During the
continuance of a Default, each Fixed Rate Advance shall bear interest for the
remainder of the applicable Interest Period, at the rate otherwise applicable to
such Interest Period plus 2% per annum.
2.5.7. INTEREST PAYMENT DATES; INTEREST BASIS. Interest
accrued on each Fixed Rate Advance shall be payable on the last day of its
applicable Interest Period and on any date on which such Fixed Rate Advance
is prepaid, whether due to acceleration or otherwise. Interest accrued on
each Fixed Rate Advance having an Interest Period longer than three months
shall also be payable on the last day of each three-month interval during
such Interest Period. Interest on Fixed Rate Advances and all fees referred
to in Sections 2.4 and 10.12 shall be calculated for the actual number of
days elapsed on the basis of a
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year consisting of 360 days. Interest on Floating Rate Advances shall be
payable on each Payment Date hereafter and on the Facility Termination Date and
shall be calculated for the actual number of days elapsed on the basis of a year
consisting of 365, or, when appropriate, 366 days. Interest shall be payable
for the day an Advance is made but not for the day of any payment on the amount
paid if payment is received prior to 2:00 p.m.(Chicago time) at the place of
payment. If any payment of principal of or interest on an Advance shall become
due on a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and, in the case of a principal payment, such extension
of time shall be included in computing interest in connection with such payment.
2.5.8. METHOD OF PAYMENT. Except as specifically provided in
this Agreement and in the following sentence, all payments of principal,
interest, and fees hereunder shall be made in immediately available funds to the
Agent at the Agent's address specified pursuant to Article XIII or at any other
Lending Installation of the Agent within the United States specified in writing
by the Agent to the Borrower (at least one Business Day prior to the applicable
due date) by 2:00 p.m. (Chicago time) on the date when due and shall be applied
(i) first, ratably among the Lenders with respect to any principal and interest
due in connection with Ratable Advances, (ii) second, after all amounts
described in clause (i) have been satisfied, ratably among those Lenders for
whom any payment of principal and interest is due in connection with any
Competitive Bid Advances and (iii) third, after all amounts described in clauses
(i) and (ii) have been satisfied, ratably to any other Obligations then due.
Each payment delivered to the Agent for the account of any Lender shall be
delivered by the Agent to such Lender in the same type of funds which the Agent
received at such Lender's address specified pursuant to Article XIII or at any
Lending Installation specified in a notice received by the Agent from such
Lender. If such payment is received by the Agent by 2:00 p.m. (Chicago time)
such delivery to the Lenders shall be made on the same day and if received
thereafter shall be made on the next succeeding Business Day. The Agent is
hereby authorized to charge the account of the Borrower for each payment of
principal and interest as it becomes due hereunder.
2.5.9. NOTES; TELEPHONIC NOTICES. Each Lender is hereby
authorized to record on the schedule attached to each of its Notes, or otherwise
record in accordance with its usual practice, the date and amount of each of its
Loans of the type evidenced by such Note; PROVIDED, HOWEVER, that any failure to
so record shall not affect the Borrower's obligations under any Note. The
Borrower hereby authorizes the Lenders and the Agent to extend Advances, effect
selections of the Types of Advances and submit Competitive Bid Quotes based on
telephonic notices made by any person or persons the Agent or any Lender in good
faith believes to be an Authorized Officer or an officer, employee or agent of
the Borrower designated by an Authorized Officer. The Borrower agrees to
deliver promptly to the Agent a written confirmation of each telephonic notice
signed by an Authorized Officer. If the written confirmation differs in any
material respect from the action taken by the Agent and the Lenders, the records
of the Agent and the Lenders shall govern absent manifest error.
2.5.10. NOTIFICATION OF ADVANCES, INTEREST RATES AND PREPAYMENTS. The
Agent will notify each Lender of the contents of each borrowing notice and
payment notice received by it hereunder promptly and in any event before the
close of business on the same Business Day of receipt thereof (or, in the case
of borrowing notices with respect to Floating Rate Advances, within one hour of
receipt thereof). The Agent will notify each Lender of the interest rate
applicable to each Fixed Rate Advance promptly upon determination of such
interest rate and will give each Lender prompt notice of each change in the
Corporate Base Rate.
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2.5.11. NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Borrower or a
Lender, as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Lenders, that it does not
intend to make such payment, the Agent may assume that such payment has been
made. The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption.
If such Lender or the Borrower, as the case may be, has not in fact made such
payment to the Agent, the recipient of such payment shall, on demand by the
Agent, repay to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to (x) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day or (y) in the case of payment by the
Borrower, the interest rate applicable to the relevant Loan.
2.5.12. CANCELLATION. The Borrower may at any time after the date
hereof cancel the Aggregate Commitment in whole, or in a minimum aggregate
amount of $5,000,000 (and in integral multiples of $1,000,000), upon at least 5
days' prior written notice to the Agent, which notice shall specify the amount
of such reduction; PROVIDED, HOWEVER, no such notice of cancellation shall be
effective to the extent that it would reduce the Aggregate Commitment to an
amount which would be less than the outstanding principal amount of Loans at the
time such cancellation is to take effect. Any partial reduction of the
Aggregate Commitment shall be allocated among the Lenders ratably based upon
their Commitments. Any notice of cancellation given pursuant to this Section
shall be irrevocable and shall specify the date upon which such cancellation is
to take effect.
2.6. LENDING INSTALLATIONS. Each Lender may book its Loans at
any Lending Installation selected by such Lender and may change its Lending
Installation from time to time. Each Lender will notify the Agent and the
Borrower on or prior to the date of this Agreement of the Lending Installation
which it intends to utilize for each type of Loan hereunder. Each Lender may,
by written or telex notice to the Agent and the Borrower, change the Lending
Installation through which Loans will be made by it and for whose account Loan
payments are to be made.
2.7. WITHHOLDING TAX EXEMPTION. At least five Business Days
prior to the first date on which interest or fees are payable hereunder for
the account of any Lender, each Lender that is not incorporated under the
laws of the United States of America, or a state thereof, agrees that it will
deliver to each of the Borrower and the Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, certifying in
either case that such Lender is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United States
federal income taxes. Each Lender which so delivers a Form 1001 or 4224
further undertakes to deliver to each of the Borrower and the Agent two
additional copies of such form (or a successor form) on or before the date
that such form expires (currently, three successive calendar years for Form
1001 and one calendar year for Form 4224) or becomes obsolete or after the
occurrence of any event requiring a change in the most recent forms so
delivered by it, and such amendments thereto or extensions or renewals
thereof as may be reasonably requested by the Borrower or the Agent, in each
case certifying that such Lender is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United States
federal income taxes, unless an event (including without limitation any
change in treaty, law or regulation) has occurred prior to the date on which
any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender advises the
Borrower and the Agent that it
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is not capable of receiving payments without any deduction or withholding of
United States federal income tax.
2.8. EXTENSION OF FACILITY TERMINATION DATE. The Borrower may
request an extension of the Facility Termination Date by submitting a request
for an extension to the Agent (an "Extension Request") not more frequently than
once during any 365 day period. The Extension Request must specify the new
Facility Termination Date requested by the Borrower and the date (which must be
at least 30 days after the Extension Request is delivered to the Agent) as of
which the Lenders must respond to the Extension Request (the "Extension Date").
Promptly upon receipt of an Extension Request, the Agent shall notify each
Lender of the contents thereof and shall request each Lender to approve the
Extension Request. Each Lender approving the Extension Request shall deliver
its written consent no later than the Extension Date. If the consent of each of
the Lenders is received by the Agent, the Facility Termination Date specified in
the Extension Request shall become effective on the Extension Date and the Agent
shall promptly notify the Borrower and each Lender of the new Facility
Termination Date.
2.9. INTEREST RATES. Each Floating Rate Advance shall bear
interest on the outstanding principal amount thereof, for each day from and
including the date such Advance is made or is converted from a Fixed Rate
Advance into a Floating Rate Advance pursuant to Section 2.2.4 to but excluding
the date it becomes due or is converted into a Fixed Rate Advance pursuant to
Section 2.2.4 hereof, at a rate per annum equal to the Floating Rate for such
day. Changes in the rate of interest on that portion of any Advance maintained
as a Floating Rate Advance will take effect simultaneously with each change in
the Alternate Base Rate. Each Fixed Rate Advance shall bear interest from and
including the first day of the Interest Period applicable thereto to (but not
including) the last day of such Interest Period at the interest rate determined
as applicable to such Fixed Rate Advance. No Interest Period may end after the
Facility Termination Date. The Applicable Margin for Advances and the
Applicable Facility Fee Rate shall be based on the Consolidated Leverage Ratio
in accordance with the table below. The Consolidated Leverage Ratio shall be
determined from the Compliance Certificate delivered by the Borrower pursuant to
Section 6.1(iii). The adjustment, if any, in the Applicable Margin and
Applicable Facility Fee Rate shall be effective beginning on the date the Agent
receives such Compliance Certificate.
Consolidated Applicable Applicable Applicable
Leverage Facility Eurodollar CD Rate
Ratio Fee Rate Advance Margin Advance Margin
- ------------------------------------------------------------------------------
(i) Less than .25 to 1.0 .125% .275% .40%
(ii) Greater than or equal
to .25 to 1.0 .150% .325% .45%
but less than
.35 to 1.0
(iii) Greater than or equal
to .35 to 1.0 .175% .375% .50%
Until the Compliance Certificate for the first quarter ending after the date
hereof has been delivered, the Applicable Margin and Applicable Facility Fee
Rate set forth in category (ii) above shall apply.
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ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. YIELD PROTECTION. If any change after the date of this
Agreement in any law or any governmental or quasi-governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law), or any
interpretation thereof, or the compliance of any Lender therewith,
(i) subjects any Lender or any applicable Lending Installation to any
tax, duty, charge or withholding on or from payments due from the
Borrower (excluding federal taxation of the overall net income of
any Lender or applicable Lending Installation), or changes the
basis of taxation of payments to any Lender in respect of its
Loans or other amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit
extended by, any Lender or any applicable Lending Installation
(other than reserves and assessments taken into account in
determining the interest rate applicable to Fixed Rate Advances),
or
(iii) imposes any other condition the result of which is to
increase the cost to any Lender or any applicable Lending
Installation of making, funding or maintaining loans or
reduces any amount receivable by any Lender or any
applicable Lending Installation in connection with loans,
or requires any Lender or any applicable Lending
Installation to make any payment calculated by reference
to the amount of loans held or interest received by it, by
an amount deemed material by such Lender,
then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an amount
received which such Lender determines is attributable to making, funding and
maintaining its Loans and its Commitment. Notwithstanding the foregoing, this
section will not impose any payment obligations upon Borrower if the increased
expense incurred or reduction in amount received by a particular Lender results
not from the general application of any law, governmental or quasi-governmental
rule, regulation, policy, guideline or directive to financial institutions, but
from requirements or directives imposed by a governmental or quasi-governmental
body only upon the Lender.
3.2. CHANGES IN CAPITAL ADEQUACY REGULATIONS. If a Lender
determines the amount of capital required or expected to be maintained by such
Lender, any Lending Installation of such Lender or any corporation controlling
such Lender is increased as a result of a Change, then, within 15 days of demand
by such Lender, the Borrower shall pay such Lender the amount necessary to
compensate for any shortfall in the rate of return on the portion of such
increased capital which such Lender determines is attributable to this
Agreement, its Loans or its obligation to make Loans hereunder (after taking
into account such Lender's policies as to capital adequacy). "Change" means (i)
any change after the date of this Agreement in the Risk-Based Capital Guidelines
or (ii) any adoption of or change in any other law, governmental or
quasi-governmental rule, regulation, policy, guideline, interpretation, or
directive (whether or not having
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the force of law) after the date of this Agreement which affects the amount
of capital required or expected to be maintained by any Lender or any Lending
Installation or any corporation controlling any Lender. "Risk-Based Capital
Guidelines" means (i) the risk-based capital guidelines in effect in the
United States on the date of this Agreement, including transition rules, and
(ii) the corresponding capital regulations promulgated by regulatory
authorities outside the United States implementing the July 1988 report of
the Basle Committee on Banking Regulation and Supervisory Practices Entitled
"International Convergence of Capital Measurements and Capital Standards,"
including transition rules, and any amendments to such regulations adopted
prior to the date of this Agreement.
3.3. AVAILABILITY OF TYPES OF ADVANCES. If any Lender
determines that maintenance of its Eurodollar Loans at a suitable Lending
Installation would violate any applicable law, rule, regulation, or directive,
whether or not having the force of law, or if the Required Lenders determine
that deposits of a type and maturity appropriate to match fund Fixed Rate
Advances are not available then the Agent shall suspend the availability of the
affected Type of Advance and require any Fixed Rate Advances of the affected
Type to be repaid.
3.4. FUNDING INDEMNIFICATION. If any payment of a Fixed Rate
Advance occurs on a date which is not the last day of the applicable Interest
Period, whether because of acceleration, prepayment or otherwise, or a Fixed
Rate Advance is not made on the date specified by the Borrower for any reason
other than default by the Lenders, the Borrower will indemnify each Lender for
any loss or cost incurred by it resulting therefrom, including, without
limitation, any loss or cost in liquidating or employing deposits acquired to
fund or maintain the Fixed Rate Advance.
3.5. LENDER STATEMENTS; SURVIVAL OF INDEMNITY. To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its Fixed Rate Loans to reduce any liability of the
Borrower to such Lender under Sections 3.1 and 3.2 or to avoid the
unavailability of a Type of Advance under Section 3.3, so long as such
designation is not disadvantageous to such Lender. Each Lender shall deliver a
written statement of such Lender as to the amount due, if any, under Sections
3.1, 3.2 or 3.4. Such written statement shall set forth in reasonable detail
the calculations upon which such Lender determined such amount and shall be
final, conclusive and binding on the Borrower in the absence of manifest error.
Determination of amounts payable under such Sections in connection with a Fixed
Rate Loan shall be calculated as though each Lender funded its Fixed Rate Loan
through the purchase of a deposit of the type and maturity corresponding to the
deposit used as a reference in determining the Fixed Rate applicable to such
Loan, whether in fact that is the case or not. Unless otherwise provided
herein, the amount specified in the written statement shall be payable on demand
after receipt by the Borrower of the written statement. The obligations of the
Borrower under Sections 3.1, 3.2 and 3.4 shall survive payment of the
Obligations and termination of this Agreement.
3.6. REMOVAL OF LENDERS. If (i) the obligation of any Lender
to make Eurodollar Loans has been suspended pursuant to Section 3.2 or (ii) any
Lender has demanded compensation under Section 3.1, the Borrower may elect to
terminate this Agreement as to such Lender, provided that (i) the Borrower
notifies such Lender through the Agent of such election at least three Business
Days before any date fixed for a borrowing, (ii) the Borrower repays all of such
Lender's outstanding Obligations at the end of the respective Interest Periods
applicable thereto and (iii) no Default or Unmatured Default exists. Upon
receipt by the Agent of such notice, the Commitment of such Lender shall
terminate.
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ARTICLE IV
CONDITIONS PRECEDENT
4.1. INITIAL ADVANCE. The Lenders shall not be required to
make the initial Advance hereunder unless the Borrower has furnished to the
Agent with sufficient copies for the Lenders:
(i) Copies of the articles of incorporation of the Borrower and of
Cascade, together with all amendments, and a certificate of good
standing, both certified by the appropriate governmental officer
in its jurisdiction of incorporation.
(ii) Copies, certified by the Secretary or Assistant Secretary of the
Borrower and of Cascade, of its by-laws and of its Board of
Directors' resolutions (and resolutions of other bodies, if any
are deemed necessary by counsel for any Lender) authorizing the
execution of the Loan Documents (in the case of the Borrower) or
the Guaranty (in the case of Cascade).
(iii) An incumbency certificate, executed by the Secretary or
Assistant Secretary of the Borrower, which shall identify
by name and title and bear the signature of the officers
of the Borrower authorized to sign the Loan Documents and
to make borrowings hereunder, upon which certificate the
Agent and the Lenders shall be entitled to rely until
informed of any change in writing by the Borrower.
(iv) An incumbency certificate, executed by the Secretary of
Assistant Secretary of Cascade, which shall identify by name
and title and bear the signature of the officers of Cascade
authorized to sign the Guaranty.
(v) A certificate, signed by the chief financial officer of the
Borrower, stating that on the initial Borrowing Date no Default
or Unmatured Default has occurred and is continuing.
(vi) A written opinion of the Borrower's counsel and Cascade's
counsel, addressed to the Lenders in substantially the form of
Exhibit "G" hereto.
(vii) Ratable Notes and Competitive Bid Notes payable to the
order of each of the Lenders.
(viii) Written money transfer instructions, in substantially the
form of Exhibit "J" hereto, addressed to the Agent and
signed by an Authorized Officer, together with such other
related money transfer authorizations as the Agent may
have reasonably requested.
(ix) A Guaranty executed by Cascade.
(x) A copy of the Property Transaction Due Diligence Report prepared
for the Borrower by CH2M Hill and dated November 30, 1994.
(xi) Such other documents as any Lender or its counsel may have
reasonably requested.
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4.2. MMI ACQUISITION. Contemporaneously with the consummation of the
MMI Acquisition, the Borrower will furnish to the Agent:
(i) Copies of the articles of incorporation of MMI, together with all
amendments, and a certificate of good standing, both certified by
the appropriate governmental officer in its jurisdiction of
incorporation.
(ii) Copies, certified by the Secretary or Assistant Secretary of MMI,
of its by-laws and of its Board of Directors' resolutions (and
resolutions of other bodies, if any are deemed necessary by
counsel for any Lender) authorizing the execution of the
Guaranty.
(iii) An incumbency certificate, executed by the Secretary of
Assistant Secretary of MMI, which shall identify by name
and title and bear the signature of the officers of MMI
authorized to sign the Guaranty.
(iv) A written opinion of MMI's counsel, addressed to the Lenders in
substantially the form of Exhibit "G" hereto.
(v) A Guaranty executed by MMI.
4.3. EACH ADVANCE. The Lenders shall not be required to make
any Advance (other than in connection with the continuation or conversion of a
Ratable Advance that, after giving effect thereto and to the application of the
proceeds thereof, does not increase the aggregate amount of outstanding Ratable
Advances), unless on the applicable Borrowing Date:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in Article V are
true and correct in all material respects as of such Borrowing
Date except to the extent any such representation or warranty is
stated to relate solely to an earlier date, in which case such
representation or warranty shall be true and correct in all
material respects on and as of such earlier date.
(iii) All legal matters incident to the making of such Advance
shall be reasonably satisfactory to the Lenders and their
counsel.
Each Borrowing Notice with respect to each such Advance shall
constitute a representation and warranty by the Borrower that the conditions
contained in Sections 4.3 (i) and (ii) have been satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
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5.1. CORPORATE EXISTENCE AND STANDING. Each of the Borrower
and its Subsidiaries is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted.
5.2. AUTHORIZATION AND VALIDITY. The Borrower has the
corporate power and authority and legal right to execute and deliver the Loan
Documents and to perform its obligations thereunder. The execution and delivery
by the Borrower of the Loan Documents and the performance of its obligations
thereunder have been duly authorized by proper corporate proceedings, and the
Loan Documents constitute legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
5.3. NO CONFLICT; GOVERNMENT CONSENT. Neither the execution
and delivery by the Borrower of the Loan Documents, nor the consummation of the
transactions therein contemplated, nor compliance with the provisions thereof
will violate any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on the Borrower or any of its Subsidiaries or the
Borrower's or any Subsidiary's articles of incorporation or by-laws or the
provisions of any indenture, instrument or agreement to which the Borrower or
any of its Subsidiaries is a party or is subject, or by which it, or its
Property, is bound, or conflict with or constitute a default thereunder, or
result in the creation or imposition of any Lien in, of or on the Property of
the Borrower or a Subsidiary pursuant to the terms of any such indenture,
instrument or agreement. Except as described in the following sentence, no
order, consent, approval, license, authorization, or validation of, or filing,
recording or registration with, or exemption by, any governmental or public body
or authority, or any subdivision thereof, is required to authorize, or is
required in connection with the execution, delivery and performance of, or the
legality, validity, binding effect or enforceability of, any of the Loan
Documents. Certain government approvals, including approvals under the Hart
Scott Rodino Act, are required prior to consummation of the MMI Acquisition.
5.4. FINANCIAL STATEMENTS. The November 30, 1994 consolidated
financial statements of the Borrower and its Subsidiaries heretofore delivered
to the Lenders were prepared in accordance with generally accepted accounting
principles in effect on the date such statements were prepared and fairly
present the consolidated financial condition and operations of the Borrower and
its Subsidiaries at such date and the consolidated results of their operations
for the period then ended.
5.5. MATERIAL ADVERSE CHANGE. Since August 31, 1994, there has
been no change in the business, Property, prospects, condition (financial or
otherwise) or results of operations of the Borrower and its Subsidiaries which
could reasonably be expected to have a Material Adverse Effect.
5.6. TAXES. The Borrower and its Subsidiaries have filed all
United States federal tax returns and all other tax returns which are required
to be filed and have paid all taxes due pursuant to said returns or pursuant to
any assessment received by the Borrower or any of its Subsidiaries, except such
taxes, if any, as are being contested in good faith and as to which adequate
reserves have been recorded. The United States income tax returns of the
Borrower and its Subsidiaries have been audited by the Internal Revenue Service
through the fiscal year ended August 31, 1987. No tax liens have been filed and
no claims are being asserted with respect to any such taxes. The charges,
accruals and reserves recorded on the books of the Borrower and its Subsidiaries
in respect of any taxes or other governmental charges are adequate.
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5.7. LITIGATION AND CONTINGENT OBLIGATIONS. Except as set
forth on Schedule "3" hereto, there is no litigation, arbitration, governmental
investigation, proceeding or inquiry pending or, to the knowledge of any of
their officers, threatened against or affecting the Borrower or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect. Other than any liability incident to such litigation, arbitration or
proceedings, the Borrower has no material contingent obligations not provided
for or disclosed in the financial statements referred to in Section 5.4.
5.8. SUBSIDIARIES. Schedule "1" hereto contains an accurate
list of all of the Subsidiaries of the Borrower existing on the date of this
Agreement, setting forth their respective jurisdictions of incorporation and
the percentage of their respective capital stock owned by the Borrower or
other Subsidiaries. All of the issued and outstanding shares of capital
stock of such Subsidiaries have been duly authorized and issued and are fully
paid and non-assessable. Schedule "1(a)" hereto lists the ownership of MMI
and all of its Subsidiaries, setting forth their respective jurisdictions of
incorporation. After completion of the MMI Acquisition, 100% of the
outstanding common stock of MMI will be owned by the Borrower and all of the
issued and outstanding shares of capital stock of MMI and its Subsidiaries
will have been duly authorized and will be fully paid and non-assessable.
5.9. ERISA. The Unfunded Liabilities of all Single Employer
Plans do not in the aggregate exceed $3,000,000. Neither the Borrower nor any
other member of the Controlled Group has incurred, or is reasonably expected to
incur, any withdrawal liability to Multiemployer Plans in excess of $3,000,000
in the aggregate. Each Plan complies in all material respects with all
applicable requirements of law and regulations, no Reportable Event has occurred
with respect to any Plan, neither the Borrower nor any other members of the
Controlled Group has withdrawn from any Plan or initiated steps to do so, and no
steps have been taken to reorganize or terminate any Plan.
5.10. ACCURACY OF INFORMATION. No information, exhibit or
report furnished by the Borrower or any of its Subsidiaries to the Agent or to
any Lender in connection with the negotiation of, or compliance with, the Loan
Documents contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements contained therein not
misleading.
5.11. REGULATION U. Margin stock (as defined in Regulation U)
constitutes less than 25% of those assets of the Borrower and its Subsidiaries
which are subject to any limitation on sale, pledge, or other restriction
hereunder.
5.12. MATERIAL AGREEMENTS. Neither the Borrower nor any
Subsidiary is a party to any agreement or instrument or subject to any charter
or other corporate restriction which could reasonably be expected to have a
Material Adverse Effect. Neither the Borrower nor any Subsidiary is in default
in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in (i) any agreement to which it is a party,
which default could reasonably be expected to have a Material Adverse Effect or
(ii) any agreement or instrument evidencing or governing Material Indebtedness.
5.13. COMPLIANCE WITH LAWS. The Borrower and its Subsidiaries
have complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof, having jurisdiction over the conduct of their respective
businesses or the ownership of their respective Property except to the extent
failure to comply would not have a Material Adverse Effect.
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5.14. OWNERSHIP OF PROPERTIES. Except as set forth on Schedule
"2" hereto, on the date of this Agreement, the Borrower and its Subsidiaries
will have good title, free of all Liens other than those permitted by Section
6.18, to all of the Property and assets reflected in the financial statements as
owned by it.
5.15. INVESTMENT COMPANY ACT. Neither the Borrower nor any
Subsidiary thereof is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
5.16. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower
nor any Subsidiary is a "holding company" or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
5.17. ENVIRONMENTAL MATTERS. In the ordinary course of its
business, the officers of the Borrower consider the effect of Environmental Laws
on the business of the Borrower and its Subsidiaries, in the course of which
they identify and evaluate potential risks and liabilities accruing to the
Borrower as lender and lessor due to Environmental Laws. On the basis of this
consideration, the Borrower has reasonably concluded that Environmental Laws are
unlikely to have a Material Adverse Effect. Except for the environmental
actions with respect to MMI described in the Property Transaction Due Diligence
Report prepared for the Borrower by CH2M Hill and dated November 30, 1994, which
Borrower has reasonably concluded is unlikely to have a Material Adverse Effect,
neither the Borrower nor any Subsidiary has received any notice to the effect
that its operations are not in material compliance with any of the requirements
of applicable federal, state and local environmental, health and safety statutes
and regulations or the subject of any federal or state investigation evaluating
whether any remedial action is needed to respond to a release of any toxic or
hazardous waste or substance into the environment, which non-compliance or
remedial action could reasonably be expected to have a Material Adverse Effect.
5.18. POST-RETIREMENT BENEFITS. The present value of the
expected cost of post-retirement medical and insurance benefits payable by the
Borrower and its Subsidiaries to its employees and former employees, as
estimated by the Borrower in accordance with procedures and assumptions deemed
reasonable by the Required Lenders, does not exceed $3,000,000.
5.19. INSURANCE. The certificate signed by the President or
Chief Financial Officer of the Borrower that attests to the existence and
adequacy of the property and casualty insurance program carried by the Borrower
and that has been furnished by the Borrower to the Agent and the Lenders is
complete and accurate in all material respects.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
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6.1. FINANCIAL REPORTING. The Borrower will maintain, for
itself and each Subsidiary, a system of accounting established and administered
in accordance with generally accepted accounting principles, and the Borrower
will furnish to the Lenders:
(i) Within 95 days after the close of each of its fiscal years, an
unqualified audit report certified by independent certified
public accountants, acceptable to the Lenders, prepared in
accordance with Agreement Accounting Principles on a consolidated
basis for itself and the Subsidiaries, including balance sheets
as of the end of such period, related profit and loss and changes
in stockholders' equity statements, and a statement of cash
flows, and, as soon as it is available, any management letter
prepared by said accountants.
(ii) Within 50 days after the close of the first three quarterly
periods of each of its fiscal years, for itself and the
Subsidiaries, consolidated unaudited balance sheets as at the
close of each such period and consolidated profit and loss and
changes in shareholders' equity statements and a statement of
cash flows for the period from the beginning of such fiscal year
to the end of such quarter, all certified by its chief financial
officer.
(iii) Together with the financial statements required hereunder,
a Compliance Certificate showing the calculations
necessary to determine compliance with this Agreement and
stating that no Default or Unmatured Default exists, or if
any Default or Unmatured Default exists, stating the
nature and status thereof.
(iv) Within 270 days after the close of each fiscal year, a statement
of the Unfunded Liabilities of each Single Employer Plan,
certified as correct by an actuary enrolled under ERISA.
(v) As soon as possible and in any event within 30 days after the
Borrower knows that any Reportable Event has occurred with
respect to any Plan, a statement, signed by the chief financial
officer of the Borrower, describing said Reportable Event and the
action which the Borrower proposes to take with respect thereto.
(vi) As soon as possible and in any event within 30 days after receipt
by the Borrower, a copy of (a) any notice or claim to the effect
that the Borrower or any of its Subsidiaries is or may be liable
to any Person as a result of the release by the Borrower, any of
its Subsidiaries, or any other Person of any toxic or hazardous
waste or substance into the environment, and (b) any notice
alleging any violation of any federal, state or local
environmental, health or safety law or regulation by the Borrower
or any of its Subsidiaries, which, in either case, could
reasonably be expected to have a Material Adverse Effect.
(vii) Promptly upon the furnishing thereof to the shareholders
of the Borrower, copies of all financial statements,
reports and proxy statements so furnished.
(viii) Promptly upon the filing thereof, copies of all
registration statements and annual, quarterly, monthly or
other regular reports which the Borrower or any of its
Subsidiaries files with the Securities and Exchange
Commission.
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(ix) Such other information (including non-financial information) as
the Agent or any Lender may from time to time reasonably request.
6.2. USE OF PROCEEDS. The Borrower will, and will cause each
Subsidiary to, use the proceeds of the Advances to fund a portion of the
purchase price of the MMI Acquisition and for general corporate purposes. The
Borrower will not, nor will it permit any Subsidiary to, use any of the proceeds
of the Advances to purchase or carry any "margin stock" (as defined in
Regulation U) or to make any Acquisition except for an Acquisition permitted by
Section 6.16 (viii).
6.3. NOTICE OF DEFAULT. The Borrower will, and will cause each
Subsidiary to, give prompt notice in writing to the Lenders of the occurrence of
any Default or Unmatured Default and of any other development, financial or
otherwise, which could reasonably be expected to have a Material Adverse Effect.
6.4. CONDUCT OF BUSINESS. The Borrower and the Subsidiaries
will carry on and conduct business in substantially the same manner and in
substantially the same fields of enterprise as presently conducted, taken as a
whole for the Borrower and the Subsidiaries. The Borrower will, and will cause
each Subsidiary to, do all things necessary to remain duly incorporated, validly
existing and in good standing as a domestic corporation in its jurisdiction of
incorporation and maintain all requisite authority to conduct its business in
each jurisdiction in which its business is conducted.
6.5. TAXES. The Borrower will, and will cause each Subsidiary
to, pay when due all taxes, assessments and governmental charges and levies upon
it or its income, profits or Property, except those which are being contested in
good faith by appropriate proceedings and with respect to which adequate
reserves have been recorded.
6.6. INSURANCE. The Borrower will, and will cause each
Subsidiary to, maintain with financially sound and reputable insurance companies
insurance on all their Property in such amounts and covering such risks as is
consistent with sound business practice, and the Borrower will furnish to any
Lender upon request full information as to the insurance carried.
6.7. COMPLIANCE WITH LAWS. The Borrower will, and will cause
each Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject, unless
failure to comply would not have a Material Adverse Effect.
6.8. MAINTENANCE OF PROPERTIES. The Borrower will, and will
cause each Subsidiary to, do all things reasonably necessary to maintain,
preserve, protect and keep its Property in good repair, working order and
condition, and make all necessary and proper repairs, renewals and replacements
so that its business carried on in connection therewith may be properly
conducted at all times unless failure to do so would not have a Material Adverse
Effect.
6.9. INSPECTION. The Borrower will, and will cause each
Subsidiary to, permit the Lenders, by their respective representatives and
agents, upon at least five Business Days' notice, to inspect during normal
business hours any of the Property, corporate books and financial records of the
Borrower and each Subsidiary, to examine and make copies of the books of
accounts and other financial records of the Borrower and each Subsidiary, and to
discuss the affairs, finances and accounts of the Borrower and each Subsidiary
with, and to be advised as to the same by, their respective officers at such
reasonable times and intervals as the Lenders may designate.
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6.10. DIVIDENDS. The Borrower will not, nor will it permit any
Subsidiary to, declare or pay any dividends on its capital stock or redeem,
repurchase or otherwise acquire or retire any of its capital stock at any time
outstanding ("Restricted Payments"), except:
(i) Dividends payable in its own capital stock.
(ii) Share repurchases used solely to fund employee stock purchase
plans, provided such share repurchases do not exceed $2,500,000
in any fiscal quarter.
(iii) Any Subsidiary may declare and pay dividends to the
Borrower or to a Wholly-Owned Subsidiary.
(iv) The Borrower may make Restricted Payments in any one fiscal
quarter (in addition to Restricted Payments permitted under
Section 6.10(i), (ii) and (iii)) not exceeding (x) an amount
equal to 50% of Consolidated Net Income earned during the four
consecutive fiscal quarters ending on the last day of the fiscal
quarter immediately preceding the fiscal quarter during which the
Restricted Payment is to be made, less any Restricted Payments
previously paid during such four quarter period, plus (y) an
amount, if positive, equal to 50% of Consolidated Net Income
earned during the four consecutive fiscal quarters immediately
preceding period of four fiscal quarters described in the
preceding clause (x), less any Restricted Payments previously
paid during such four quarter period.
No Restricted Payment may be made if prior to, and after giving effect
thereto, any Default or Unmatured Default exists.
6.11. SUBSIDIARY INDEBTEDNESS. The Borrower will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume, guaranty,
or otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except the Borrower's Subsidiaries may become and remain liable
with respect to Indebtedness not exceeding at any one time outstanding an
aggregate principal amount equal to 10% of Consolidated Net Worth as of the
quarter end most recently reported prior to the date of determination.
6.12. MERGER. The Borrower will not, nor will it permit any
Subsidiary to, merge or consolidate with or into any other Person, except that:
(i) Any Subsidiary of the Borrower may merge and/or consolidate with
and/or into the Borrower or any wholly-owned Subsidiary or any
other corporation so long as in any merger or consolidation
involving the Borrower, the Borrower shall be the surviving
and/or continuing corporation and in any merger and/or
consolidation involving any other corporation, upon completion of
such merger and/or consolidation the surviving corporation is a
wholly-owned Subsidiary of the Borrower.
(ii) The Borrower may consolidate and/or merge with any other
corporation if (a) the Borrower is the surviving and/or
continuing corporation and remains a corporation organized and
existing under the laws of the United States, any state thereof
or the District of Columbia, and (b) at the time of such
consolidation and/or merger, and after giving effect thereto, no
Default or Unmatured Default shall have occurred and be
continuing or would result therefrom.
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6.13. SALE OF ASSETS. The Borrower will not, nor will it permit
any Subsidiary to, lease, sell or otherwise dispose of its Property, to any
other Person except for:
(i) Sales of inventory in the ordinary course of business.
(ii) Leases, sales or other dispositions of its Property that,
together with all other Property of the Borrower and its
Subsidiaries previously leased, sold or disposed of (other than
inventory in the ordinary course of business) as permitted by
this Section during the twelve-month period ending with the month
in which any such lease, sale or other disposition occurs, do not
constitute a Substantial Portion of the Property of the Borrower
and its Subsidiaries.
6.14. SALE OF ACCOUNTS. The Borrower will not, nor will it
permit any Subsidiary to, sell or otherwise dispose of any notes receivable or
accounts receivable, with or without recourse, except for sales and disposition,
aggregating not more than $1,000,000 after the date of this Agreement.
6.15. SALE AND LEASEBACK. The Borrower will not, nor will it
permit any Subsidiary to, sell or transfer any of its Property in order to
concurrently or subsequently lease as lessee such or similar Property other than
such sale/leaseback transactions which shall involve a sale of such Property by
the Borrower or a Subsidiary occurring not later than one year after either (i)
the date of the acquisition of such Property by the Borrower or a Subsidiary, or
(ii) if such Property is real estate, the date such Property is first occupied
for use by the Borrower or a Subsidiary, provided that the net proceeds to the
Borrower or Subsidiary of such sale are at least equal to the fair market value
of such Property.
6.16. INVESTMENTS AND ACQUISITIONS. The Borrower will not, nor
will it permit any Subsidiary to, make or suffer to exist any Investments
(including without limitation, loans and advances to, and other Investments in,
Subsidiaries), or commitments therefor, or to create any Subsidiary or to become
or remain a partner in any partnership or joint venture, or to make any
Acquisition of any Person, except:
(i) Short-term obligations of, or fully guaranteed by, the United
States of America.
(ii) Commercial paper rated A-l or better by Standard and Poor's
Corporation or P-l or better by Moody's Investors Service, Inc.
(iii) Demand deposit accounts maintained in the ordinary course
of business.
(iv) Certificates of deposit issued by and time deposits with
commercial banks (whether domestic or foreign) having capital and
surplus in excess of $100,000,000.
(v) Existing Investments in Subsidiaries and other Investments in
existence on the date hereof and described in Schedule "1"
hereto.
(vi) The completion of the Acquisition of MMI on substantially the
terms set forth in the MMI Acquisition Agreement.
(vii) Investments in joint ventures and partnerships engaged
solely in a line or lines of business which comply with
the provisions of Section 6.4.
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(viii) Acquisitions of entities which are engaged solely in a
line or lines of business which comply with the provisions
of Section 6.4, provided that, in the case of the
Acquisition of a corporation or similar entity, the
Acquisition has been approved by the board of directors of
the entity to be acquired.
(ix) In addition to Investments and Acquisitions permitted by Sections
6.16 (i) - (viii) above, Investments and Acquisitions aggregating
not more than $5,000,000 after the date of this Agreement.
Investments and Acquisitions made in reliance on Sections 6.16 (vii) and (viii)
may be made only if (x) there exists no Default or Unmatured Default after
giving effect to the Investment or Acquisition and (y) after giving effect to
the Investment or Acquisition, the aggregate value (taking into account all
consideration paid in connection with the Investment or Acquisitions, whether
cash, notes, stock or otherwise) of such Investments and Acquisitions made in
any one fiscal year does not exceed 15% of Consolidated Net Worth on the last
day of the immediately preceding fiscal year.
6.17. CONTINGENT OBLIGATIONS. The Borrower will not, nor will
it permit any Subsidiary to, make or suffer to exist any Contingent Obligation
(including, without limitation, any Contingent Obligation with respect to the
obligations of a Subsidiary), except:
(i) By endorsement of instruments for deposit or collection in the
ordinary course of business.
(ii) For the Guaranties executed by the Guarantors.
(iii) Other Contingent Obligations in an amount not exceeding
$10,000,000 at any one time outstanding.
6.18. LIENS. The Borrower will not, nor will it permit any
Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the
Property of the Borrower or any of its Subsidiaries, except:
(i) Liens for taxes, assessments or governmental charges or levies on
its Property if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in
good faith and by appropriate proceedings and for which adequate
reserves in accordance with generally accepted principles of
accounting shall have been recorded on its books.
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary
course of business which secure payment of obligations not more
than 60 days past due or which are being contested in good faith
by appropriate proceedings and for which adequate reserves shall
have been recorded on its books.
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age
pensions, or other social security or retirement benefits,
or similar legislation.
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(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature
generally existing with respect to properties of a similar
character and which do not in any material way affect the
marketability of the same or interfere with the use thereof in
the business of the Borrower or the Subsidiaries.
(v) Liens existing on the date hereof and described in Schedule "2"
hereto.
(vi) Liens given to secure Indebtedness representing the purchase
price of personal property purchased by the Borrower or any
Subsidiary after the date of this Agreement, or existing on such
property or purchased at the time of purchase thereof, and all
Liens given upon the renewal, extension or refunding of any such
Indebtedness in an amount not exceeding the amount thereof
remaining unpaid immediately prior to such renewal, extension or
refunding, provided that, (x) no such Lien shall extend to any
property other than the property at the time being purchased and
(y) the aggregate principal amount of all Indebtedness secured by
all Liens incurred in reliance on this Section 6.18(vi) (as to
the Borrower and all the Subsidiaries) shall not at any time
exceed $5,000,000.
(vii) Liens on any real property of the Borrower or a Subsidiary in favor
of the United States of America or any State thereof, or any
department, agency or instrumentality or political subdivision of
the United States of America or any State thereof, or any political
subdivision thereof, to secure any Indebtedness incurred or
guaranteed for the purposes of financing all or any part of the
cost of acquiring, constructing or improving the real property
subject to such Liens, and all Liens given upon the renewal,
extension or refunding of any such Indebtedness in an amount not
exceeding the amount thereof remaining unpaid immediately prior
to such renewal, extension or refunding, provided that (x) no such
Lien shall extend to any property other than the property at the
time being purchased and (y) the aggregate principal amount of all
Indebtedness secured by all liens incurred in reliance on this
Section 6.18(vi) (as to the Borrower and all the Subsidiaries)
shall not at any time exceed $5,000,000.
(viii) In addition to Liens permitted by Sections 6.18 (i) -
(vii) above, Liens securing Indebtedness not exceeding
$5,000,000 at any one time outstanding.
6.19. AFFILIATES. The Borrower will not, and will not permit
any Subsidiary to, enter into any transaction (including, without limitation,
the purchase or sale of any Property or service) with, or make any payment or
transfer to, any Affiliate except (i) in the ordinary course of business and
pursuant to the reasonable requirements of the Borrower's or such Subsidiary's
business and upon fair and reasonable terms no less favorable to the Borrower or
such Subsidiary than the Borrower or such Subsidiary would obtain in a
comparable arms-length transaction and (ii) for transactions not satisfying the
conditions of clause (i) in an amount not exceeding $1,000,000 in the aggregate
for all transactions after the date of this Agreement.
6.20. CONSOLIDATED LEVERAGE RATIO. The Borrower will not permit
its Consolidated Leverage Ratio to exceed .45 to 1.00 at any time.
6.21. CONSOLIDATED NET WORTH. The Borrower will maintain
Consolidated Net Worth at all times of not less than the sum of (i) $100,000,000
plus (ii) 50% of the amount, if positive, of the cumulative Consolidated Net
Income of the Borrower and its Subsidiaries earned after November 30, 1994
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(determined as of the end of each fiscal quarter commencing with the quarter
ending February 28, 1995), plus (iii) 100% of the aggregate equity contributions
received by the Borrower and its Subsidiaries in connection with the issuance of
capital stock of the Borrower or its Subsidiaries subsequent to the date of this
Agreement.
6.22. CONSOLIDATED FIXED CHARGE COVERAGE RATIO. The Borrower
will not permit the Consolidated Fixed Charge Coverage Ratio to be less than 3.0
to 1.0 for any period of four consecutive fiscal quarters taken as one
accounting period commencing with the four quarters ending February 28, 1995.
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
7.1. Any representation or warranty made or deemed made by or
on behalf of the Borrower or any of its Subsidiaries to the Lenders or the Agent
under or in connection with this Agreement, any Loan, or any certificate or
information delivered in connection with this Agreement or any other Loan
Document shall be materially false on the date as of which made.
7.2. Nonpayment of principal of any Note within one day after
the same becomes due, or nonpayment of interest upon any Note or of any
commitment fee or other obligations under any of the Loan Documents within five
days after the same becomes due.
7.3. The breach by the Borrower of any of the terms or
provisions of 6.2, 6.10, 6.12, 6.13, 6.14, 6.15 or 6.19.
7.4. The breach by the Borrower (other than a breach which
constitutes a Default under Section 7.1, 7.2 or 7.3) of any of the terms or
provisions of this Agreement which is not remedied within 30 days after written
notice from the Agent or any Lender.
7.5. Failure of the Borrower or any of its Subsidiaries or any
Guarantor to pay any Indebtedness when due; or the default by the Borrower or
any of its Subsidiaries or any Guarantor in the performance of any term,
provision or condition contained in any agreement under which any Indebtedness
was created or is governed, or any other event shall occur or condition exist,
the effect of which is to cause, or to permit the holder or holders of such
Indebtedness to cause, such Indebtedness to become due prior to its stated
maturity; or any Indebtedness of the Borrower or any of its Subsidiaries or any
Guarantor shall be declared to be due and payable or required to be prepaid
(other than by a regularly scheduled payment) prior to the stated maturity
thereof; or the Borrower or any of its Subsidiaries or any Guarantor shall not
pay, or admit in writing its inability to pay, its debts generally as they
become due.
7.6. The Borrower or any of its Subsidiaries or any
Guarantor shall (i) have an order for relief entered with respect to it under
the Federal bankruptcy laws as now or hereafter in effect, (ii) make an
assignment for the benefit of creditors, (iii) apply for, seek, consent to,
or acquiesce in, the appointment
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of a receiver, custodian, trustee, examiner, liquidator or similar
official for it or any Substantial Portion of its Property, (iv) institute any
proceeding seeking an order for relief under the Federal bankruptcy laws as now
or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or
seeking dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail to file an
answer or other pleading denying the material allegations of any such proceeding
filed against it, (v) take any corporate action to authorize or effect any of
the foregoing actions set forth in this Section 7.6 or (vi) fail to contest in
good faith any appointment or proceeding described in Section 7.7.
7.7. Without the application, approval or consent of the
Borrower or any of its Subsidiaries, or any Guarantor a receiver, trustee,
examiner, liquidator or similar official shall be appointed for the Borrower or
any of its Subsidiaries or any Guarantor or any Substantial Portion of its
Property, or a proceeding described in Section 7.6(iv) shall be instituted
against the Borrower or any of its Subsidiaries or any Guarantor and such
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of 60 consecutive days.
7.8. Any court, government or governmental agency shall
condemn, seize or otherwise appropriate, or take custody or control of (each a
"Condemnation"), all or any portion of the Property of the Borrower and its
Subsidiaries or any Guarantor which, when taken together with all other
Property of the Borrower and its Subsidiaries or any Guarantor so condemned,
seized, appropriated, or taken custody or control of, during the twelve-month
period ending with the month in which any such Condemnation occurs, constitutes
a Substantial Portion.
7.9. The Borrower or any of its Subsidiaries shall fail within
30 days to pay, bond or otherwise discharge any judgment or order for the
payment of money in excess of $3,000,000, which is not stayed on appeal or
otherwise being appropriately contested in good faith.
7.10. The Unfunded Liabilities of all Single Employer Plans
shall exceed in the aggregate $3,000,000 or any Reportable Event shall occur in
connection with any Plan.
7.11. The Borrower or any other member of the Controlled Group
shall have been notified by the sponsor of a Multiemployer Plan that it has
incurred withdrawal liability to such Multiemployer Plan in an amount which,
when aggregated with all other amounts required to be paid to Multiemployer
Plans by the Borrower or any other member of the Controlled Group as withdrawal
liability (determined as of the date of such notification), exceeds $3,000,000.
7.12. The Borrower or any other member of the Controlled Group
shall have been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated, within the
meaning of Title IV of ERISA, if as a result of such reorganization or
termination the aggregate annual contributions of the Borrower and the other
members of the Controlled Group (taken as a whole) to all Multiemployer Plans
which are then in reorganization or being terminated have been or will be
increased over the amounts contributed to such Multiemployer Plans for the
respective plan years of each such Multiemployer Plan immediately preceding the
plan year in which the reorganization or termination occurs by an amount
exceeding $3,000,000.
7.13. The Borrower or any of its Subsidiaries shall be the
subject of any proceeding or investigation pertaining to the release by the
Borrower or any of its Subsidiaries, or any other Person of any toxic or
hazardous waste or substance into the environment, or any violation of any
federal, state or
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local environmental, health or safety law or regulation, which, in either
case, could reasonably be expected to have a Material Adverse Effect.
7.14. Any Change in Control shall occur.
7.15. Nonpayment by the Borrower of any Rate Hedging
Obligation(s) relating to notional amounts equal to or in excess of $3,000,000
or the breach by the Borrower of any term, provision or condition contained in
any agreement, device or arrangement giving rise to any Rate Hedging
Obligation(s) relating to notional amounts equal to or in excess of $3,000,000.
7.16. Any Guaranty shall fail to remain in full force or effect
or any action shall be taken to discontinue or to assert the invalidity or
unenforceability of any Guaranty, or any Guarantor shall fail to comply with any
of the terms or provisions of any Guaranty to which it is a party, or any
Guarantor denies that it has any further liability under any Guaranty to which
it is a party, or gives notice to such effect.
7.17. Twenty-five percent (25%) or more of the value of any
class of equity interests in the Borrower shall be held by "benefit plan
investors" within the meaning of 29 C.F.R. Section 2510.3-101(f).
7.18. The Borrower shall fail to complete the Acquisition of MMI
substantially on the terms of the MMI Acquisition Agreement on or before April
14, 1995.
7.19. Cascade shall cease to be a Wholly-Owned Subsidiary of the
Borrower or, at any time after the Acquisition of MMI is completed, MMI shall
cease to be a Wholly-Owned Subsidiary of the Borrower.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. ACCELERATION. If any Default described in Section 7.6 or
7.7 occurs with respect to the Borrower, the obligations of the Lenders to make
Loans hereunder shall automatically terminate and the Obligations shall
immediately become due and payable without any election or action on the part of
the Agent or any Lender. If any other Default occurs, the Required Lenders may
terminate or suspend the obligations of the Lenders to make Loans hereunder, or
declare the Obligations to be due and payable, or both, whereupon the
Obligations shall become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which the Borrower hereby
expressly waives.
If, within 20 days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans
hereunder as a result of any Default (other than any Default as described in
Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or
decree for the payment of the Obligations due shall have been obtained or
entered, the Required Lenders (in their sole discretion) shall so direct, the
Agent shall, by notice to the Borrower, rescind and annul such acceleration
and/or termination.
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8.2. AMENDMENTS. Subject to the provisions of this Article
VIII, the Required Lenders (or the Agent with the consent in writing of the
Required Lenders) and the Borrower may enter into agreements supplemental hereto
for the purpose of adding or modifying any provisions to the Loan Documents or
changing in any manner the rights of the Lenders or the Borrower hereunder or
waiving any Default hereunder; provided, however, that no such supplemental
agreement shall, without the consent of each Lender affected thereby:
(i) Extend the maturity of any Loan or Note or forgive all or any
portion of the principal amount of any Loan or Note; or forgive
all or any portion of the interest on any Loan or Note or any
fees payable under this Agreement; or reduce the rate or extend
the time of payment of interest on any Loan or Note or any fees
payable under this Agreement.
(ii) Reduce the percentage specified in the definition of Required
Lenders.
(iii) Extend the Facility Termination Date, or reduce the amount
or extend the payment date for, the mandatory payments
required under Section 2.2, or increase the amount of the
Commitment of any Lender hereunder, or permit the Borrower
to assign its rights under this Agreement.
(iv) Amend this Section 8.2.
(v) Release any Guarantor of any Advance.
No amendment of any provision of this Agreement relating specifically to the
Agent shall be effective without the written consent of the Agent. The Agent
may waive payment of the fee required under Section 12.3.2 without obtaining the
consent of any other party to this Agreement.
8.3. PRESERVATION OF RIGHTS. No delay or omission of the
Lenders or the Agent to exercise any right under the Loan Documents shall impair
such right or be construed to be a waiver of any Default or an acquiescence
therein, and the making of a Loan notwithstanding the existence of a Default or
the inability of the Borrower to satisfy the conditions precedent to such Loan
shall not constitute any waiver or acquiescence. Any single or partial exercise
of any such right shall not preclude other or further exercise thereof or the
exercise of any other right, and no waiver, amendment or other variation of the
terms, conditions or provisions of the Loan Documents whatsoever shall be valid
unless in writing signed by the Lenders required pursuant to Section 8.2, and
then only to the extent in such writing specifically set forth. All remedies
contained in the Loan Documents or by law afforded shall be cumulative and all
shall be available to the Agent and the Lenders until the Obligations have been
paid in full.
ARTICLE IX
GENERAL PROVISIONS
9.1. SURVIVAL OF REPRESENTATIONS. All representations and
warranties of the Borrower contained in this Agreement shall survive delivery of
the Notes and the making of the Loans herein contemplated.
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9.2. GOVERNMENTAL REGULATION. Anything contained in this
Agreement to the contrary notwithstanding, no Lender shall be obligated to
extend credit to the Borrower in violation of any limitation or prohibition
provided by any applicable statute or regulation.
9.3. TAXES. Any taxes (excluding federal income taxes on the
overall net income of any Lender) or other similar assessments or charges made
by any governmental or revenue authority in respect of the Loan Documents shall
be paid by the Borrower, together with interest and penalties, if any.
9.4. HEADINGS. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.
9.5. ENTIRE AGREEMENT. The Loan Documents embody the entire
agreement and understanding among the Borrower, the Agent and the Lenders and
supersede all prior agreements and understandings among the Borrower, the Agent
and the Lenders relating to the subject matter thereof.
9.6. SEVERAL OBLIGATIONS; BENEFITS OF THIS AGREEMENT. The
respective obligations of the Lenders hereunder are several and not joint and no
Lender shall be the partner or agent of any other (except to the extent to which
the Agent is authorized to act as such). The failure of any Lender to perform
any of its obligations hereunder shall not relieve any other Lender from any of
its obligations hereunder. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the parties to this
Agreement and their respective successors and assigns.
9.7. EXPENSES; INDEMNIFICATION. The Borrower shall reimburse
the Agent for any reasonable costs, internal charges and out-of-pocket expenses
(including reasonable attorneys' fees and time charges of attorneys for the
Agent, which attorneys may be employees of the Agent) paid or incurred by the
Agent in connection with the preparation, negotiation, execution, delivery,
review, amendment, and modification of the Loan Documents, and, during the
continuance of a Default or Unmatured Default, in connection with any
inspection, audit, consulting study or any other cost of administration (other
than in connection with the routine administration and monitoring of the
Agreement by the employees of the Agent). The Borrower also agrees to reimburse
the Agent and the Lenders for any reasonable costs, internal charges and
out-of-pocket expenses (including reasonable attorneys' fees and time charges of
attorneys for the Agent and the Lenders, which attorneys may be employees of the
Agent or the Lenders) paid or incurred by the Agent or any Lender in connection
with the collection and enforcement of the Loan Documents. The Borrower
further agrees to indemnify the Agent and each Lender, its directors, officers
and employees against all losses, claims, damages, penalties, judgments,
liabilities and expenses (including, without limitation, all expenses of
litigation or preparation therefor whether or not the Agent or any Lender is a
party thereto, but specifically excluding expenses for routine administration
and monitoring of the Agreement by employees of the Agent or any Lender) which
any of them may pay or incur arising out of or relating to this Agreement, the
other Loan Documents, the transactions contemplated hereby or the direct or
indirect application or proposed application of the proceeds of any Loan
hereunder. The obligations of the Borrower under this Section shall survive the
termination of this Agreement. Notwithstanding the foregoing, the Borrower has
no duty to indemnify the Agent or any Lender against any losses, claims,
damages, penalties, judgments, liabilities and expenses resulting from the
Agent's or any Lender's gross negligence or willful misconduct.
9.8. NUMBERS OF DOCUMENTS. All statements, notices, closing
documents, and requests hereunder shall be furnished to the Agent with
sufficient counterparts so that the Agent may furnish one to each of the
Lenders.
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9.9. ACCOUNTING. Except as provided to the contrary herein,
all accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles.
9.10. SEVERABILITY OF PROVISIONS. Any provision in any Loan
Document that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
9.11. NONLIABILITY OF LENDERS. The relationship between the
Borrower and the Lenders and the Agent shall be solely that of borrower and
lender. Neither the Agent nor any Lender shall have any fiduciary
responsibilities to the Borrower. Neither the Agent nor any Lender undertakes
any responsibility to the Borrower to review or inform the Borrower of any
matter in connection with any phase of the Borrower's business or operations.
9.12. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
9.13. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING BROUGHT
AGAINST THE BORROWER ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE
BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES
ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY
LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER
JURISDICTION.
9.14. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH
LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
9.15. CONFIDENTIALITY. Each Lender agrees to hold any
confidential information which it may receive from the Borrower pursuant to this
Agreement in confidence, except for disclosure (i) to its Affiliates and to
other Lenders and their respective Affiliates, (ii) to legal counsel,
accountants, and other professional advisors to that Lender or to a Transferee,
(iii) to bank regulatory officials in connection with the periodic examination
of the Lender, (iv) to any Person as requested pursuant to or as required by
law, regulation, or legal process, (v) to any Person in connection with any
legal proceeding to which that Lender is a party, and (vi) permitted by Section
12.4. Any Lender disclosing information pursuant to
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Section 9.15(iv) will endeavor to notify the Borrower of the request for
disclosure unless it is prohibited by law or regulation from giving such
notice.
9.16. NONRELIANCE. Each Lender hereby represents that it is not
relying on or looking to any margin stock (as defined in Regulation U of the
Board of Governors of the Federal Reserve System) for the repayment of the Loans
provided for herein.
ARTICLE X
THE AGENT
10.1. APPOINTMENT. The First National Bank of Chicago is hereby
appointed Agent hereunder and under each other Loan Document, and each of the
Lenders irrevocably authorizes the Agent to act as the agent of such Lender.
The Agent agrees to act as such upon the express conditions contained in this
Article X. The Agent shall not have a fiduciary relationship in respect of the
Borrower or any Lender by reason of this Agreement.
10.2. POWERS. The Agent shall have and may exercise such powers
under the Loan Documents as are specifically delegated to the Agent by the terms
of each thereof, together with such powers as are reasonably incidental thereto.
The Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder except any action specifically provided by
the Loan Documents to be taken by the Agent.
10.3. GENERAL IMMUNITY. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable to the Borrower, the
Lenders or any Lender for any action taken or omitted to be taken by it or them
hereunder or under any other Loan Document or in connection herewith or
therewith except for its or their own gross negligence or willful misconduct.
10.4. NO RESPONSIBILITY FOR LOANS, RECITALS, ETC. Neither the
Agent nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into, or verify (i) any
statement, warranty or representation made in connection with any Loan Document
or any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of any obligor under any Loan Document, including,
without limitation, any agreement by an obligor to furnish information directly
to each Lender; (iii) the satisfaction of any condition specified in Article IV,
except receipt of items required to be delivered to the Agent; (iv) the
validity, effectiveness or genuineness of any Loan Document or any other
instrument or writing furnished in connection therewith; or (v) the value,
sufficiency, creation, perfection or priority of any interest in any collateral
security. The Agent shall have no duty to disclose to the Lenders information
that is not required to be furnished by the Borrower to the Agent at such time,
but is voluntarily furnished by the Borrower to the Agent (either in its
capacity as Agent or in its individual capacity).
10.5. ACTION ON INSTRUCTIONS OF LENDERS. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder and
under any other Loan Document in accordance with written instructions signed by
the Required Lenders, and such instructions and any action taken or failure to
act pursuant thereto shall be binding on all of the Lenders and on all holders
of Notes. The Agent shall be fully justified in failing or refusing to take any
action hereunder and under any other Loan Document
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unless it shall first be indemnified to its satisfaction by the Lenders pro
rata against any and all liability, cost and expense that it may incur by
reason of taking or continuing to take any such action.
10.6. EMPLOYMENT OF AGENTS AND COUNSEL. The Agent may execute
any of its duties as Agent hereunder and under any other Loan Document by or
through employees, agents, and attorneys-in-fact and shall not be answerable to
the Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care, unless the Agent had actual knowledge of
such default or misconduct. Notwithstanding the foregoing, if the Agent shall
desire to execute any of its material duties hereunder through an agent or
attorney-in-fact, the Agent shall provide prior written notice of such
determination to the Lenders and the Agent shall be required to terminate its
relationship with any such agent or attorney-in-fact for good cause upon the
request of the Required Lenders. Any written agreement evidencing such agency
or power of attorney shall, by its terms, be revocable by the Agent upon such
request of the Required Lenders. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.
10.7. RELIANCE ON DOCUMENTS; COUNSEL. The Agent shall be
entitled to rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and, in respect
to legal matters, upon the opinion of counsel selected by the Agent, which
counsel may be employees of the Agent.
10.8. AGENT'S REIMBURSEMENT AND INDEMNIFICATION. The Lenders
agree to reimburse and indemnify the Agent ratably in proportion to their
respective Commitments (i) for any amounts not reimbursed by the Borrower for
which the Agent is entitled to reimbursement by the Borrower under the Loan
Documents, provided, however, that such reimbursement shall not include amounts
representing fees due and owing by the Borrower to the Agent under the Loan
Documents, (ii) for any other expenses incurred by the Agent on behalf of the
Lenders, in connection with the preparation, execution, delivery, administration
and enforcement of the Loan Documents and (iii) for any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against the Agent in any way relating to or arising
out of the Loan Documents or any other document delivered in connection
therewith or the transactions contemplated thereby, or the enforcement of any of
the terms thereof or of any such other documents, provided that no Lender shall
be liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the Agent. The obligations of the Lenders
under this Section 10.8 shall survive payment of the Obligations and termination
of this Agreement but, notwithstanding the foregoing, shall only be due and
owing to the Agent only after the Agent has made reasonable attempts to collect
such amounts from the Borrower.
10.9. RIGHTS AS A LENDER. In the event the Agent is a Lender,
the Agent shall have the same rights and powers hereunder and under any other
Loan Document as any Lender and may exercise the same as though it were not the
Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a
Lender, unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Subsidiaries in which the Borrower or such
Subsidiary is not restricted hereby from engaging with any other Person. The
Agent, in its individual capacity, is not obligated to remain a Lender.
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10.l0. LENDER CREDIT DECISION. Each Lender acknowledges that
it has, independently and without reliance upon the Agent or any other Lender
and based on the financial statements prepared by the Borrower and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.
10.11. SUCCESSOR AGENT. The Agent may resign at any time by
giving written notice thereof to the Lenders and the Borrower, such resignation
to be effective upon the appointment of a successor Agent or, if no successor
Agent has been appointed, forty-five days after the retiring Agent gives notice
of its intention to resign. The Agent may be removed at any time with or
without cause by written notice received by the Agent from the Required Lenders,
such removal to be effective on the date specified by the Required Lenders.
Upon any such resignation, or removal, the Required Lenders shall have the right
to appoint, on behalf of the Borrower and the Lenders, a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders within
thirty days after the resigning Agent's giving notice of its intention to
resign, then the resigning Agent may appoint, on behalf of the Borrower and the
Lenders, a successor Agent. If the Agent has resigned or been removed and no
successor Agent has been appointed, the Lenders may perform all the duties of
the Agent hereunder and the Borrower shall make all payments in respect of the
Obligations to the applicable Lender and for all other purposes shall deal
directly with the Lenders. No successor Agent shall be deemed to be appointed
hereunder until such successor Agent has accepted the appointment. Any such
successor Agent shall be a commercial bank having capital and retained earnings
of at least $50,000,000. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
resigning or removed Agent. Upon the effectiveness of the resignation or
removal of the Agent, the resigning or removed Agent shall be discharged from
its duties and obligations hereunder and under the Loan Documents. After the
effectiveness of the resignation or removal of an Agent, the provisions of this
Article X shall continue in effect for the benefit of such Agent in respect of
any actions taken or omitted to be taken by it while it was acting as the Agent
hereunder and under the other Loan Documents.
10.12. AGENT'S FEE. The Borrower agrees to pay to the Agent, for
its own account, the fees agreed to by the Borrower and the Agent pursuant to
that certain letter agreement dated November 23, 1994, or as otherwise agreed
from time to time.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. SETOFF. In addition to, and without limitation of, any
rights of the Lenders under applicable law, if the Borrower becomes insolvent,
however evidenced, or any Default or Unmatured Default occurs, any and all
deposits (including all account balances, whether provisional or final and
whether or not collected or available) and any other Indebtedness at any time
held or owing by any Lender to or for the credit or account of the Borrower may
be offset and applied toward the payment of the Obligations owing to such
Lender, whether or not the Obligations, or any part hereof, shall then be due.
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11.2. RATABLE PAYMENTS. If any Lender, whether by setoff or
otherwise, has payment made to it upon its Loans (other than payments received
pursuant to Sections 3.1, 3.2 or 3.4) in a greater proportion than that received
by any other Lender, such Lender agrees, promptly upon demand, to purchase a
portion of the Loans held by the other Lenders so that after such purchase each
Lender will hold its ratable proportion of Loans. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or otherwise,
receives collateral or other protection for its Obligations or such amounts
which may be subject to setoff, such Lender agrees, promptly upon demand, to
take such action necessary such that all Lenders share in the benefits of such
collateral ratably in proportion to their Loans. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. SUCCESSORS AND ASSIGNS. The terms and provisions of the
Loan Documents shall be binding upon and inure to the benefit of the Borrower
and the Lenders and their respective successors and assigns, except that (i) the
Borrower shall not have the right to assign its rights or obligations under the
Loan Documents and (ii) any assignment by any Lender must be made in compliance
with Section 12.3. Notwithstanding clause (ii) of this Section, any Lender may
at any time, without the consent of the Borrower or the Agent, assign all or any
portion of its rights under this Agreement and its Notes to a Federal Reserve
Bank; provided, however, that no such assignment shall release the transferor
Lender from its obligations hereunder. The Agent may treat the payee of any
Note as the owner thereof for all purposes hereof unless and until such payee
complies with Section 12.3 in the case of an assignment thereof or, in the case
of any other transfer, a written notice of the transfer is filed with the
Agent. Any assignee or transferee of a Note agrees by acceptance thereof to be
bound by all the terms and provisions of the Loan Documents. Any request,
authority or consent of any Person, who at the time of making such request or
giving such authority or consent is the holder of any Note, shall be conclusive
and binding on any subsequent holder, transferee or assignee of such Note or of
any Note or Notes issued in exchange therefor.
12.2. PARTICIPATIONS.
12.2.1 PERMITTED PARTICIPANTS; EFFECT. Any Lender may, in the
ordinary course of its business and in accordance with applicable law,
at any time sell to one or more banks or other entities
("Participants") participating interests in any Loan owing to such
Lender, any Note held by such Lender, any Commitment of such Lender or
any other interest of such Lender under the Loan Documents. In the
event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under the Loan Documents shall
remain unchanged, such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, such
Lender shall remain the holder of any such Note for all purposes under
the Loan Documents, all amounts payable by the Borrower under this
Agreement shall be determined as if such Lender had not sold such
participating interests, and the Borrower and the Agent shall continue
to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under the Loan Documents.
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12.2.2. VOTING RIGHTS. Each Lender shall retain the sole right
to approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other
than any amendment, modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which forgives
principal, interest or fees or reduces the interest rate or fees
payable with respect to any such Loan or Commitment, postpones any
date fixed for any regularly-scheduled payment of principal of, or
interest or fees on, any such Loan or Commitment, releases any
guarantor of any such Loan or releases any substantial portion of
collateral, if any, securing any such Loan.
12.2.3. BENEFIT OF SETOFF. The Borrower agrees that each
Participant shall be deemed to have the right of setoff provided in
Section 11.1 in respect of its participating interest in amounts owing
under the Loan Documents to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under the
Loan Documents, provided that each Lender shall retain the right of
setoff provided in Section 11.1 with respect to the amount of
participating interests sold to each Participant. The Lenders agree
to share with each Participant, and each Participant, by exercising
the right of setoff provided in Section 11.1, agrees to share with
each Lender, any amount received pursuant to the exercise of its right
of setoff, such amounts to be shared in accordance with Section 11.2
as if each Participant were a Lender.
12.3. ASSIGNMENTS.
12.3.1. PERMITTED ASSIGNMENTS. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any
time assign to one or more banks or other entities ("Purchasers") all
or any part of its rights and obligations under the Loan Documents.
An assignment shall be in the minimum amount of $5,000,000 (or, if
less, the remaining amount of a Lender's Commitment). Each Lender
shall maintain a Commitment of not less than $10,000,000, provided
that a Lender may sell the entire remaining amount of its Commitment.
Such assignment shall be substantially in the form of Exhibit "I"
hereto or in such other form as may be agreed to by the parties
thereto. The consent of the Borrower and the Agent shall be required
prior to an assignment becoming effective with respect to a Purchaser
which is not a Lender or an Affiliate thereof; provided, however, that
if a Default has occurred and is continuing, the consent of the
Borrower shall not be required. Such consents shall not be
unreasonably withheld.
12.3.2. EFFECT; EFFECTIVE DATE. Upon (i) delivery to the Agent
of a notice of assignment, substantially in the form attached as
Exhibit "I" to Exhibit "I" hereto (a "Notice of Assignment"), together
with any consents required by Section 12.3.1, and (ii) payment of a
$2,500 fee to the Agent for processing such assignment, such
assignment shall become effective on the effective date specified in
such Notice of Assignment. The Notice of Assignment shall contain a
representation by the Purchaser to the effect that none of the
consideration used to make the purchase of the Commitment and Loans
under the applicable assignment agreement are "plan assets" as defined
under ERISA and that the rights and interests of the Purchaser in and
under the Loan Documents will not be "plan assets" under ERISA. On
and after the effective date of such assignment, such Purchaser shall
for all purposes be a Lender party to this Agreement and any other
Loan Document executed by the Lenders and shall have all the rights
and obligations of a Lender under the Loan Documents, to the same
extent as if it were an original party hereto, and no further consent
or action by the Borrower, the Lenders or the Agent shall be required
to release the transferor Lender with respect to the percentage of the
Aggregate Commitment and
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Loans assigned to such Purchaser. Upon the consummation of any
assignment to a Purchaser pursuant to this Section 12.3.2, the
transferor Lender, the Agent and the Borrower shall make appropriate
arrangements so that replacement Notes are issued to such
transferor Lender and new Notes or, as appropriate, replacement Notes,
are issued to such Purchaser, in each case in principal amounts
reflecting their Commitment, as adjusted pursuant to such assignment.
12.4. DISSEMINATION OF INFORMATION. The Borrower authorizes
each Lender to disclose to any Participant or Purchaser or any other Person
acquiring an interest in the Loan Documents by operation of law (each a
"Transferee") and any prospective Transferee any and all information in such
Lender's possession concerning the creditworthiness of the Borrower and its
Subsidiaries; provided that each Transferee and prospective Transferee agrees to
be bound by Section 9.15 of this Agreement.
12.5. TAX TREATMENT. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section 2.7.
ARTICLE XIII
NOTICES
13.1. GIVING NOTICE. Except as otherwise permitted by Section
2.5 with respect to borrowing notices, all notices and other communications
provided to any party hereto under this Agreement or any other Loan Document
shall be in writing or by telex or by facsimile and addressed or delivered to
such party at its address set forth below its signature hereto or at such other
address as may be designated by such party in a notice to the other parties.
Any notice, if mailed and properly addressed with postage prepaid, shall be
deemed given when received; any notice, if transmitted by telex or facsimile,
shall be deemed given when transmitted (answerback confirmed in the case of
telexes).
13.2. CHANGE OF ADDRESS. The Borrower, the Agent and any Lender
may each change the address for service of notice upon it by a notice in writing
to the other parties hereto.
ARTICLE XIV
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Borrower, the
Agent and the Lenders and each party has notified the Agent by telex or
telephone, that it has taken such action.
Page 45
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have
executed this Agreement as of the date first above written.
COMMITMENTS
SCHNITZER STEEL INDUSTRIES, INC.
By: /s/ BARRY A. ROSEN
-----------------------------
Print Name: Barry A. Rosen
--------------------
Title: Vice President, Finance
-------------------------
3200 Northwest Yeon Avenue
Portland, Oregon 97210
Attention: Barry A. Rosen
----------------------
$25,000,000 THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By:
------------------------------
Print Name:
----------------------
Title:
---------------------------
The First National Bank of
Chicago
777 South Figueroa Street,
Fourth Floor
Los Angeles, California
90017
Telephone: (213) 683-4964
Telecopy: (213) 683-4949
Attention: Thomas C. Williams
with a copy to:
The First National Bank of
Chicago
One First National Plaza
10th Floor, Suite 0634
Chicago, Illinois 60670
Telephone: (312) 732-7172
Telecopy: (312) 732-4840
Attention: Marilyn Fisher
Page 46
<PAGE>
$25,000,000 THE CHASE MANHATTAN BANK, N.A.
By: /s/ Peter S. Predun
-----------------------------
Print Name: Peter S. Predun
---------------------
Title: Vice President
--------------------------
Mr. Peter S. Predun
Vice President
One Chase Plaza - 18
New York, New York 10081
$25,000,000 FIRST INTERSTATE BANK OF OREGON,
N.A.
By:
------------------------------
Print Name:
----------------------
Title:
---------------------------
Mr. James L. Franzen
Vice President
1300 Southwest 5th Avenue
T-19
Portland, Oregon 97208
$25,000,000 SEATTLE-FIRST NATIONAL BANK
By:
--------------------------------
Print Name:
------------------------
Title:
----------------------------
Mr. Hendrikus T. Knottnerus
Vice President
Columbia Seafirst Center
701 Fifth Avenue
Floor 12
Seattle, Washington 98124
------------
$100,000,000
------------
------------
Page 47
<PAGE>
EXHIBIT "A"
RATABLE NOTE
$ March 27, 1995
-----------------
Schnitzer Steel Industries, Inc., an Oregon corporation (the
"Borrower"), promises to pay to the order of
(the "Lender") the lesser of the principal sum of Dollars or
the aggregate unpaid principal amount of all Ratable Loans made by the Lender to
the Borrower pursuant to Sections 2.1 and 2.2 of the Credit Agreement (as the
same may be amended or modified, the "Agreement") hereinafter referred to, in
immediately available funds at the main office of The First National Bank of
Chicago in Chicago, Illinois, as Agent, together with interest on the unpaid
principal amount hereof at the rates and on the dates set forth in the
Agreement. The Borrower shall pay the principal of and accrued and unpaid
interest on the Loans in full on the Facility Termination Date.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.
This Ratable Note is one of the Ratable Notes issued pursuant to, and
is entitled to the benefits of, the Credit Agreement, dated as of March 27, 1995
among the Borrower, The First National Bank of Chicago, individually and as
Agent, and the lenders named therein, including the Lender, to which Agreement,
as it may be amended from time to time, reference is hereby made for a statement
of the terms and conditions governing this Ratable Note, including the terms and
conditions under which this Ratable Note may be prepaid or its maturity date
accelerated. Capitalized terms used herein and not otherwise defined herein are
used with the meanings attributed to them in the Agreement.
SCHNITZER STEEL INDUSTRIES, INC.
By:
-----------------------------
Print Name:
---------------------
Title:
--------------------------
Page 48
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF SCHNITZER STEEL INDUSTRIES, INC.
DATED MARCH 27, 1995
Maturity
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
- ---- --------- ----------- --------- -------
Page 49
<PAGE>
EXHIBIT "B"
COMPETITIVE BID LOAN NOTE
$100,000,000 March 27, 1995
Schnitzer Steel Industries, Inc., an Oregon corporation (the
"Borrower"), promises to pay, on or before the Termination Date, to the order
of (the "Lender") the aggregate unpaid principal
amount of all Competitive Bid Loans made by the Lender to the Borrower
pursuant to Sections 2.1 and 2.3 of the Credit Agreement hereinafter referred
to (as the same may be amended or modified, the "Agreement"), in lawful money
of the United States in immediately available funds at the main office of The
First National Bank of Chicago, as Agent, in Chicago, Illinois, together with
interest, in like money and funds, on the unpaid principal amount hereof at
the rates and on the dates determined in accordance with the Agreement. The
Borrower shall pay each Competitive Bid Loan in full on the last day of such
Competitive Bid Loan's applicable Interest Period.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or otherwise record in accordance with its usual practice, the
date and amount of each Competitive Bid Loan and the date and amount of each
principal payment hereunder.
This Competitive Bid Loan Note is one of the Competitive Bid Loan
Notes issued pursuant to, and is entitled to the benefits of, the Credit
Agreement dated as of March 27, 1995, among the Borrower, The First National
Bank of Chicago, individually and as Agent, and the banks named therein,
including the Lender, to which Agreement, as it may be amended from time to
time, reference is hereby made for a statement of the terms and conditions under
which this Note may be prepaid or its maturity date accelerated. Capitalized
terms used herein and not otherwise defined herein are used with the meanings
attributed to them in the Agreement.
Each Competitive Bid Loan Note issued pursuant to the Agreement is in
the amount of $100,000,000, PROVIDED, HOWEVER, that the aggregate principal
amount of Loans from all Lenders under the Agreement shall not exceed
$100,000,000.
SCHNITZER STEEL INDUSTRIES,
INC.
By:
-----------------------
Title:
--------------------
Page 50
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
COMPETITIVE BID LOAN NOTE
OF SCHNITZER STEEL INDUSTRIES, INC.
DATED MARCH 27, 1995
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
- ---- --------- ----------- --------- -------
Page 51
<PAGE>
EXHIBIT "C"
COMPETITIVE BID QUOTE REQUEST
(Section 2.3.2)
, 19
To: The First National Bank of Chicago,
as agent (the "Agent")
From: Schnitzer Steel Industries, Inc. ("Borrower")
Re: Credit Agreement (the "Agreement") dated as of March 27, 1995,
among the Borrower, The First National Bank of Chicago,
individually and as Agent, and the Lenders listed on the
signature pages thereof
We hereby give notice pursuant to Section 2.3.2 of the Agreement that
we request Competitive Bid Quotes for the following proposed Competitive Bid
Advance(s):
Borrowing Date: , 19
Principal Amount(1) Interest Period(2)
- ------------------- ------------------
$
Such Competitive Bid Quotes should offer a [Competitive Bid Margin]
[Absolute Rate].
Upon acceptance by the undersigned of any or all of the Competitive
Bid Advances offered by Lenders in response to this request, the undersigned
shall be deemed to affirm as of such date the representations and warranties
made in the Agreement to the extent specified in Article IV thereof.
Capitalized terms used herein have the meanings assigned to them in the
Agreement.
SCHNITZER STEEL INDUSTRIES, INC.
By:
----------------------------
Title:
-------------------------
(1) Amount must be at least $5,000,000 and an integral multiple of
$1,000,000.
(2) One, two, three, six or twelve months (Eurodollar Auction) or at least
14 and up to 360 days (Absolute Rate Auction), subject to the
provisions of the definitions of Eurodollar Interest Period and
Absolute Rate Interest Period.
Page 52
<PAGE>
EXHIBIT "D"
INVITATION FOR COMPETITIVE BID QUOTES
(Section 2.3.3)
, 19
To: [Name of Lender]
Re: Invitation for Competitive Bid Quotes to Schnitzer Steel
Industries, Inc. (the "Borrower")
Pursuant to Section 2.3.3 of the Credit Agreement dated as of
, 19 (the "Agreement") among the Borrower, the Lenders parties thereto and
the undersigned, as Agent, we are pleased on behalf of the Borrower to invite
you to submit Competitive Bid Quotes to the Borrower for the following proposed
Competitive Bid Advance(s):
Borrowing Date: , 19
Principal Amount Interest Period
- ---------------- ---------------
$
Such Competitive Bid Quotes should offer a [Competitive Bid Margin]
[Absolute Rate]. Your Competitive Bid Quote must comply with Section 2.3.4 of
the Agreement and the foregoing terms in which the Competitive Bid Quote Request
was made. Capitalized terms used herein have the meanings assigned to them in
the Agreement.
Please respond to this invitation by no later than [ ]
[ ] Chicago time on , 19 .
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
By:
------------------------------
Authorized Officer
Page 53
<PAGE>
EXHIBIT "E"
COMPETITIVE BID QUOTE
(Section 2.3.4)
, 19
To: The First National Bank of Chicago, as Agent
Attn:
Re: Competitive Bid Quote to Schnitzer Steel Industries, Inc. (the
"Borrower")
In response to your invitation on behalf of the Borrower dated ,
19 , we hereby make the following Competitive Bid Quote pursuant to Section
2.3.4 of the Credit Agreement hereinafter referred to and on the following
terms:
1. Quoting Lender:
2. Person to contact at Quoting Lender:
3. Borrowing Date: , 19 1
4. We hereby offer to make Competitive Bid Loan(s) in the following
principal amounts, for the following Interest Periods and at the
following rates:
Principal Interest [Competitive [Absolute Minimum
Amount(2) Period(3) Bid Margin(4)] Rate(5)] Amount(6)
- --------- --------- -------------- --------- ----------
$
- -------------
(1) As specified in the related Invitation.
(2) Principal amount bid for each Interest Period may not exceed principal
amount requested. Bids must be made for $5,000,000 and an integral
multiple of $1,000,000.
(3) One, two, three, six or twelve months or at least 14 and up to 360
days, as specified in the related Invitation.
(4) Competitive Bid Margin over or under the Eurodollar Base Rate
determined for the applicable Interest Period. Specify percentage
(rounded to the nearest 1/100 of 1%) and specify whether "PLUS" or
"MINUS".
(5) Specify rate of interest per annum (rounded to the nearest 1/100 of
1%).
(6) Specify minimum amount which the Borrower may accept (see Section
2.3.4(ii)(d)).
Page 54
<PAGE>
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Credit Agreement
dated as of March 27, 1995 among the Borrower, the Lenders listed on the
signature pages thereof and yourselves, as Agent, irrevocably obligates us to
make the Competitive Bid Loan(s) for which any offer(s) are accepted, in whole
or in part.
Very truly yours,
[NAME OF LENDER]
Dated: , 19
By:
-----------------------------
Authorized Officer
Page 55
<PAGE>
EXHIBIT "F"
SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY (this "Guaranty") is made as of the
day of , 1995, by * (the "Subsidiary Guarantor") in favor
of the Agent, for the ratable benefit of the Lenders, under the Credit Agreement
referred to below;
RECITALS
1. Schnitzer Steel Industries, Inc., an Oregon corporation (the
"Borrower"), and The First National Bank of Chicago, as Agent (the "Agent"), and
certain other Lenders from time to time party thereto have entered into a
certain Credit Agreement dated as of even date herewith (as same may be amended
or modified from time to time, the "Credit Agreement"), providing, subject to
the terms and conditions thereof, for extensions of credit to be made by the
Lenders to the Borrower.
2. It is a condition precedent to the Agent and the Lenders
executing the Credit Agreement that the Subsidiary Guarantor execute and deliver
this Guaranty whereby the Subsidiary Guarantor shall guarantee the payment when
due, subject to Section 9 hereof, of all principal, interest and other amounts
that shall be at any time payable by the Borrower under the Credit Agreement,
the Notes and the other Loan Documents.
3. In consideration of the financial and other support that the
Borrower has provided, and such financial and other support as the Borrower may
in the future provide, to the Subsidiary Guarantor, and in order to induce the
Lenders and the Agent to enter into the Credit Agreement, the Subsidiary
Guarantor is willing to guarantee the obligations of the Borrower under the
Credit Agreement, the Notes, and the other Loan Documents.
AGREEMENT
In consideration of the foregoing, the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS. Capitalized terms defined herein shall have the
meanings specified in the Credit Agreement.
2. REPRESENTATIONS AND WARRANTIES. The Subsidiary Guarantor
represents and warrants (which representations and warranties shall be deemed to
have been renewed upon each Borrowing Date under the Credit Agreement) as
follows:
*A separate Guaranty will be signed by each of Cascade Steel Rolling Mill, Inc.
and Manufacturing Management, Inc.
Page 56
<PAGE>
2.1 it is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation;
2.2 it has all requisite corporate power, and has all material
governmental licenses, authorizations, consents and approvals necessary to own
its assets and carry on its business as now being or as proposed to be
conducted;
2.3 it is qualified to do business in all jurisdictions in
which the nature of the business conducted by it makes such qualification
necessary and where failure so to qualify would have a Material Adverse Effect;
2.4 it has all necessary corporate power and authority to
execute, deliver and perform its obligations under this Guaranty;
2.5 the execution, delivery and performance of this Guaranty
have been duly authorized by all necessary corporate action;
2.6 this Guaranty has been duly and validly executed and
delivered by it and constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization, or moratorium or other
similar laws relating to the enforcement of creditors' rights generally and by
general equitable principles; and
2.7 neither the execution and delivery by it of this Guaranty
nor compliance with the terms and provisions hereof will conflict with or result
in a breach of, or require any consent under, its certificate of incorporation
or by-laws or any applicable law or regulation, or any order, writ, injunction
or decree of any court or governmental authority or agency, or any agreement or
instrument to which it is a party or by which it is bound or to which it is
subject, or constitute a default under any such agreement or instrument, or
result in the creation or imposition of any Lien upon any of its revenues or
assets pursuant to the terms of any such agreement or instrument.
3. COVENANTS. So long as any Lender has any Commitment outstanding
under the Credit Agreement or any amount payable under the Credit Agreement or
any Note shall remain unpaid, the Subsidiary Guarantor covenants that it will,
and, if necessary, will enable the Borrower to fully comply with those covenants
and agreements set forth in the Credit Agreement.
4. THE GUARANTY. Subject to Section 10 hereof, the Subsidiary
Guarantor hereby unconditionally guarantees the full and punctual payment
(whether at stated maturity, upon acceleration or otherwise) of the principal of
and interest on each Note issued by the Borrower pursuant to the Credit
Agreement, and the full and punctual payment of all other amounts payable by the
Borrower under the Credit Agreement and the other Loan Documents including,
without limitation, the Obligations (all of the foregoing, subject to the
provisions of Section 10 hereof, being referred to collectively as the
"Guaranteed Obligations"). Upon failure by the Borrower to pay punctually any
such amount, the Subsidiary Guarantor agrees that it shall forthwith on demand
pay the amount not so paid at the place and in the manner specified in the
Credit Agreement, any Note or the relevant Loan Document, as the case may be.
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<PAGE>
5. GUARANTY UNCONDITIONAL. Subject to Section 10 hereof, the
obligations of the Subsidiary Guarantor hereunder shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:
5.1 any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of the Borrower under the Credit Agreement, any
Note, or any other Loan Document, by operation of law or otherwise or any
obligation of any other guarantor of any of the Obligations;
5.2 any modification or amendment of or supplement to the Credit
Agreement, any Note, or any other Loan Document;
5.3 any release, nonperfection or invalidity of any direct or
indirect security for any obligation of the Borrower under the Credit Agreement,
any Note, any Loan Document, or any obligations of any other guarantor of any of
the Obligations;
5.4 any change in the corporate existence, structure or ownership of
the Borrower or any other guarantor of any of the Obligations, or any
insolvency, bankruptcy, reorganization or other similar proceeding affecting the
Borrower, or any other guarantor of the Obligations, or its assets or any
resulting release or discharge of any obligation of the Borrower, or any other
guarantor of any of the Obligations;
5.5 the existence of any claim, setoff or other rights which the
Subsidiary Guarantors may have at any time against the Borrower, any other
guarantor of any of the Obligations, the Agent, any Lender or any other Person,
whether in connection herewith or any unrelated transactions;
5.6 any invalidity or unenforceability relating to or against the
Borrower, or any other guarantor of any of the Obligations, for any reason
related to the Credit Agreement, any other Loan Document, or any provision of
applicable law or regulation purporting to prohibit the payment by the Borrower,
or any other guarantor of the Obligations, of the principal of or interest on
any Note or any other amount payable by the Borrower under the Credit Agreement,
the Notes, or any other Loan Document; or
5.7 any other act or omission to act or delay of any kind by the
Borrower, any other guarantor of the Obligations, the Agent, any Lender or any
other Person or any other circumstance whatsoever which might, but for the
provisions of this paragraph, constitute a legal or equitable discharge of the
Subsidiary Guarantor's obligations hereunder.
6. DISCHARGE ONLY UPON PAYMENT IN FULL: REINSTATEMENT IN CERTAIN
CIRCUMSTANCES. The Subsidiary Guarantor's obligations hereunder shall remain in
full force and effect until all Guaranteed Obligations shall have been paid in
full and the Commitments under the Credit Agreement shall have terminated or
expired. If at any time any payment of the principal of or interest on any Note
or any other amount payable by the Borrower or any other party under the Credit
Agreement or any other Loan Document is rescinded or must be otherwise restored
or returned upon the insolvency, bankruptcy or reorganization of the Borrower or
otherwise, the Subsidiary Guarantor's obligations hereunder with respect to such
payment shall be reinstated as though such payment had been due but not made at
such time.
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<PAGE>
7. WAIVER OF NOTICE. The Subsidiary Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and, to the fullest extent
permitted by law, any notice not provided for herein, as well as any requirement
that at any time any action be taken by any Person against the Borrower, any
other guarantor of the Obligations, or any other Person.
8. SUBROGATION. The Subsidiary Guarantor hereby agrees not to assert
any right, claim or cause of action, including, without limitation, a claim for
subrogation, reimbursement, indemnification or otherwise, against the Borrower
arising out of or by reason of this Guaranty or the obligations hereunder,
including, without limitation, the payment or securing or purchasing of any of
the Obligations by the Subsidiary Guarantor unless and until the Guaranteed
Obligations are paid in full and any commitment to lend under the Credit
Agreement and other Loan Documents is terminated.
9. STAY OF ACCELERATION. If acceleration of the time for payment of
any amount payable by the Borrower under the Credit Agreement, any Note or any
other Loan Document is stayed upon the insolvency, bankruptcy or reorganization
of the Borrower, all such amounts otherwise subject to acceleration under the
terms of the Credit Agreement, any Note or any other Loan Document shall
nonetheless be payable by the Subsidiary Guarantor hereunder forthwith on demand
by the Agent made at the request of the Required Lenders.
10. LIMITATION ON OBLIGATIONS.
10.1 It is the intention of the Subsidiary Guarantor and the Lenders
that the Subsidiary Guarantor's obligations hereunder shall be in, but not in
excess of, as of any date, the greater of the following (such greater amount
determined hereunder being the Subsidiary Guarantor's "Maximum Liability"):
10.1.1 the aggregate amount of all monies received by the
Subsidiary Guarantor from the Borrower after the date hereof (whether by loan,
capital infusion or other means), or
10.1.2 the maximum amount (such amount being the Subsidiary
Guarantor's "Alternative Limitation") not subject to avoidance under Title 11 of
the United States Code, as same may be amended from time to time, or any
applicable state law (collectively, the "Bankruptcy Code"). To that end, but as
to the Alternative Limitation of the Subsidiary Guarantor, only to the extent
such obligations would otherwise be subject to avoidance under the Bankruptcy
Code if the Subsidiary Guarantor is not deemed to have received valuable
consideration, fair value or reasonably equivalent value for its obligations
hereunder, the Subsidiary Guarantor's obligations hereunder shall be reduced to
that amount which, after giving effect thereto, would not render the Subsidiary
Guarantor insolvent, or leave the Subsidiary Guarantor with an unreasonably
small capital to conduct its business, or cause the Subsidiary Guarantor to have
incurred debts (or intended to have incurred debts) beyond its ability to pay
such debts as they mature, at the time such obligations are deemed to have been
incurred under the Bankruptcy Code. As used herein, the terms "insolvent" and
"unreasonably small capital" shall likewise be determined in accordance with the
Bankruptcy Code. This Section 10.1 with respect to the Alternative Limitation
of the Subsidiary Guarantor is intended solely to preserve the rights of the
Agent hereunder to the maximum extent not subject to avoidance under the
Bankruptcy Code, and neither the Subsidiary Guarantor nor any other person or
entity shall have any right or claim under this Section 10.1 with respect to the
Alternative Limitation, except to
Page 59
<PAGE>
the extent necessary so that the obligations of the Subsidiary Guarantor
hereunder shall not be rendered voidable under the Bankruptcy Code.
10.2 The Subsidiary Guarantor agrees that the Guaranteed Obligations
may at any time and from time to time exceed the Maximum Liability of the
Subsidiary Guarantor, and may exceed the aggregate Maximum Liability of all
other Subsidiary Guarantors, without impairing this Guaranty or affecting the
rights and remedies of the Agent hereunder. Nothing in this Section 10.2 shall
be construed to increase the Subsidiary Guarantor's obligations hereunder beyond
its Maximum Liability.
10.3 In the event the Subsidiary Guarantor (a "Paying Subsidiary
Guarantor") shall make any payment or payments under this Guaranty or shall
suffer any loss as a result of any realization upon any collateral granted by it
to secure its obligations under this Guaranty, each other Subsidiary Guarantor
(each a "Non-Paying Subsidiary Guarantor") shall contribute to such Paying
Subsidiary Guarantor an amount equal to such Non-Paying Subsidiary Guarantor's
"Pro Rata Share" of such payment or payments made, or losses suffered, by such
Paying Subsidiary Guarantor. For the purposes hereof, each Non-Paying
Subsidiary Guarantor's "Pro Rata Share" with respect to any such payment or loss
by a Paying Subsidiary Guarantor shall be determined as of the date on which
such payment or loss was made by reference to the ratio of
(a) such Non-Paying Subsidiary Guarantor's Maximum Liability
as of such date (without giving effect to any right to receive, or obligation to
make, any contribution hereunder) to
(b) the aggregate Maximum Liability of all Subsidiary
Guarantors (including such Paying Subsidiary Guarantor) as of such date (without
giving effect to any right to receive, or obligation to make, any contribution
hereunder). Nothing in this Section 10.3 shall affect the Subsidiary
Guarantor's several liability for the entire amount of the Guaranteed
Obligations (up to such Subsidiary Guarantor's Maximum Liability). The
Subsidiary Guarantor covenants and agrees that its right to receive any
contribution under this Guaranty from a Non-Paying Subsidiary Guarantor shall be
subordinate and junior in right of payment to all the Guaranteed Obligations.
The provisions of this Section 10.3 are for the benefit of both the Agent and
the Subsidiary Guarantors and may be enforced by any one, or more, or all of
them in accordance with the terms hereof.
11. NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing, by telex or facsimile and addressed or
delivered to such party at its address or telecopier number set forth on the
signature pages hereof or such other address or telecopy number as such party
may hereafter specify for such purpose by notice to the Agent in accordance with
the provisions of Section 13.1 of the Credit Agreement. Any notice, if mailed
and properly addressed with postage prepaid, shall be deemed given when
received; any notice, if transmitted by telex or facsimile, shall be deemed
given when transmitted (answerback confirmed in the case of telexes).
12. NO WAIVERS. No failure or delay by the Agent or any Lenders
in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies provided in this Guaranty, the Credit
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<PAGE>
Agreement, the Notes, and the other Loan Documents shall be cumulative and not
exclusive of any rights or remedies provided by law.
13. SUCCESSORS AND ASSIGNS. This Guaranty is for the benefit of the
Agent and the Lenders and their respective successors and permitted assigns and
in the event of an assignment of any amounts payable under the Credit Agreement,
the Notes, or the other Loan Documents, the rights hereunder, to the extent
applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Guaranty shall be binding upon the Subsidiary Guarantor and
its respective successors and permitted assigns.
14. CHANGES IN WRITING. Neither this Guaranty nor any provision
hereof may be changed, waived, discharged or terminated orally, but only in
writing signed by the Subsidiary Guarantor and the Agent with the consent of the
Required Lenders.
15. ENTIRE AGREEMENT. This Guaranty embodies the entire agreement
and understanding among the Subsidiary Guarantor, the Agent and the Lenders
relating to the subject matter hereof.
16. CHOICE OF LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAW OF THE STATE OF ILLINOIS.
17. CONSENT TO JURISDICTION. THE SUBSIDIARY GUARANTOR HEREBY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO IN ANY LEGAL PROCEEDINGS BROUGHT AGAINST IT ARISING OUT
OF OR RELATING TO THIS GUARANTY (INCLUDING, WITHOUT LIMITATION, ANY OF THE OTHER
LOAN DOCUMENTS) OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE SUBSIDIARY
GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
18. WAIVER OF JURY TRIAL. THE SUBSIDIARY GUARANTOR, AND THE AGENT
AND THE LENDERS ACCEPTING THIS GUARANTY, HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.
19. TAXES, ETC. All payments required to be made by the Subsidiary
Guarantor hereunder shall be made without setoff or counterclaim and free and
clear of and without deduction or withholding for or on account of, any present
or future taxes, levies, imposts, duties or other charges of whatsoever nature
imposed by any government or any political or taxing authority thereof,
provided, however, that if the Subsidiary Guarantor is required by law to make
such deduction or withholding, the Subsidiary Guarantor shall forthwith pay to
the Agent or any Lender, as applicable, such additional amount as results in the
net amount received by the Agent or any Lender, as applicable, equaling the full
amount which would have been
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received by the Agent or any Lender, as applicable, had no such deduction or
withholding been made.
IN WITNESS WHEREOF, the Subsidiary Guarantor has executed this
Guaranty effective the day and year first above written.
--------------------------*
By:
-----------------------
Title:
--------------------
* Insert name of Cascade Steel Rolling Mill, Inc. or Manufacturing
Management, Inc., as appropriate.
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<PAGE>
EXHIBIT "G"
FORM OF OPINION
March 27, 1995
The Agent and the Lenders who are parties to the
Credit Agreement described below.
Gentlemen/Ladies:
I am general counsel for Schnitzer Steel Industries, Inc. (the
"Borrower"), and Cascade Steel Rolling Mills, Inc. and [Manufacturing
Management, Inc. and] (collectively, the "Subsidiary Guarantors"), and have
represented the Borrower in connection with its execution and delivery of a
Credit Agreement among the Borrower, The First National Bank of Chicago,
individually and as Agent, and the Lenders named therein, providing for Advances
in an aggregate principal amount not exceeding $100,000,000 at any one time
outstanding and dated as of March 27, 1995 (the "Agreement"), and have
represented the Subsidiary Guarantors in connection with their execution of the
Guaranty. All capitalized terms used in this opinion and not otherwise defined
shall have the meanings attributed to them in the Agreement.
I have examined the Borrower's and each Subsidiary Guarantor's
articles of incorporation, by-laws, resolutions, the Loan Documents, the
Guaranty, and such other matters of fact and law which I deem necessary in order
to render this opinion. Based upon the foregoing, it is our opinion that:
l. The Borrower and the Subsidiary Guarantors are corporations duly
incorporated, validly existing and in good standing under the laws of their
states of incorporation and have all requisite authority to conduct their
business in each jurisdiction in which their business is conducted.
2. The execution and delivery of the Loan Documents by the Borrower
and of the Guaranty by the Subsidiary Guarantors and the performance by the
Borrower and the Subsidiary Guarantors of their obligations under the Loan
Documents and the Guaranty have been duly authorized by all necessary corporate
action and proceedings on the part of the Borrower and the Subsidiary Guarantors
will not:
(a) require any consent of the Borrower's or any Subsidiary
Guarantor's shareholders;
(b) violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on the Borrower or any of its
Subsidiary Guarantor's articles of incorporation or by-laws or any
indenture, instrument or agreement binding upon the Borrower or the
Subsidiary Guarantors; or
(c) result in, or require, the creation or imposition of any
Lien pursuant to the provisions of any indenture, instrument or
agreement binding upon the Borrower or any of its Subsidiary
Guarantors.
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<PAGE>
3. The Loan Documents have been duly executed and delivered by the
Borrower and constitute legal, valid and binding obligations of the Borrower
enforceable in accordance with their terms except to the extent the enforcement
thereof may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and subject also to the availability
of equitable remedies if equitable remedies are sought.
4. The Guaranty have been duly executed and delivered by each
Subsidiary Guarantor and constitutes a legal, valid and binding obligation of
each Subsidiary Guarantor enforceable in accordance with their terms except to
the extent the enforcement thereof may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally and
subject also to the availability of equitable remedies if equitable remedies are
sought.
5. There is no litigation or proceeding against the Borrower or the
Subsidiary Guarantor which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect.
6. No approval, authorization, consent, adjudication or order of any
governmental authority, which has not been obtained by the Borrower or the
Subsidiary Guarantors, is required to be obtained by the Borrower or the
Subsidiary Guarantors in connection with the execution and delivery of the Loan
Documents, the borrowings under the Agreement or in connection with the payment
by the Borrower of the Obligations.
7. No approval, authorization, consent, adjudication or order of any
governmental authority, which has not been obtained by the Subsidiary
Guarantors, is required to be obtained by the Subsidiary Guarantors in
connection with the execution and delivery of the Guaranty, or in connection
with the payment by the Subsidiary Guarantors of the obligations under the
Guaranty.
This opinion may be relied upon by the Agent, the Lenders and their
participants, assignees and other transferees.
Very truly yours,
----------------------
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<PAGE>
EXHIBIT "H"
COMPLIANCE CERTIFICATE
To: The Lenders parties to the
Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that certain
Credit Agreement dated as of March 27, 1995 (as amended, modified, renewed or
extended from time to time, the "Agreement") among the Borrower, the lenders
party thereto and The First National Bank of Chicago, as Agent for the Lenders.
Unless otherwise defined herein, capitalized terms used in this Compliance
Certificate have the meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected of the Borrower;
2. I have reviewed the terms of the Agreement and I have made, or
have caused to be made under my supervision, a detailed review of the
transactions and conditions of the Borrower and its Subsidiaries during the
accounting period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event which constitutes
a Default or Unmatured Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below;
4. Schedule I attached hereto sets forth financial data and
computations evidencing the Borrower's compliance with certain covenants of the
Agreement, all of which data and computations are true, complete and correct and
Schedule II attached hereto sets forth the determination of the interest rate to
be paid for Advances commencing the first day of the month following the
delivery hereof; and
5. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event relating to the
environmental actions with respect to MMI described in the Property Transaction
Due Diligence Report prepared for the Borrower by CH2M Hill and dated November
30, 1994 (including, but not limited to, a material increase in the estimated or
actual cost of remediation of the environmental conditions set forth therein)
that would be likely to have a Material Adverse Effect.
Described below are the exceptions, if any, to paragraphs 3 and 5.
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
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(List in detail, the nature of the condition or event, the period
during which it has existed and the action which the Borrower has taken, is
taking, or proposes to take with respect to each such condition or event).
The foregoing certifications, together with the computations set forth
in Schedule I and Schedule II hereto and the financial statements delivered with
this Certificate in support hereof, are made and delivered this day of
, 19 .
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<PAGE>
SCHEDULE I TO THE COMPLIANCE CERTIFICATE
SCHNITZER STEEL INDUSTRIES, INC.
CREDIT AGREEMENT DATED MARCH 27, 1995
<TABLE>
<S> <C> <C> <C> <C>
A. RESTRICTED PAYMENTS (SECTION 8.10)
i) Maximum shares repurchased for Employee
Stock Purchase Plan in any quarter $2,500,000
ii) Actual current quarter shares repurchased
for Employee Stock Purchase Plan $0
iii) Consolidated Net Income if positive
for preceding four quarters $0
iv) Consolidated Net Income if positive
for 4 quarters prior to iii) $0
v) Maximum payments for current quarter [(iii) + (iv)]x 30.0% $0
a) Dividends $0
b) Share Repurchases $0
c) Total $0
B. SUBSIDIARY INDEBTEDNESS (SECTION 8.11)
i) Consolidated Net Worth previous quarter end $0
ii) Maximum subsidiary indebtedness ix 10.0% $0
iii) Actual subsidiary indebtedness $0
C. INVESTMENTS AND ACQUISITIONS (SECTION 8.16)
i) Consolidated Net Worth prior year end $0
ii) Maximum yearly Acquisitions and joint
venture investments ix 15.0% $0
iii) [Note: rested on FYE only, otherwise FYI]
iv) Actual year-to-date Acquisitions and
joint venture investments $0
v) Maximum other Acquisitions and Investments $5,000,000
vi) Actual other Acquisitions and Investments $0
D. CONTINGENT OBLIGATIONS (SECTION 8.17)
i) Maximum Contingent Obligations $10,000,000
ii) Actual Contingent Obligations $0
E. LIENS (SECTION 8.18)
i) Maximum purchase money liens on personal property $5,000,000
ii) Actual purchase money liens on personal property $0
iii) Maximum purchase money liens on real property $5,000,000
iv) Actual purchase money liens on real property $0
v) Maximum other liens $5,000,000
vi) Actual other liens $0
F. CONSOLIDATED LEVERAGE RATIO (SECTION 8.20)
i) Maximum Consolidated Leverage Ratio 0.45
ii) Consolidated Funded Indebtedness
a) Obligations for borrowed money $0
b) Obligations for deferred purchase
price of property $0
c) Obligations secured by Liens $0
d) Capital Lease Obligations $0
e) Total $0
iii) Consolidated Net Worth $0
iv) Consolidated Capitalization (ii + iii) $0
v) Actual Consolidated Leverage Ratio (ii(e)/(iv))
G. CONSOLIDATED NET WORTH (SECTION 8.21)
i) Cumulative Consolidated Net Income since 11/30/94 $0
ii) x 60% ix 60.0% $0
iii) Cumulative equity proceeds since 12/23/94 $0
iv) Floor Value $100,000,000
v) Minimum Consolidated Net Worth (ii + iii + iv) $100,000,000
vi) Actual Consolidated Net Worth $0
H. CONSOLIDATED FIXED CHARGE COVERAGE RATIO (SECTION 8.22)
i) Minimum Rolling Four Quarter Fixed Charge
Coverage Ratio
3.00
ii) Rolling four quarter EBITDA
a) Consolidated Net Income $0
b) Income taxes $0
c) Interest expense $0
d) depreciation and amortization $0
e) other non-cash items (non-cash charges net of credits) $0
f) EBITDA (sum of a-e) $0
iii) Consolidated Rentals $0
iv) Consolidated Fixed Charges (ii(c) = iii) $0
v) Consolidated Scheduled Principal Payments $0
vi) Consolidated Fixed Charge Coverage Ratio ((ii + iv)/(iv + v))
</TABLE>
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<PAGE>
SCHEDULE II TO COMPLIANCE CERTIFICATE
Schedule of Applicable Interest Rate Margin and Facility Fee
as of pursuant to
Section 2.9 of the Agreement
Actual Consolidated Leverage Ratio
(See Section 6.20 and item F(i) on
Schedule I to Compliance Certificate): ---
Applicable Interest Rate Margin and Facility
Fee (See Section 2.9):
Applicable Facility Fee Rate
--- %
Applicable Eurodollar Advance Margin --- %
Applicable CD Rate Advance Margin --- %
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<PAGE>
EXHIBIT "I"
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
(the "Assignor") and (the
"Assignee") is dated as of , 19 . The parties hereto agree as
follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit
Agreement (which, as it may be amended, modified, renewed or extended from time
to time is herein called the "Credit Agreement") described in Item 1 of Schedule
1 attached hereto ("Schedule 1"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings attributed to them in the
Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns
to the Assignee, and the Assignee hereby purchases and assumes from the
Assignor, an interest in and to the Assignor's rights and obligations under the
Credit Agreement such that after giving effect to such assignment the Assignee
shall have purchased pursuant to this Assignment Agreement the percentage
interest specified in Item 3 of Schedule 1 of all outstanding rights and
obligations under the Credit Agreement relating to the facilities listed in Item
3 of Schedule 1 and the other Loan Documents. The aggregate Commitment (or
Loans, if the applicable Commitment has been terminated) purchased by the
Assignee hereunder is set forth in Item 4 of Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement
(the "Effective Date") shall be the later of the date specified in Item 5 of
Schedule 1 or two Business Days (or such shorter period agreed to by the Agent)
after a Notice of Assignment substantially in the form of Exhibit "I" attached
hereto has been delivered to the Agent. Such Notice of Assignment must include
any consents required to be delivered to the Agent by Section 12.3.1 of the
Credit Agreement. In no event will the Effective Date occur if the payments
required to be made by the Assignee to the Assignor on the Effective Date under
Sections 4 and 5 hereof are not made on the proposed Effective Date. The
Assignor will notify the Assignee of the proposed Effective Date no later than
the Business Day prior to the proposed Effective Date. As of the Effective
Date, (i) the Assignee shall have the rights and obligations of a Lender under
the Loan Documents with respect to the rights and obligations assigned to the
Assignee hereunder and (ii) the Assignor shall relinquish its rights and be
released from its corresponding obligations under the Loan Documents with
respect to the rights and obligations assigned to the Assignee hereunder.
4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the
Assignee shall be entitled to receive from the Agent all payments of principal,
interest and fees with respect to the interest assigned hereby. The Assignee
shall advance funds directly to the Agent with respect to all Loans and
reimbursement payments made on or after the Effective Date with respect to the
interest assigned hereby. [In consideration for the sale and assignment of
Loans hereunder, (i) the Assignee shall pay the Assignor, on the Effective Date,
an amount equal to
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<PAGE>
the principal amount of the portion of all Floating Rate Loans assigned to
the Assignee hereunder and (ii) with respect to each Fixed Rate Loan made by
the Assignor and assigned to the Assignee hereunder which is outstanding on
the Effective Date, (a) on the last day of the Interest Period therefor or
(b) on such earlier date agreed to by the Assignor and the Assignee or (c) on
the date on which any such Fixed Rate Loan either becomes due (by
acceleration or otherwise) or is prepaid (the date as described in the
foregoing clauses (a), (b) or (c) being hereinafter referred to as the
"Payment Date"), the Assignee shall pay the Assignor an amount equal to the
principal amount of the portion of such Fixed Rate Loan assigned to the
Assignee which is outstanding on the Payment Date. If the Assignor and the
Assignee agree that the Payment Date for such Fixed Rate Loan shall be the
Effective Date, they shall agree to the interest rate applicable to the
portion of such Loan assigned hereunder for the period from the Effective
Date to the end of the existing Interest Period applicable to such Fixed Rate
Loan (the "Agreed Interest Rate") and any interest received by the Assignee
in excess of the Agreed Interest Rate shall be remitted to the Assignor. In
the event interest for the period from the Effective Date to but not
including the Payment Date is not paid by the Borrower with respect to any
Fixed Rate Loan sold by the Assignor to the Assignee hereunder, the Assignee
shall pay to the Assignor interest for such period on the portion of such
Fixed Rate Loan sold by the Assignor to the Assignee hereunder at the
applicable rate provided by the Credit Agreement. In the event a prepayment
of any Fixed Rate Loan which is existing on the Payment Date and assigned by
the Assignor to the Assignee hereunder occurs after the Payment Date but
before the end of the Interest Period applicable to such Fixed Rate Loan, the
Assignee shall remit to the Assignor the excess of the prepayment penalty
paid with respect to the portion of such Fixed Rate Loan assigned to the
Assignee hereunder over the amount which would have been paid if such
prepayment penalty was calculated based on the Agreed Interest Rate. The
Assignee will also promptly remit to the Assignor (i) any principal payments
received from the Agent with respect to Fixed Rate Loans prior to the Payment
Date and (ii) any amounts of interest on Loans and fees received from the
Agent which relate to the portion of the Loans assigned to the Assignee
hereunder for periods prior to the Effective Date, in the case of Floating
Rate Loans or fees, or the Payment Date, in the case of Fixed Rate Loans, and
not previously paid by the Assignee to the Assignor.]* In the event that
either party hereto receives any payment to which the other party hereto is
entitled under this Assignment Agreement, then the party receiving such
amount shall promptly remit it to the other party hereto.
*Each Assignor may insert its standard payment provisions in lieu of the payment
terms included in this Exhibit.
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the
Assignor a fee on each day on which a payment of interest or [commitment] fees
is made under the Credit Agreement with respect to the amounts assigned to the
Assignee hereunder (other than a payment of interest or commitment fees for the
period prior to the Effective Date or, in the case of Fixed Rate Loans, the
Payment Date, which the Assignee is obligated to deliver to the Assignor
pursuant to Section 4 hereof). The amount of such fee shall be the difference
between (i) the interest or fee, as applicable, paid with respect to the amounts
assigned to the Assignee hereunder and (ii) the interest or fee, as applicable,
which would have been paid with respect to the amounts assigned to the Assignee
hereunder if each interest rate was of 1% less than the interest rate paid
by the Borrower or if the commitment fee was of 1% less than the commitment
fee paid by the Borrower, as applicable. In addition, the Assignee agrees to
pay
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<PAGE>
% of the recordation fee required to be paid to the Agent in connection
with this Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by the Assignor. It is
understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor
nor any of its officers, directors, employees, agents or attorneys shall be
responsible for (i) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectability of any Loan Document, including
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of the Borrower or any guarantor, (ii) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (iii) the financial condition or creditworthiness of the
Borrower or any guarantor, (iv) the performance of or compliance with any of the
terms or provisions of any of the Loan Documents, (v) inspecting any of the
Property, books or records of the Borrower, (vi) the validity, enforceability,
perfection, priority, condition, value or sufficiency of any collateral securing
or purporting to secure the Loans or (vii) any mistake, error of judgment, or
action taken or omitted to be taken in connection with the Loans or the Loan
Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that
it has received a copy of the Credit Agreement, together with copies of the
financial statements requested by the Assignee and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement, (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Lender and based on such documents and information at it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Loan Documents, (iii) appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto, (iv) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender, (v) agrees that
its payment instructions and notice instructions are as set forth in the
attachment to Schedule 1, (vi) confirms that none of the funds, monies, assets
or other consideration being used to make the purchase and assumption hereunder
are "plan assets" as defined under ERISA and that its rights, benefits and
interests in and under the Loan Documents will not be "plan assets" under ERISA,
[and (vii) attaches the forms prescribed by the Internal Revenue Service of the
United States certifying that the Assignee is entitled to receive payments under
the Loan Documents without deduction or withholding of any United States federal
income taxes].*
*to be inserted if the Assignee is not incorporated under the laws of the United
States, or a state thereof.
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable
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<PAGE>
attorneys' fees) and liabilities incurred by the Assignor in connection with
or arising in any manner from the Assignee's non-performance of the
obligations assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee
shall have the right pursuant to Section [12.3.1] of the Credit Agreement to
assign the rights which are assigned to the Assignee hereunder to any entity or
person, provided that (i) any such subsequent assignment does not violate any of
the terms and conditions of the Loan Documents or any law, rule, regulation,
order, writ, judgment, injunction or decree and that any consent required under
the terms of the Loan Documents has been obtained and (ii) unless the prior
written consent of the Assignor is obtained, the Assignee is not thereby
released from its obligations to the Assignor hereunder, if any remain
unsatisfied, including, without limitation, its obligations under Sections 4, 5
and 8 hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the
Aggregate Commitment occurs between the date of this Assignment Agreement and
the Effective Date, the percentage interest specified in Item 3 of Schedule 1
shall remain the same, but the dollar amount purchased shall be recalculated
based on the reduced Aggregate Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached
Notice of Assignment embody the entire agreement and understanding between the
parties hereto and supersede all prior agreements and understandings between the
parties hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by
the internal law, and not the law of conflicts, of the State of Illinois.
13. NOTICES. Notices shall be given under this Assignment Agreement
in the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall be
the address set forth in the attachment to Schedule 1.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
[NAME OF ASSIGNOR]
By:
--------------------------
Title:
--------------------------
--------------------------
--------------------------
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<PAGE>
[NAME OF ASSIGNEE]
By:
---------------------------
Title:
---------------------------
---------------------------
---------------------------
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<PAGE>
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement:
2. Date of Assignment Agreement: , 19
3. Amounts (As of Date of Item 2 above):
Facility Facility
1* 2*
-------- --------
a. Total of Commitments
(Loans)** under
Credit Agreement $ $
--------- --------
b. Assignee's Percentage
of each Facility purchased
under the Assignment
Agreement*** % %
--------- --------
c. Amount of Assigned Share in
each Facility purchased under
the Assignment
Agreement $ $
--------- --------
4. Assignee's Aggregate (Loan
Amount)** Commitment Amount
Purchased Hereunder: $
--------
5. Proposed Effective Date:
--------
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: By:
-------------------- ---------------------
Title: Title:
----------------- ---------------------
* Insert specific facility names per Credit Agreement
** If a Commitment has been terminated, insert outstanding Loans in place
of Commitment
*** Percentage taken to 10 decimal places
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<PAGE>
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which must
include notice address for the Assignor and the Assignee
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<PAGE>
EXHIBIT "I"
to Assignment Agreement
NOTICE
OF ASSIGNMENT
----------------- , 19 ---
To: Schnitzer Steel Industries, Inc.
3200 Northwest Yeon Avenue
Portland, Oregon 97210
The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that Credit Agreement (the "Credit Agreement")
described in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
attributed to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and
delivered to the Borrower and the Agent pursuant to Section 12.3.1 of the Credit
Agreement.
3. The Assignor and the Assignee have entered into an
Assignment Agreement, dated as of , 19 (the "Assignment"), pursuant
to which, among other things, the Assignor has sold, assigned, delegated and
transferred to the Assignee, and the Assignee has purchased, accepted and
assumed from the Assignor the percentage interest specified in Item 3 of
Schedule 1 of all outstandings, rights and obligations under the Credit
Agreement relating to the facilities listed in Item 3 of Schedule 1. The
Effective Date of the Assignment shall be the later of the date specified in
Item 5 of Schedule 1 or two Business Days (or such shorter period as agreed to
by the Agent) after this Notice of Assignment and any consents and fees required
by Sections 12.3.1 and 12.3.2 of the Credit Agreement have been delivered to the
Agent, provided that the Effective Date shall not occur if any condition
precedent agreed to by the Assignor and the Assignee has not been satisfied.
*To be included only if consent must be obtained from the Borrower pursuant to
Section 12.3.1 of the Credit Agreement.
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4. The Assignor and the Assignee hereby give to the Borrower
and the Agent notice of the assignment and delegation referred to herein. The
Assignor will confer with the Agent before the date specified in Item 5 of
Schedule 1 to determine if the Assignment Agreement will become effective on
such date pursuant to Section 3 hereof, and will confer with the Agent to
determine the Effective Date pursuant to Section 3 hereof if it occurs
thereafter. The Assignor shall notify the Agent if the Assignment Agreement
does not become effective on any proposed Effective Date as a result of the
failure to satisfy the conditions precedent agreed to by the Assignor and the
Assignee. At the request of the Agent, the Assignor will give the Agent
written confirmation of the satisfaction of the conditions precedent.
5. The Assignor or the Assignee shall pay to the Agent on or
before the Effective Date the processing fee of $2,500 required by Section
12.3.2 of the Credit Agreement.
6. If Notes are outstanding on the Effective Date, the
Assignor and the Assignee request and direct that the Agent prepare and cause
the Borrower to execute and deliver new Notes or, as appropriate, replacements
notes, to the Assignor and the Assignee. The Assignor and, if applicable, the
Assignee each agree to deliver to the Agent the original Note received by it
from the Borrower upon its receipt of a new Note in the appropriate amount.
7. The Assignee advises the Agent that notice and payment
instructions are set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of
the funds, monies, assets or other consideration being used to make the purchase
pursuant to the Assignment are "plan assets" as defined under ERISA and that its
rights, benefits, and interests in and under the Loan Documents will not be
"plan assets" under ERISA.
9. The Assignee authorizes the Agent to act as its agent
under the Loan Documents in accordance with the terms thereof. The Assignee
acknowledges that the Agent has no duty to supply information with respect to
the Borrower or the Loan Documents to the Assignee until the Assignee becomes a
party to the Credit Agreement.*
*May be eliminated if Assignee is a party to the Credit Agreement prior to the
Effective Date.
NAME OF ASSIGNOR NAME OF ASSIGNEE
By: By:
------------------------- -------------------------
Title: Title:
---------------------- ----------------------
ACKNOWLEDGED AND CONSENTED TO ACKNOWLEDGED AND CONSENTED TO
BY THE FIRST NATIONAL BANK OF CHICAGO BY SCHNITZER STEEL INDUSTRIES, INC.
By: By:
------------------------- -------------------------
Title: Title:
---------------------- ----------------------
[Attach photocopy of Schedule 1 to Assignment]
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EXHIBIT "J"
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To The First National Bank of Chicago,
as Agent (the "Agent") under the Credit Agreement
Described Below.
Re: Credit Agreement, dated March 27, 1995 (as the same may be amended or
modified, the "Credit Agreement"), among Schnitzer Steel Industries,
Inc. (the "Borrower"), the Agent, and the Lenders named therein Terms
used herein and not otherwise defined shall have the meanings assigned
thereto in the Credit Agreement.
The Agent is specifically authorized and directed to act upon the
following standing money transfer instructions with respect to the proceeds of
Advances or other extensions of credit from time to time until receipt by the
Agent of a specific written revocation of such instructions by the Borrower,
provided, however, that the Agent may otherwise transfer funds as hereafter
directed in writing by the Borrower in accordance with Section 13.1 of the
Credit Agreement or based on any telephonic notice made in accordance with
Section 2.5.9 of the Credit Agreement.
Facility Identification Number(s)
--------------------------------------------
Customer/Account Name
-------------------------------------------------------
Transfer Funds To
-----------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
For Account No.
-------------------------------------------------------------
Reference/Attention To
------------------------------------------------------
Authorized Officer (Customer Representative) Date
--------------------
- -------------------------------------- -------------------------
(Please Print) Signature
Lender Officer Name Date
--------------------
- -------------------------------------- -------------------------
(Please Print) Signature
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
Page 78
<PAGE>
SCHEDULE "1"
SUBSIDIARIES AND OTHER INVESTMENTS
(See Sections 5.8 and 6.16)
Investment Owned Percent Jurisdiction of
In By Ownership Organization
- ---------- ----- ---------- ---------------
Alaska Steel Co. SSI* 100% Oregon
Cascade Steel Rolling Mills, Inc. SSI 100% Oregon
Edman Corp. SSI 100% Oregon
Levi's Iron and Metal, Inc. SSI 100% Oregon
Mormil Corp. SSI 100% Oregon
Norprop, Inc. SSI 100% Oregon
Oregon Rail Marketing, Inc. SSI 100% Oregon
Schnitzer Leasing, Inc. SSI 100% Oregon
SSP Arion Corp. SSI 100% Oregon
Arion Shipping Co. SSP Arion Corp. 100% Delaware
SSP International Corp. SSI 100% Guam
SSP Reclamation Company SSI 100% Oregon
Partnerships
- ------------
F. Scott Industries Mormil Corp. 50% California
Pick-N-Pull Norprop, Inc. 50% California
American Rail Marketing Oregon Rail 50% Illinois
Marketing, Inc.
Joint Ventures
- --------------
SSP Industrial Reclamation SSP Reclamation 50% California
Company
Plant Reclamation SSP Reclamation 50% California
Company
*Schnitzer Steel Industries, Inc.
Page 79
<PAGE>
SCHEDULE "1(a)"
MMI* SUBSIDIARIES
(See Sections 5.8 and 6.16)
Investment Owned Percent Jurisdiction of
In By Ownership Organization
- ---------- ----- --------- ----------------
ACME Trading & MMI 100% Oregon
Supply Company
Asset Recovery, Inc. MMI 100% Oregon
Columbia Forge MMI 100% Oregon
Machine Works, Inc.
Crawford Street MMI 100% Oregon
Corporation
Front Street Management MMI 100% Oregon
Corporation
General Metals of MMI 100% Washington
Tacoma, Inc.
MMI International MMI 100% Oregon
(Oregon), Inc.
MMI International MMI 100% Guam
(Guam), Inc.
MMI International MMI 100% Korea
Far East Ltd.
*Manufacturing Management, Inc.
Page 80
<PAGE>
SCHEDULE "2"
INDEBTEDNESS AND LIENS
(See Sections 5.14 and 6.18)
as of November 30, 1994
Maturity
Indebtedness Indebtedness Property and Amount
Incurred By Owed To Encumbered (If Any) of Indebtedness
- ------------ ------------ ------------------- -------------------------
CSRM State of Oregon Energy Conservation 6/01/2011 $2,400,000
Equipment
SSI F.I. of Oregon None 12/31/94 $6,700,000
SSP F.I. of Oregon Property, Plant 7/01/95 $ 924,000
Alemeda & Equipment
Bond
SSP California Waste Recyclying Equipment 5/01/2004 $ 500,000
Management Bond
SSI F.I. of Oregon None 10/01/95 $1,000,000
Letters 12/13/95 $ 703,051
of Credit 3/01/95 $ 220,000
9/30/95 $ 3,762
10/31/95 $ 25,000
12/23/95 $ 500,000
Page 81
<PAGE>
SCHEDULE "3"
LITIGATION
None
Page 82
<PAGE>
AGREEMENT AND PLAN OF MERGER
AMONG
SCHNITZER STEEL INDUSTRIES, INC.,
PROLER INTERNATIONAL CORP.,
AND
PIC ACQUISITION CORPORATION
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER made as of September 15, 1996
(the "Agreement") is among Schnitzer Steel Industries, Inc., an Oregon
corporation ("Schnitzer"), Proler International Corp., a Delaware corporation
("Proler"), and PIC Acquisition Corporation, a Delaware corporation ("Sub").
RECITALS
A. Sub is a direct, wholly-owned subsidiary of Schnitzer,
formed solely for the purposes of the transactions contemplated by this
Agreement.
B. The Boards of Directors of Schnitzer, Sub, and Proler have
determined that it is advisable and in the best interests of their respective
stockholders to enter into a business combination as described in this
Agreement.
C. In furtherance of such combination it is proposed that
(i) Sub conduct a cash tender offer pursuant to the terms and conditions of this
Agreement for all of the outstanding shares of Common Stock, $1.00 par value per
share, of Proler (each, a "Share," and collectively, the "Shares") and the
associated Stock Rights (the "Rights") issued pursuant to the Rights Agreement
dated as of February 28, 1996 between Proler and KeyCorp Shareholder Services,
Inc. (the "Rights Agreement") (such cash tender offer, as described in more
detail in Article 1 below, the "Offer"), and (ii) that upon consummation of the
Offer, Sub merge with and into Proler pursuant to the applicable provisions of
the Delaware General Corporation Law (the "DGCL") and the terms and conditions
of this Agreement (such merger, as described in more detail in Article 2 below,
the "Merger").
AGREEMENT
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained in this Agreement,
the parties agree as follows:
ARTICLE 1
THE OFFER
1.1 THE OFFER.
(a) Provided that this Agreement has not been
terminated in accordance with Article 6 of this Agreement and
subject to the conditions and events set forth in ANNEX A to this
Agreement (the "Offer Conditions"), as promptly as practicable
but in no event later than five (5) business days after the
execution date of this Agreement, Sub will commence (within the
meaning of Rule 14d-2(a) under the Securities Exchange Act
<PAGE>
of 1934, as amended (the "Exchange Act")) a cash tender offer to
purchase all of the Shares (and the associated Rights) for $7.50
per Share (and associated Right), net to the seller in cash (less
any required withholding of taxes) (as such may be increased by
Sub from time to time, the "Offer Price"). The terms of the
Offer will provide that, subject to Sub's right to extend the
Offer pursuant to Section 1.1(b) below, the Offer will expire on
the date that is twenty (20) business days from the date the
Offer is commenced (such date, or the date through which the
Offer may be extended pursuant to Section 1.1(b) below, the
"Expiration Date").
(b) Sub may in its sole discretion increase the Offer
Price, but Sub may not without the prior written consent of
Proler, (i) decrease the Offer Price, (ii) change the form of
consideration payable in the Offer, (iii) decrease the number of
Shares sought pursuant to the Offer, (iv) add to or modify the
Offer Conditions or (v) otherwise amend the Offer in any manner
adverse to Proler's stockholders. Notwithstanding the foregoing,
Sub may, without Proler's consent (x) extend the Offer for an
aggregate total of not more than twenty-five (25) business days
from the original Expiration Date contemplated by Section 1.1(a),
if at such original Expiration Date any of the Offer Conditions
have not been satisfied or waived; (y) extend the Offer for any
period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "SEC");
or (z) extend the Offer for no more than five (5) business days
beyond the original Expiration Date contemplated by
Section 1.1(a) in the event that the Offer Conditions have been
satisfied but less than ninety percent (90%) of the Shares have
been tendered pursuant to the Offer.
(c) On the date the Offer is commenced, Sub will file
with the SEC a Tender Offer Statement on Schedule 14D-1 (together
with all amendments and supplements thereto, the "Schedule
14D-1") with respect to the Offer. The Schedule 14D-1 will
contain as an exhibit or incorporate by reference the Offer to
Purchase (or portions thereof) and form of the related letter of
transmittal and summary advertisement to be used in connection
with the Offer (the Schedule 14D-1 and such other documents,
together with any supplements thereto or amendments thereof,
being referred to herein collectively as the "Offer Documents").
Proler will provide to Sub in writing all information regarding
Proler necessary for the preparation of the Offer Documents, and
Proler and its counsel will be given a reasonable opportunity to
review and comment on the Offer Documents before they are filed
with the SEC and distributed to Proler's stockholders. Sub will
provide to Proler and its counsel any comments that Sub receives
(directly or through its counsel) from the SEC or its staff with
respect to the Offer Documents promptly after receiving such
comments. Sub and Proler will each promptly correct any
information provided by it for use in the Offer Documents if and
to the extent that it has become false or misleading in any
material respect, and Sub will promptly amend and supplement the
Offer Documents if and to the extent that they have become false
or misleading in any material respect and will promptly cause the
Offer Documents as so amended and supplemented to be filed with
the SEC and to be
2
<PAGE>
disseminated to Proler's stockholders, in each case as and to the
extent required by applicable federal securities laws.
(d) Subject only to the Offer Conditions, in
accordance with the terms of the Offer, Sub will, and Schnitzer
will cause Sub to, accept for payment all Shares validly tendered
and not withdrawn (the "Tendered Shares") as soon as legally
permissible after commencement of the Offer, and pay for all
Tendered Shares as promptly as practicable thereafter. Schnitzer
will provide or cause to be provided to Sub on a timely basis the
funds necessary to accept for payment, and pay for, any Shares
that Sub becomes obligated to accept for payment, and pay for,
pursuant to the Offer.
1.2 ACTIONS BY PROLER.
(a) Proler hereby consents to the Offer and represents
and warrants that its Board of Directors (the "Proler Board"), at
a meeting duly called and held on September 15, 1996 unanimously
has (i) determined that this Agreement and the transactions
contemplated hereby, including the Offer, are fair to and in the
best interests of Proler's stockholders, (ii) approved this
Agreement and the transactions contemplated hereby, including the
Offer, and (iii) resolved to recommend that the stockholders of
Proler accept the Offer, tender their Shares to Sub and, if
required by applicable law, approve the transactions contemplated
hereby. Proler has been advised by each of its directors that
each such person intends to tender all Shares, if any, that he or
she owns pursuant to the Offer. Proler further represents and
warrants that J.C. Bradford & Co. has delivered to the Proler
Board its written opinion dated September 15, 1996 to the effect
that, as of the date of such opinion, the amount of the Offer
Price and the Merger Consideration (as defined in Section 2.7.1.3
below) are fair to Proler's stockholders from a financial point
of view. J.C. Bradford & Co. has agreed to permit the inclusion
of its fairness opinion in the Offer Documents and the Schedule
14D-9 referred to below and the Proxy Statement referred to in
Section 2.2(b), and Proler consents to the inclusion in the Offer
Documents of the recommendations of the Proler Board described in
this Section 1.2.
(b) As soon as practicable following Sub's filing of
the Schedule 14D-1, Proler will file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9
pertaining to the Offer (together with any amendments or
supplements thereto, the "Schedule 14D-9") containing the Proler
Board's recommendation described in Section 1.2(a) and will
promptly disseminate the Schedule 14D-9 to Proler's stockholders.
Sub and its counsel will be given a reasonable opportunity to
review and comment on the Schedule 14D-9 before it is filed with
the SEC and disseminated to Proler's stockholders. Proler will
provide to Sub and its counsel any comments that Proler receives
(directly or through its counsel) from the SEC or its staff with
respect to the Schedule 14D-9 promptly after receiving such
comments.
3
<PAGE>
(c) Proler will promptly furnish Sub with mailing
labels, security position listings and any available listing or
computer files containing the names and addresses of the record
holders of the Shares as of a recent date and furnish Sub with
such additional information and assistance (including, without
limitation, updated lists of stockholders, mailing labels and
lists of securities positions) as Sub or its agents may
reasonably request for the purpose of communicating the Offer to
the record and beneficial holders of Shares. Subject to the
requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Schnitzer and Sub
and their agents will hold in confidence the information
contained in any such labels, listings, and files, will use such
information only in connection with the Offer and the Merger, and
if this Agreement is terminated, will upon Proler's request
deliver and will use their best efforts to cause their agents to
deliver to Proler all copies of and any extracts or summaries
from such information then in their possession and control.
1.3 DESIGNATION OF DIRECTORS OF PROLER FOLLOWING COMPLETION OF
OFFER.
(a) Promptly upon Sub's consummation of the Offer, Sub
will be entitled, subject to compliance with Section 14(f) of the
Exchange Act, to designate that number (rounded up to the next
greatest whole number) of directors on the Proler Board that is
equal to the product of the total number of directors on the
Proler Board multiplied by the percentage that the aggregate
number of Shares beneficially owned by Sub or any affiliate of
Sub (including for purposes of this Section 1.3 such Shares as
are accepted for payment pursuant to the Offer but excluding
Shares held by any Proler Entity (as that term is defined in the
introduction to Article 3 below)) bears to the number of Shares
outstanding. Proler will cause (i) each committee of the Proler
Board, (ii) the board of directors of each subsidiary of Proler,
and (iii) each committee of such board to include persons
designated by Sub constituting the same percentage of each such
committee or board as Sub's designees are of the Proler Board.
Proler will, upon request by Sub, promptly increase the size of
the Proler Board or exercise its best efforts to secure the
resignations of such number of directors as is necessary to
enable Sub designees to be elected to the Proler Board and to
cause Sub's designees to be so elected. Nothing in this
Section 1.3 will require Proler to elect any person a director if
such election would violate applicable law. After the time that
Sub's designees constitute a majority of the Proler Board, any
action on the part of Proler with respect to this Agreement or
any of the transactions contemplated hereby will require the vote
of a majority of the directors who are not designees of Sub.
(b) Subject to applicable law, Proler will promptly
take all action necessary pursuant to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder in order to
fulfill its obligations under this Section 1.3 and will include
in the Schedule 14D-9 disseminated to stockholders promptly after
the commencement of the Offer (or an amendment thereof or an
information statement pursuant to Rule 14f-1 if Sub has not
theretofore designated directors) such information with respect
to Proler and
4
<PAGE>
its officers and directors as is required under Section 14(f)
and Rule 14f-1 in order to fulfill its obligations under this
Section 1.3. Schnitzer and Sub will supply to Proler and be
solely responsible for any information with respect to itself
and its nominees, officers, directors and affiliates required
by Section 14(f) and Rule 14f-1.
ARTICLE 2
THE MERGER
2.1 THE MERGER. Pursuant to the DGCL, and subject to and in
accordance with the terms and conditions of this Agreement, Sub will be merged
with and into Proler as soon as practicable following the satisfaction or waiver
of the conditions set forth in Article 5 of this Agreement.
2.2 STOCKHOLDERS' MEETING; PROXY STATEMENT.
(a) If required by applicable law in order to
consummate the Merger, Proler will, in accordance with Delaware
law and Proler's Certificate of Incorporation and Bylaws, call
and hold a special meeting of its stockholders (the
"Stockholders' Meeting") as soon as practicable following the
date on which the Offer is consummated for the purpose of
approving the Merger. Subject to Section 4.2.2, the Proler Board
will recommend to its stockholders that the Merger be approved,
and Proler will use its reasonable best efforts to solicit from
its stockholders proxies in favor of the approval of the Merger
("Stockholder Approval"), and will take all other action
necessary or advisable to secure the vote or consent of
stockholders required by Delaware law to obtain such consents.
(b) Proler will, as soon as practicable following the
consummation of the Offer, prepare and file a preliminary Proxy
Statement to solicit Stockholder Approval (the "Proxy Statement")
with the SEC and will use its best efforts to respond to any
comments of the SEC or its staff and to cause the Proxy
Statement, as finalized, to be mailed to Proler's stockholders as
promptly as practicable after responding to all such comments to
the satisfaction of the staff. Sub and Schnitzer will provide to
Proler in writing all information regarding Sub and Schnitzer
necessary for the preparation of the Proxy Statement. Proler
will notify Schnitzer promptly of the receipt of any comments
from the SEC or its staff and of any request by the SEC or its
staff for amendments or supplements to the Proxy Statement or for
additional information and will supply Schnitzer with copies of
all correspondence between Proler or any of its representatives,
on the one hand, and the SEC or its staff, on the other hand,
with respect to the Proxy Statement or the Merger. If at any
time before the Stockholders' Meeting there occurs any event that
should be set forth in an amendment or supplement to the Proxy
Statement, Proler will promptly prepare and mail to its
stockholders such an amendment or supplement. Proler will not
mail any Proxy Statement, or any amendment or supplement thereto,
to which Schnitzer reasonably objects. The Proxy Statement will
5
<PAGE>
include the Proler Board's recommendation that Proler's
stockholders grant proxies to approve the Merger; provided,
however, that such recommendation may be withdrawn, modified, or
amended if and to the extent the Proler Board determines, in good
faith after consultation with outside legal counsel, that a
failure to do so would be contrary to its fiduciary obligations.
2.3 MERGER WITHOUT STOCKHOLDERS' MEETING. Notwithstanding any
other provision in this Agreement, if Schnitzer, Sub, or any affiliate of either
of them beneficially owns at least 90% of the outstanding Shares, the parties
agree to take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the Expiration Date, but in no event
later than ten business days thereafter, without a meeting of stockholders of
Proler in accordance with Section 253 of the Delaware General Corporation Law.
2.4 EFFECTIVE TIME. As soon as practicable after satisfaction
or waiver of all of the conditions to the Merger set forth in Article 5 of this
Agreement, a Certificate of Merger or Certificate of Ownership and Merger, as
the case may be, prepared in accordance with the applicable provisions of the
DGCL (the "Certificate of Merger") will be executed and filed with the Secretary
of State of the State of Delaware. The Merger will be effective on the date and
at the time (the "Effective Time") when the Certificate of Merger or Certificate
of Ownership and Merger, as the case may be, has been accepted for filing by the
Secretary of State of the State of Delaware.
2.5 EFFECT OF MERGER. At the Effective Time, Sub will be merged
with and into Proler in the manner and with the effect provided by the DGCL, the
separate corporate existence of Sub will cease and thereupon Sub and Proler will
be a single corporation (the "Surviving Corporation") and will continue to be
governed by the laws of the State of Delaware.
2.6 CERTIFICATE OF INCORPORATION, ETC. In addition to the
effects identified in Section 2.5:
2.6.1 CERTIFICATE OF INCORPORATION AND BYLAWS. The
Certificate of Incorporation and Bylaws of Proler as in effect at the Effective
Time will be the Certificate of Incorporation and Bylaws of the Surviving
Corporation, until each has been duly amended (subject to Section 4.11) in
accordance with the terms thereof and of the DGCL;
2.6.2 DIRECTORS. The directors of Sub at the Effective
Time will be the directors of the Surviving Corporation, until their respective
successors have been duly elected or appointed and qualified or until their
earlier death, resignation, or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws; and
2.6.3 OFFICERS. The officers of Sub at the Effective
Time will be the officers of the Surviving Corporation and will hold office from
the Effective Time in accordance with the Bylaws of the Surviving Corporation.
6
<PAGE>
2.7 EFFECT OF MERGER ON CAPITAL STOCK OF CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES. The manner and basis of canceling or
converting shares of Proler or Sub will be as follows:
2.7.1 EFFECT ON CAPITAL STOCK. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any of the Shares or any shares of capital stock of Sub:
2.7.1.1 CAPITAL STOCK OF SUB. Each issued and
outstanding share of capital stock of Sub will be converted into and become one
fully paid and nonassessable share of Proler Common Stock.
2.7.1.2 CANCELLATION OF TREASURY STOCK AND SCHNITZER
OWNED STOCK. Each Share (and associated Right) that is owned by Proler or by
any subsidiary of Proler and each Share (and associated Right) that is owned by
Schnitzer, Sub, or any other subsidiary of Schnitzer will automatically be
canceled and retired and will cease to exist, and no consideration will be
delivered in exchange therefor.
2.7.1.3 CONVERSION OF PROLER SHARES. Subject to
Section 2.7.1.4, each Share (and associated Right) issued and outstanding (other
than shares to be canceled in accordance with Section 2.7.1.2) will be converted
into the right to receive from the Surviving Corporation in cash, without
interest, the Offer Price (such amount referred to in connection with the Merger
as the "Merger Consideration"). As of the Effective Time, all such Shares (and
associated Rights) will no longer be outstanding and will automatically be
canceled and retired and will cease to exist, and each holder of a certificate
representing any such Shares (and Rights) will cease to have any rights with
respect thereto, except the right to receive the Merger Consideration, without
interest.
2.7.1.4 SHARES OF DISSENTING STOCKHOLDERS.
Notwithstanding anything in this Agreement to the contrary, any issued and
outstanding Shares (and associated Rights) held by any stockholder (a
"Dissenting Stockholder") who has not voted such Shares in favor of or consented
to the Merger and who complies with all the provisions of Section 262 of the
DGCL concerning the right of holders of Shares to dissent from the Merger and
require appraisal of their Shares ("Dissenting Shares") will not be converted as
described in Section 2.7.1.3 but will become the right to receive such
consideration as may be determined to be due to such Dissenting Stockholder
pursuant to the laws of the State of Delaware. If, after the Effective Time,
such Dissenting Stockholder withdraws his or her demand for appraisal or fails
to perfect or otherwise loses his or her right of appraisal, in any case
pursuant to DGCL, his or her Shares will be deemed to be converted as of the
Effective Time into the right to receive the Merger Consideration. Proler will
give Schnitzer (i) prompt notice of any demands for appraisal of Shares received
by Proler and (ii) the opportunity to participate in and direct all negotiations
and proceedings with respect to any such demands. Proler will not, without the
prior written consent of Schnitzer, make any payment with respect to, or settle,
offer to settle, or otherwise negotiate, any such demands.
7
<PAGE>
2.7.1.5 WITHHOLDING TAX. The right of any stockholder
to receive the Merger Consideration will be subject to and reduced by the amount
of any required tax withholding obligation.
2.7.2 EXCHANGE OF CERTIFICATES.
2.7.2.1 PAYING AGENT. Before the Effective Time,
Schnitzer and Proler will designate a mutually acceptable bank or trust company
to act as paying agent in the Merger (the "Paying Agent"), and, from time to
time on, before or after the Effective Time, Schnitzer will make available, or
cause the Surviving Corporation to make available, to the Paying Agent funds in
amounts and at the times necessary for the payment of the Merger Consideration
upon surrender of certificates representing Shares as part of the Merger
pursuant to Section 2.7.1, it being understood that any and all interest earned
on funds made available to the Paying Agent pursuant to this Agreement will be
turned over to Schnitzer.
2.7.2.2 EXCHANGE PROCEDURE. As soon as reasonably
practicable after the Effective Time, the Paying Agent will mail to each holder
of record of a certificate or certificates that immediately before the Effective
Time represented Shares (the "Certificates"), (i) a notice (advising the holders
that the Merger has become effective) and a letter of transmittal in customary
and appropriate form (which will specify that delivery will be effected, and
risk of loss and title to the Certificates will pass, only upon proper delivery
of the Certificates to the Paying Agent) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by Schnitzer,
together with such letter of transmittal, properly completed and duly executed,
and such other customary documents as may reasonably be required by the Paying
Agent, the holder of such Certificate will be entitled to receive in exchange
therefor the amount of cash into which the Shares theretofore represented by
such Certificate have been converted pursuant to Section 2.7.1, and the
Certificate so surrendered will be canceled. In the event of a transfer of
ownership of Shares that is not registered in the transfer records of Proler,
payment may be made to a Person (as defined in Section 2.7.2.4 below) other than
the Person in whose name the Certificate so surrendered is registered, if such
Certificate is properly endorsed or otherwise is in proper form for transfer and
the Person requesting such payment pays any transfer or other taxes required by
reason of the payment to a Person other than the registered holder of such
Certificate or establishes to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered as contemplated
by this Section 2.7.2.2, each Certificate will be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
amount of cash, without interest, into which the Shares theretofore represented
by such Certificate will have been converted pursuant to Section 2.7.1. No
interest will be paid or will accrue on the cash payable upon the surrender of
any Certificate.
2.7.2.3 NO FURTHER OWNERSHIP RIGHTS IN PROLER COMMON
STOCK. All cash paid upon the surrender of Certificates in accordance with the
terms of Section 2.7 will be deemed to have been paid in full satisfaction of
all rights pertaining to the Shares theretofore
8
<PAGE>
represented by such Certificates. At the Effective Time, the stock transfer
books of Proler will be closed, and there will be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the Shares
that were outstanding immediately before the Effective Time. If, after the
ffective Time, Certificates are presented to the Surviving Corporation or the
Paying Agent for any reason, they will be canceled and exchanged as provided
in Section 2.7.
2.7.2.4 NO LIABILITY. None of Schnitzer, Sub, Proler,
or the Paying Agent will be liable to any Person in respect of any cash
delivered to a public official pursuant to any applicable abandoned property,
escheat, or similar law. As used in this Agreement, the term "Person" means any
individual, corporation, general partnership, limited partnership, limited
liability company, joint venture, trust, cooperative or other association,
Governmental Entity (as defined in Section 3.1.2(b) below), or any other
organization.
2.7.2.5 LOST, STOLEN, OR DESTROYED CERTIFICATES. In
the event that any Certificate will have been lost, stolen, or destroyed, upon
the making of an affidavit of that fact by the Person claiming such Certificate
to be lost, stolen, or destroyed, Proler will issue in exchange for such lost,
stolen, or destroyed Certificate the Merger Consideration deliverable in respect
thereof as determined in accordance with this Agreement; PROVIDED, HOWEVER, that
Proler may, in its sole discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed Certificate to
give Proler a bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against Proler with respect to the certificate
alleged to have been lost, stolen, or destroyed.
2.8 CONVERSION OF PROLER STOCK OPTIONS; RESTRICTED STOCK.
Before the Effective Time, Proler will use its best efforts to obtain the
cancellation of all stock options, vested and unvested, outstanding under
Proler's 1988 Stock Option Plan as amended (the "1988 Plan") with an exercise
price less than the amount of the Merger Consideration in exchange for a payment
to the optionee of an amount per option share equal to the difference between
the exercise price for such share and the amount of the Merger Consideration.
In accordance with the 1988 Plan and Proler's 1994 Non-Employee Director Stock
Option Plan (the "1994 Plan"), a holder of any options outstanding as of the
Effective Time will be entitled to receive, upon exercise of such options in
accordance with the 1988 Plan or the 1994 Plan, as the case may be, an amount
equal to the Merger Consideration such holder would have been entitled to
receive in the Merger if he had been the holder of the shares of Common Stock
that he would otherwise have received upon exercise of the options, and will
have no right to receive any stock of Proler upon such exercise. Before the
Effective Time, Proler will use its best efforts to obtain the cancellation of
all unvested rights to receive in the future shares of Common Stock pursuant to
Proler's 1993 Incentive Compensation Plan in exchange for payment to the holders
of such rights of an amount per share equal to the amount of the Merger
Consideration.
2.9 CLOSING. Unless this Agreement has been terminated and the
transactions contemplated by it have been abandoned pursuant to Article 6, the
closing of the Merger (the "Closing") will take place at the offices of Stoel
Rives LLP, 900 SW Fifth Avenue, Suite 2300,
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Portland, Oregon 97204, at 10:00 a.m. on the date when the last of the
conditions set forth in Article 5 hereof (other than conditions that by their
terms are to occur at Closing) will have been fulfilled or waived or on such
other date as Schnitzer and Proler may agree (the "Closing Date").
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
In this Agreement, any reference to any event, change, effect or
agreement being "material" with respect to any entity or group of entities means
any material event, change, effect or agreement related to the condition
(financial or otherwise), properties, assets, liabilities, businesses,
operations or results of operations of such entity or group of entities taken as
a whole. The term "Material Adverse Effect" used in connection with a party or
any of such party's subsidiaries or joint ventures means any event, change or
effect that is materially adverse to the condition (financial or otherwise),
properties, assets, liabilities, businesses, operations or results of operations
of such party, its subsidiaries and joint ventures taken as a whole, provided
that a Material Adverse Effect will not include any adverse effect resulting
from general economic conditions. As used in this Agreement, the term "Proler
Entity" (and collectively, the "Proler Entities") means (i) Proler, (ii) Hugo
Neu Proler Company together with each of its subsidiaries and any other entity
used in connection with its business in which Proler or any Proler subsidiary
has an interest, (iii) Prolerized New England Company, together with Proleride
Transport Systems, Inc. and any other entity used in connection with the
business of Prolerized New England Company in which Proler or any Proler
subsidiary has an interest, (iv) Prolerized-Schiabo Neu Company together with
each of its subsidiaries and any other entity used in connection with its
business in which Proler or a Proler subsidiary has an interest, (v) Proler's
wholly-owned direct or indirect subsidiaries and (vi) any other entity in which
Proler or any subsidiary has an ownership interest through a joint venture or
other enterprise. The entities described in clauses (ii), (iii) and (iv) of the
preceding sentence are hereinafter referred to as the "Joint Ventures." For
purposes of this Agreement, "to the knowledge of Proler" or words of similar
import mean actual knowledge of any executive officer of Proler.
3.1 PROLER'S REPRESENTATIONS AND WARRANTIES. Proler represents
and warrants to Schnitzer and Sub as follows:
3.1.1 CORPORATE EXISTENCE AND AUTHORITY. Proler is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. Proler has the full corporate power and
authority to enter into this Agreement and carry out its terms. Except for the
approval of its stockholders, if required, Proler has taken all corporate action
necessary to authorize the execution, delivery, and performance of this
Agreement. This Agreement has been duly and validly executed and delivered by
Proler and is binding upon and enforceable against Proler in accordance with its
terms, except as enforceability may belimited or affected by applicable
bankruptcy, insolvency, reorganization, or other laws of general application
relating to or affecting the rights of creditors and except as enforceability
may be
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limited by principles of equity governing specific performance, injunctive
relief, or other equitable remedies.
3.1.2 NO ADVERSE CONSEQUENCES. Except as set forth on
SCHEDULE 3.1.2, neither the execution and delivery of this Agreement by Proler
nor the consummation of the transactions contemplated by this Agreement will:
(a) violate or conflict with any provision of Proler's
certificate of incorporation or bylaws;
(b) violate any law, judgment, order, injunction,
decree, rule, regulation, or ruling of any court, legislature,
arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a
"Governmental Entity") applicable to any Proler Entity, except as
such would not have a Material Adverse Effect, individually or in
the aggregate;
(c) either alone or with the giving of notice or the
passage of time or both, conflict with, constitute grounds for
termination or acceleration of, result in the breach of the
terms, conditions, or provisions of, result in the loss of any
benefit to any Proler Entity under, or constitute a default under
any agreement, instrument, license, or permit to which any Proler
Entity is a party or by which any Proler Entity is bound, except
as such would not have a Material Adverse Effect, individually or
in the aggregate; or
(d) require any notices to or consent of any third
party, including without limitation any Governmental Entity.
3.1.3 CAPITALIZATION. Proler has authorized capital
stock consisting of 15,000,000 shares of Proler Common Stock, of which 4,717,356
shares were outstanding on September 15, 1996 and 500,000 shares of preferred
stock, par value $1.00, none of which is outstanding. Proler has 6,057 shares
of Common Stock in treasury as of the execution date of this Agreement. Options
to purchase 140,845 shares were outstanding on September 15, 1996 under grants
made pursuant to the 1988 Plan and the 1994 Plan (collectively, the "Proler
Stock Plans"). All of the outstanding shares of capital stock of Proler have
been duly authorized and are validly issued, fully paid, and nonassessable, and
no shares were issued in violation of preemptive or similar rights of any
stockholder or in violation of any applicable securities laws. Except as set
forth above, there are no shares of capital stock of Proler authorized, issued,
or outstanding, and, except for options granted pursuant to the Proler Stock
Plans and the Rights, there are no preemptive rights or any outstanding
subscriptions, options, warrants, rights, convertible securities, or other
agreements or commitments of Proler of any character relating to the issued or
unissued capital stock or other securities of Proler. There are no outstanding
obligations of Proler to repurchase, redeem, or otherwise acquire any of the
Shares.
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3.1.4 SUBSIDIARIES AND JOINT VENTURES. Except as
disclosed on SCHEDULE 3.1.4, Proler has no subsidiaries and owns no stock or
other interest in any other corporation or in any partnership or limited
liability company, or other venture or entity. Each subsidiary of Proler and
each joint enterprise in which Proler has an interest is duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation or formation.
3.1.5 SEC REPORTS AND FINANCIAL STATEMENTS. Proler has
filed with the SEC, and has made available to Schnitzer true and complete copies
of, all forms, reports, schedules, statements, and other documents required to
be filed by it since December 31, 1994 under the Exchange Act or the Securities
Act of 1933 (the "Securities Act") (each of such forms, reports, schedules,
statements, and other documents, to the extent filed and publicly available
before the date of this Agreement, other than preliminary filings, is referred
to as a "Proler SEC Document"). Each Proler SEC Document, at the time filed,
(a) 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 and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. The financial
statements of all Proler Entities included in the Proler SEC Documents comply as
to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of
the unaudited statements, to normal, recurring audit adjustments) the
consolidated financial position of Proler and its consolidated subsidiaries as
at the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended.
3.1.6 INFORMATION SUPPLIED. None of the information
supplied or to be supplied by any Proler Entity specifically for inclusion or
incorporation by reference in (i) the Offer Documents; (ii) the Schedule 14D-9;
(iii) the information to be filed by Proler in connection with the Offer
pursuant to Rule 14f-1 promulgated under the Exchange Act (the "Information
Statement") or (iv) the Proxy Statement will, in the case of the Offer
Documents, the Schedule 14D-9, and the Information Statement, at the respective
times the Offer Documents, the Schedule 14D-9, and the Information Statement are
filed with the SEC or first published, sent, or given to Proler's stockholders,
or, in the case of the Proxy Statement, at the time the Proxy Statement is first
mailed to Proler's stockholders or at the time of the Stockholders' Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation or warranty is made by Proler with
respect to statements made or incorporated by reference therein based on
information supplied by Schnitzer or Sub in writing specifically for inclusion
or incorporation by reference therein. The Schedule 14D-9, the Information
Statement, and the Proxy Statement
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will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder.
3.1.7 LEGAL PROCEEDINGS. Except as disclosed in
SCHEDULE 3.1.7, there is neither pending nor, to the knowledge of Proler,
threatened by or against any Proler Entity any legal action, claim, arbitration,
investigation, or administrative proceeding before any Governmental Entity that
could (i) have a Material Adverse Effect on the parties following the Closing;
or (ii) enjoin or restrict the right or ability of Proler to perform its
obligations under this Agreement and, to the knowledge of Proler, there is no
basis for any such claim, litigation, proceeding, or investigation.
3.1.8 CONTRACTS AND ARRANGEMENTS. SCHEDULE 3.1.8, which
is organized by type of agreement, contains a complete and accurate list of all
agreements of the following types to which any Proler Entity is a party or by
which it is bound and which are material to the Proler Entities (the
"Contracts"):
(a) any mortgage, note, or other instrument or
agreement relating to the borrowing of money or the incurrence of
indebtedness by Proler or Proler's guaranty of any obligation for
the borrowing of money;
(b) contracts, agreements, purchase orders, or
acknowledgment forms for the purchase, sale, lease or other
disposition of any Proler Entity's equipment, products,
materials, or capital assets, or for the performance of services;
(c) contracts or agreements for the joint performance
of work or services and all other joint venture agreements;
(d) contracts or agreements with agents, brokers,
consignees, sales representatives, or distributors relating to
the sale of any Proler Entity's products or services;
(e) contracts or agreements relating to the employment
or compensation of any Proler Entity's officers, directors, or
employees, including without limitation any collective bargaining
agreements;
(f) any other contract, instrument, agreement, or
obligation not described in any other section of this Agreement
to which any Proler Entity is a party or by which it is bound and
which contains material unfulfilled obligations of any Proler
Entity.
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3.1.9 REAL PROPERTY; MATERIAL ASSETS.
(a) SCHEDULE 3.1.9 contains a list of (i) all real
property owned by any Proler Entity and (ii) all other assets
owned by any Proler Entity having an original cost of more than
$5,000 (together, the "Material Properties and Assets"). Except
as set forth in SCHEDULE 3.1.9, each Proler Entity has good and
marketable title to all of its respective Material Properties and
Assets subject to no encumbrance, lien, charge, or other
restriction (including, without limitation, any restriction or
transfer) of any kind or character and there is no condition,
restriction, or reservation affecting the title to or utility of
any of the Material Properties and Assets, other than (i) such
imperfections or irregularities of title, encumbrances, claims,
liens, charges or other conditions, restrictions or reservations
as do not materially affect the use of the properties or assets
subject thereto or affected thereby or otherwise materially
impair business operations at such properties, (ii) statutory
liens securing payments (including taxes) not yet due and
(iii) such imperfections or irregularities of title,
encumbrances, claims, liens, charges or other conditions,
restrictions or reservations as do not have a Material Adverse
Effect on the Proler Entities.
(b) Except as does not hot have a Material Adverse
Effect with regard to buildings and improvements listed on
SCHEDULE 3.1.9, (i) there are no structural or nonstructural
defects of a material character, (ii) such buildings and
improvements are not in violation of the requirements of any
Governmental Entity, and all necessary final certificates of
occupancy have been issued for such buildings and improvements,
(iii) all licenses and permits required by Governmental Entities
have been issued for such buildings and improvements and the
operations conducted in connection with them, (iv) the current
use of the buildings and improvements does not violate such
licenses and permits, (v) all such licenses and permits have been
paid, and (vi) the remainder of the Material Properties and
Assets are in good working order and condition, ordinary wear and
tear excepted, and are useable in the ordinary course of
business.
3.1.10 LEASES. SCHEDULE 3.1.10 contains a list of all
material leases with terms in excess of one year to which any Proler Entity is a
party (the "Leases"). Except as does not have a Material Adverse Effect, each
Proler Entity enjoys undisturbed possession to each leasehold interest it holds
under the Leases.
3.1.11 STATUS OF CONTRACTS AND LEASES.
(a) Each of the Contracts and Leases is valid,
binding, and enforceable by the applicable Proler Entity in
accordance with its terms and is in full force and effect, except
as enforceability may be limited or affected by applicable
bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the rights of creditors and
except as enforceability may be limited by principles of equity
governing specific performance, injunctive relief or other
equitable remedies. There is no existing default or violation by
any Proler Entity under any Contract or Lease and no
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event has occurred which (whether with or without notice, lapse
of time, or both) would constitute a default of any Proler Entity
under any Contract or Lease, except for such defaults as would
not have a Material Adverse Effect.
(b) Proler is not aware of any default by any other
party to any Contract or Lease or of any event which (whether
with or without notice, lapse of time, or both) would constitute
a default by any other party with respect to obligations of that
party under any Contract or Lease, except for such defaults as
would not have a Material Adverse Effect.
3.1.12 COMPLIANCE WITH LAWS. Except for those whose
absence would not have a Material Adverse Effect, each Proler Entity possesses
all governmental and other licenses, certificates, consents, permits, and other
authorizations of Governmental Entities (collectively, "Licenses") legally
required to carry on its business as now conducted. No material violation
exists in respect of, and no proceeding is pending or to Proler's knowledge
threatened to revoke or limit, any such License. Except as disclosed in the
Proler SEC Documents, the businesses of the Proler Entities are not being
conducted in violation of any laws, rules, regulations, ordinances, codes,
judgments, orders, writs, or decrees applicable to its business where such
violation would have a Material Adverse Effect. Except as set forth on SCHEDULE
3.1.12 or disclosed in the Proler SEC Documents, there have been no violations
of such laws, rules, regulations, ordinances, codes, judgments, orders, writs,
and decrees since December 31, 1990 where such violation would have a Material
Adverse Effect.
3.1.13 ENVIRONMENTAL MATTERS.
3.1.13.1 DEFINITIONS. As used in this Agreement,
"Environmental Law" means any federal, state, or local statute, regulation, or
ordinance pertaining to the protection of human health or the environment and
any applicable orders, judgments, decrees, permits, licenses, or other
authorizations or mandates under such laws. "Hazardous Substance" means any
hazardous, toxic, radioactive, or infectious substance, material, or waste as
defined, listed, or regulated under any Environmental Law, and includes without
limitation petroleum oil and its fractions. "Contamination" means the existence
(actual or reasonably suspected) in the environment of a Hazardous Substance, if
the existence or suspected existence of such Hazardous Substance requires any
investigatory, remedial, removal, or other response action under any
Environmental Law, if such response action legally could be required by any
Governmental Entity.
3.1.13.2 ENVIRONMENTAL COMPLIANCE. Except as set
forth in SCHEDULE 3.1.13:
(a) Each Proler Entity possesses all material
governmental and other Licenses it is required to carry under any
Environmental Law for its business as now conducted. No material
violation exists in respect of, and no proceeding is pending or
threatened to revoke or limit, any such License. Each Proler
Entity is operating its
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business in material compliance with all Environmental Laws.
No incident regarding environmental matters has occurred in
connection with the business of any Proler Entity that was
required to be reported to a Governmental Entity under any
Environmental Law that was not so reported, except where the
failure to report would not have a Material Adverse Effect.
(b) No real property currently or previously owned,
leased, or occupied by any Proler Entity is or during Proler's
ownership or occupation was used as a hazardous waste treatment,
storage, or disposal facility within the meaning of Subtitle C of
the Resource Conservation and Recovery Act ("RCRA") or any
comparable state Environmental Law. No real property currently
owned, leased, or occupied by any Proler Entity and to Proler's
knowledge no real property previously owned, leased, or occupied
by any Proler Entity is listed on the National Priority List or
the Comprehensive Environmental Response, Compensation and
Liability Information System list compiled by the Environmental
Protection Agency or any comparable listing compiled by any state
or local Governmental Entity having jurisdiction over
environmental matters.
(c) No Proler Entity has received notice from any
Governmental Entity or other Person that it has been named as a
responsible or potentially responsible party with respect to any
site listed on the lists described in paragraph (b) above or that
it otherwise is potentially liable for Contamination under any
Environmental Law.
(d) Except as would not have a Material Adverse
Effect, no portion of any property currently owned, leased, or
occupied by any Proler Entity is Contaminated. Except as would
not have a Material Adverse Effect, with respect to property
previously owned, leased, or occupied by any Proler Entity, no
Contamination occurred during any Proler Entity's ownership,
lease, or occupancy.
3.1.14 TAX MATTERS.
3.1.14.1 RETURNS. Each Proler Entity has filed on a
timely basis all federal, state, foreign, and other returns, reports, forms,
declarations, and information returns required to be filed by it with respect to
Taxes (as defined below) that relate to the business, results of operations,
financial condition, properties, or assets of the Proler Entities (collectively,
the "Proler Returns") and has paid on a timely basis all Taxes shown to be due
on the Proler Returns. Except as detailed on SCHEDULE 3.1.14, no Proler Entity
is part of an affiliated group of corporations that files or has the privilege
of filing consolidated tax returns pursuant to Section 1501 of the Internal
Revenue Code of 1986, as amended (the "Code") or any similar provisions of
state, local, or foreign law, and no Proler Entity is a party to any tax-sharing
or tax-allocation agreement. No extensions of time have been requested for
Proler Returns that have not been filed except as set forth on SCHEDULE 3.1.14.
Except as set forth on SCHEDULE 3.1.14, no Proler Entity has received any notice
of audit and there are no outstanding agreements or waivers extending the
applicable statutory periods of limitation for such Taxes for
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any period. All Proler Returns filed are complete and accurate in all material
respects. Proler has provided Schnitzer with complete and accurate copies of
Proler Returns for each of Proler's fiscal years 1991 through 1995 and the
Forms 1139 related to any loss or credit or carryback claim for those years.
3.1.14.2 TAXES PAID OR RESERVED. The reserves for
taxes reflected in the current balance sheet most recently filed as part of a
Proler SEC Document are adequate for payment of Taxes in respect of periods
ending on or before the Closing Date. All reserves for Taxes have been
determined in accordance with generally accepted accounting principles
consistently applied throughout the periods involved and with prior periods.
All Taxes that any Proler Entity has been required to collect or withhold have
been collected or withheld and, to the extent required, have been paid to the
proper taxing authority except where the failure to do so would not have a
Material Adverse Effect. No Proler Entity has elected to be treated as a
consenting corporation pursuant to Section 341(f) of the Code.
3.1.14.3 LOSS CARRYFORWARDS; INVESTMENT TAX CREDIT
CARRYFORWARDS. SCHEDULE 3.1.14.3 contains a complete and accurate list of net
operating loss ("NOL") carryforwards and investment tax credit ("ITC")
carryforwards available to Proler or one or more other Proler Entities for
federal income tax purposes that originated in taxable years set forth in
SCHEDULE 3.1.14.3.
3.1.14.4 DEFINITION. As used in this Agreement, the
term "Taxes" means all federal, state, local, or foreign taxes, charges, fees,
levies, or other assessments, including without limitation all net income, gross
income, gross receipts, premium, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, estimated severance,
stamp, occupation, property, or other taxes, fees, assessments, or charges of
any kind whatsoever, together with any interest and any penalties (including
penalties for failure to file in accordance with applicable information
reporting requirements), and additions to tax.
3.1.15 EMPLOYEES AND LABOR RELATIONS MATTERS. Except as
set forth on SCHEDULE 3.1.15 or as provided in this Agreement:
(a) To the knowledge of Proler, no Proler Entity
employee or executive designated by Schnitzer as a key employee
and listed as such on SCHEDULE 3.1.15 has any plans to terminate
employment with the Proler Entity that employs him or her;
(b) The Proler Entities have complied in all material
respects with all labor and employment laws, including provisions
thereof relating to wages, hours, equal opportunity, collective
bargaining, and the payment of social security and other taxes,
except where the failure to comply would not have a Material
Adverse Effect;
(c) There is no unfair labor practice charge,
complaint, representation petition, or other action against any
Proler Entity pending or to Proler's knowledge
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threatened before the National Labor Relations Board or any other
Governmental Entity and no Proler Entity is subject to any order
to bargain by the National Labor Relations Board;
(d) There is no labor strike, request for
representation, slowdown, or work stoppage actually occurring,
pending, or to Proler's knowledge threatened against any Proler
Entity;
(e) To Proler's knowledge no questions concerning
representation have been raised or are threatened with respect to
employees of any Proler Entity;
(f) No grievance that might have a material adverse
effect on any Proler Entity and no arbitration proceeding arising
out of or under any collective bargaining agreement is pending
and to Proler's knowledge no basis exists for any such grievance
or arbitration proceeding; and
(g) To Proler's knowledge no employee of any Proler
Entity is subject to any noncompetition, nondisclosure,
confidentiality, employment, consulting, or similar agreements
with Persons other than a Proler Entity relating to the present
business activities of the Proler Entities.
3.1.16 EMPLOYEE BENEFITS. SCHEDULE 3.1.16 lists all
pension, retirement, profit sharing, deferred compensation, bonus, commission,
incentive, life insurance, health and disability insurance, hospitalization, and
all other employee benefit plans or arrangements (including, without limitation,
any contracts or agreements with trustees, insurance companies or others
relating to any such employee benefit plans or arrangements) established,
maintained, or contributed to by any Proler Entity, and complete and accurate
copies of all those plans or arrangements have been provided to Schnitzer. The
employee pension benefit plans (within the meaning of Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
established and maintained by Proler Entities that are subject to ERISA are
listed separately as ERISA Plans on SCHEDULE 3.1.16 (the "ERISA Plans"). The
ERISA Plans (to the knowledge of Proler with respect to the ERISA Plans of the
Joint Ventures) comply in all material respects with the applicable requirements
of ERISA and any other applicable laws and regulations. With respect to ERISA
Plans intended to qualify under Section 401(a) of the Code, each applicable
Proler Entity has received from the Internal Revenue Service a favorable
determination for each of the ERISA Plans and their related trusts that each of
the ERISA Plans is qualified and the related trust is tax-exempt under Section
501(a) of the Code. There has been no event subsequent to that determination
that has adversely affected the tax qualified status of the ERISA Plans (to the
knowledge of Proler with respect to the ERISA Plans of the Joint Ventures) or
the exemption of the related trusts other than changes in the Code that are not
effective as of the Closing Date. No "accumulated funding deficiency" as
defined in Section 302(a)(2) of ERISA or Section 412(a) of the Code exists, or
has existed, with respect to any of the ERISA Plans. The present value of all
accrued benefits under each of the funded ERISA Plans does not exceed by more
than $1,000,000 the value of such ERISA Plan's assets, less all
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liabilities other than those attributable to accrued benefits. None of the
Proler Entities nor a controlled group of corporations of which any Proler
Entity is a member have any "potential withdrawal liability," as defined in
Section 4201 of ERISA. None of the ERISA Plans (to the knowledge of Proler with
respect to the ERISA Plans of the Joint Ventures), its related trusts or any
trustee, investment manager or administrator thereof has engaged in a nonexempt
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code. To the knowledge of Proler, there are not and have
not been any excess deferrals or excess contributions under any ERISA Plan that
have not been corrected. Each ERISA Plan is and has been operated and
administered in all material respects in conformance with the requirements of
all applicable laws and regulations, whether or not the ERISA Plan documents
have been amended to reflect such requirements. Except as set forth in SCHEDULE
3.1.16, no Proler Entity has any obligation of any kind (whether under the terms
of the ERISA Plans or under any understanding with employees) to make payments
under, or to pay contributions to, any plan, agreement, or other arrangement for
deferred compensation of employees, whether or not tax qualified, including,
without limitation, a single employer tax qualified plan, a tax qualified plan
of a controlled group of corporations, a multi-employer pension plan, a
nonqualified deferred compensation plan, an individual employment or
compensation agreement, or a commitment to provide medical benefits to retirees.
3.1.17 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in SCHEDULE 3.1.17, since July 31, 1996, there has not been:
(a) Any event, occurrence, development, or state of
circumstances or facts which could reasonably be expected to
result in a Material Adverse Effect on the business, results of
operations, financial position, assets, or properties of the
Proler Entities;
(b) Any damage, destruction, or casualty loss, whether
insured against or not, to the assets or properties of the Proler
Entities that would result in a Material Adverse Effect;
(c) Any increase in the rate or terms of compensation
payable or to become payable by Proler to its directors,
officers, or key employees; any increase in the rate or terms of
any bonus, insurance, pension, or other employee benefit plan,
payment, or arrangement made to, for or with any such directors,
officers, or key employees; any special bonus or remuneration
paid; or any written employment contract executed or amended;
(d) Any amendment to Proler's Certificate of
Incorporation or Bylaws or any entry into any material agreement,
commitment, or transaction (including, without limitation, any
borrowing, capital expenditure or capital financing or any
amendment, modification, or termination of any existing
agreement, commitment, or transaction) by the Proler Entities,
except agreements, commitments, or transactions in the ordinary
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course of business and consistent with past practices or as
expressly contemplated in this Agreement;
(e) Any direct or indirect declaration, setting aside,
or payment of any dividend or other distribution (whether in
cash, stock, property, or any combination thereof) in respect of
the common stock of Proler, or any direct or indirect repurchase,
redemption, or other acquisition by Proler of any shares of its
stock;
(f) Any issuance or sale of any stock of Proler (other
than issuances pursuant to the exercise of options outstanding on
April 30, 1996) or any issuance or granting of any option,
warrant, or right to purchase any stock of Proler (other than
options granted under the Proler Stock Plans on or before
August 22, 1996) or any commitment to do any of the foregoing;
(g) Any conduct of business that is outside the
ordinary course of business or not substantially in the manner
that the Proler Entities have previously conducted its business;
(h) Any material purchase or other acquisition of
property by any Proler Entity, any sale, lease, or other
disposition of property by any Proler Entity, or any expenditure
by any Proler Entity, except in the ordinary course of business;
(i) Any incurrence of any noncontract liability which,
either singly or in the aggregate is material to the business,
results of operations, financial condition, or prospects of the
Proler Entities; or
(j) Any encumbrance or consent to encumbrance of any
material property or assets of the Proler Entities except in the
ordinary course of business and except for the types of
encumbrances listed in Section 3.1.9.
3.1.18 UNDISCLOSED LIABILITIES. Except for liabilities
or obligations described in the Proler SEC Documents, SCHEDULE 3.1.18, or in
another Schedule to this Agreement, neither the Proler Entities nor any of
the property of the Proler Entities are subject to any material liability or
obligation, whether absolute, contingent, known, or unknown, that was not
included or adequately reserved against in the financial statements contained
in the Proler SEC Documents.
3.1.19 INSURANCE. All material property (fire and
extended coverage perils), business interruption, public liability, workers'
compensation, directors' and officers' liability, and other insurance
policies and fidelity and surety bonds of any Proler Entity in Proler's
possession are identified on SCHEDULE 3.1.19 (the "Policies"), and all such
Policies are currently in full force and effect. Copies of the Policies have
been provided to Schnitzer. To Proler's knowledge, there are no disputes
with insurers under the Policies, and all premiums due and payable thereto
have been paid. To Proler's knowledge, there are no pending or threatened
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cancellations or nonrenewals or premium increases with respect to any of the
Policies, and each Proler Entity is in compliance with all material
conditions contained in its Policies.
3.1.20 INTELLECTUAL PROPERTY.
(a) The term "Intellectual Property Assets" means
collectively:
(i) all registered and unregistered trademarks,
service marks, and applications (collectively, "Marks");
(ii) all patents and patent applications
(collectively, "Patents");
(iii) all copyrights in both published works
and unpublished works that are material to any Proler
Entity's businesses (collectively, "Copyrights"); and
(iv) all trade secrets
used in the conduct of the businesses of the Proler Entities.
SCHEDULE 3.1.20 contains a list and summary description of all
Marks, Patents and Copyrights.
(b) Each Proler Entity owns, has the right to use,
sell, license, dispose of, and to bring actions for the
misappropriation of all of Intellectual Property Assets, material
to the conduct of its business without any conflict with or
infringement of the rights of others, free and clear of all
liens, charges, encumbrances, or other restrictions of any kind.
(c) SCHEDULE 3.1.20 contains a list of all material
agreements relating to the Intellectual Property Assets material
to the conduct of its business to which any Proler Entity is a
party.
(d) To Proler's knowledge, no Intellectual Property
Asset material to the conduct of business of any Proler Entity is
infringed or has been challenged.
(e) There is no action, suit, proceeding, judgment,
order, or writ pending or to Proler's knowledge, threatened
against any Proler Entity contesting the validity, ownership, or
right to use, sell, license, dispose of, or to bring actions for
the misappropriation of the Intellectual Property Assets material
to the conduct of its business.
3.1.21 GUARANTIES; POWERS OF ATTORNEY. Except as set forth
on SCHEDULE 3.1.21, no Proler Entity is a guarantor or otherwise liable for any
liability or material obligation (including without limitation any indebtedness)
of any other Person. To Proler's knowledge, there are no outstanding powers of
attorney executed on behalf of any Proler Entity.
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3.1.22 BROKERS. No broker, investment banker, financial
advisor, or other Person, other than J.C. Bradford & Co. and Chase
Securities, Inc., the fees and expenses of which will be paid by Proler, is
entitled to any broker's, finder's, financial advisor's, or other similar fee
or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Proler. Proler has
provided Schnitzer true and correct copies of all agreements between any
Proler Entity and each of J.C. Bradford & Co. and Chase Securities, Inc.
3.1.23 RIGHTS AGREEMENT. Proler has provided Schnitzer
with a complete and correct copy of the Rights Agreement, including all
amendments and exhibits thereto. The amendment to the Rights Agreement
attached to this Agreement as Annex B has been duly authorized by the Board
of Directors of Proler and has been duly executed by Proler, and,
accordingly, the execution of this Agreement, the announcement or making of
the Offer, the acquisition of Shares pursuant to the Offer, and the Merger
and the other transactions contemplated in this Agreement will not cause the
Rights to become exercisable or result in either Schnitzer or Sub or any of
their Affiliates being considered to be an "Acquiring Person" (as defined in
the Rights Agreement) or the occurrence of a "Distribution Date", a "Section
11(a)(ii) Event" or a "Section 13 Event" (as such terms are defined in the
Rights Agreement).
3.1.24 STATE TAKEOVER STATUTES AND OTHER TAKEOVER
PROVISIONS. The Board of Directors of Proler has approved the Offer, the
Merger, and this Agreement and such approval is sufficient to render
inapplicable to the Offer, the Merger, and this Agreement and the
transactions contemplated by this Agreement the provisions of Section 203 of
the DGCL and the provisions of Article Fifteenth of Proler's Certificate of
Incorporation. To the best of Proler's knowledge, no other state takeover
statute or similar statute or regulation applies or purports to apply to the
Offer, the Merger, this Agreement, or any of the transactions contemplated by
this Agreement.
3.1.25 DEFERRED COMPENSATION OBLIGATIONS. Proler's
aggregate discounted (at 9%) deferred compensation obligations, both vested
and unvested, to all current and former employees of any Proler Entity, net
of related insurance benefits, is (or, as of the consummation of the Offer
and as of the Effective Time, will be) not more than $1,650,000.
3.1.26 DISCLOSURE. None of representations and
warranties made by Proler in this Agreement contains any untrue statement of
a material fact or omits a material fact necessary to make each statement
contained therein not misleading. To Proler's knowledge, neither Proler nor
any responsible officer or director of Proler has intentionally concealed any
fact known by such Person to have a material adverse effect upon the existing
or expected financial condition, operating results, assets, customer
relations, employee relations, or business prospects of any Proler Entity.
3.2 SCHNITZER'S REPRESENTATIONS AND WARRANTIES. Schnitzer
represents and warrants to Proler as follows:
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3.2.1 CORPORATE EXISTENCE AND AUTHORITY. Schnitzer is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Oregon. Schnitzer has the full corporate power and
authority to enter into this Agreement and carry out its terms. Schnitzer has
taken all corporate action necessary to authorize the execution, delivery, and
performance of this Agreement. This Agreement has been duly and validly
executed and delivered by Schnitzer and is binding upon and enforceable against
Schnitzer in accordance with its terms, except as enforceability may be limited
or affected by applicable bankruptcy, insolvency, reorganization, or other laws
of general application relating to or affecting the rights of creditors and
except as enforceability may be limited by rules of law governing specific
performance, injunctive relief, or other equitable remedies.
3.2.2 CORPORATE EXISTENCE AND AUTHORITY OF SUB. Sub is
a corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. Sub has the full corporate power and authority
to enter into this Agreement and carry out its terms. Sub has taken all
corporate action necessary to authorize the execution, delivery, and performance
of this Agreement. This Agreement has been duly and validly executed and
delivered by Sub and is binding upon and enforceable against Sub in accordance
with its terms, except as enforceability may be limited or affected by
applicable bankruptcy, insolvency, reorganization, or other laws of general
application relating to or affecting the rights of creditors and except as
enforceability may be limited by rules of law governing specific performance,
injunctive relief, or other equitable remedies. All of the issued and
outstanding voting capital stock of Sub is owned by Schnitzer.
3.2.3 NO ADVERSE CONSEQUENCES. Neither the execution
and delivery of this Agreement by Schnitzer and by Sub nor the consummation of
the transactions contemplated by this Agreement will:
(a) violate or conflict with any provision of
Schnitzer's Articles of Incorporation or Bylaws or Sub's
certificate of incorporation or bylaws;
(b) violate any law, judgment, order, injunction,
decree, rule, regulation, or ruling of any Governmental Entity
applicable to Schnitzer or Sub, except such as would not have a
Material Adverse Effect, individually or in the aggregate;
(c) either alone or with the giving of notice or the
passage of time or both, conflict with, constitute grounds for
termination or acceleration of, result in the breach of the terms
conditions or provisions of, result in the loss of any benefit to
Schnitzer under, or constitute a default under any agreement,
instruction, license, or permit to which Schnitzer or Sub is a
party or by which it is bound, except such as would not have a
Material Adverse Effect, individually or in the aggregate; or
(d) except as to HSR Act (as defined in Section 4.4
below) compliance, require any notices to or consent of any third
party, including without limitation any Governmental Entity.
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3.2.4 LEGAL PROCEEDINGS. There is neither pending
nor, to the knowledge of Schnitzer or Sub, threatened by or against Schnitzer
or Sub any legal action, claim, arbitration, investigation, or administrative
proceeding before any Governmental Entity that could enjoin or restrict
either Schnitzer's or Sub's right or ability to perform its obligations under
this Agreement and, to the knowledge of Schnitzer, there is no basis for any
such claim, litigation, proceeding or investigation.
3.2.5 BROKERS. No broker, investment banker, financial
advisor, or other Person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Schnitzer.
3.2.6 INFORMATION SUPPLIED. None of the information
supplied or to be supplied by Schnitzer or Sub specifically for inclusion or
incorporation by reference in the Proxy Statement or Schedule 14D-9 will, at
the time they are first filed with the SEC, 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 were made, not misleading, except that no
representation is made by Schnitzer or Sub with respect to statements made or
information supplied by Proler in writing specifically for inclusion or
incorporation by reference therein.
3.2.7 FINANCIAL CAPABILITY. As of the date hereof,
Schnitzer has sufficient financial resources to consummate the transactions
contemplated by this Agreement. None of Sub's or Schnitzer's obligations
pursuant to this Agreement are subject to Schnitzer's or Sub's obtaining or
securing any financing or credit support for the transactions contemplated
hereby.
ARTICLE 4
COVENANTS
4.1 CONTINUATION OF BUSINESS. From and after the execution
date of this Agreement until Closing, Proler will use its commercially
reasonable best efforts to, and to cause each Proler Entity other than
Proler, to: (i) keep the business and organization of each Proler Entity
intact until the Closing; and (ii) carry on the business of each Proler
Entity in its usual manner until Closing. Without limiting the generality of
the foregoing, except as expressly provided to the contrary in this Agreement
or with the prior written consent of Schnitzer, until the Closing, Proler
agrees that:
(a) Proler will not declare, pay, or set aside for
payment any dividend or other distribution of money or property
in respect of its capital stock;
(b) Proler will not issue any shares of its capital
stock (except upon the valid exercise of currently outstanding
Options under the Proler Stock Plans), or issue or sell any
securities convertible into, or exchangeable for, or options,
warrants to
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purchase, or rights to subscribe to, any shares of its capital
stock or subdivide or in any way reclassify any shares of its
capital stock, or repurchase, reacquire, cancel, or redeem any
such shares;
(c) Proler will use its commercially reasonable best
efforts to ensure that (i) the assets, property and rights now
owned by each Proler Entity will be used, preserved, and
maintained, as far as practicable, in the ordinary course of
business, to the same extent and in the same condition as said
assets, property, and rights are on the date of this Agreement,
and no unusual or novel methods of manufacture, purchase, sale,
management, or operation of said properties or business or
accumulation, disposition, or valuation of inventory will be made
or instituted; (ii) no Proler Entity will encumber any of its
material assets other than in connection with Proler's credit
arrangements with Texas Commerce Bank, N.A. or make any material
commitments relating to such assets, property, or business,
except in the ordinary course of its business. Proler will use
its commercially reasonable best efforts to ensure that each
Proler Entity will pay all debts when due in the usual course of
business;
(d) Proler will, and Proler will use its commercially
reasonable best efforts to ensure that each Proler Entity will,
comply in all material respects with all statutes, laws,
ordinances, rules, and regulations applicable to it in the
ordinary course of business;
(e) Proler will, and Proler will use its commercially
reasonable best efforts to ensure that each Proler Entity will,
use its commercially reasonable best efforts to keep or cause to
be kept the Policies (or substantial equivalents) in such amounts
duly in force until the Closing Date and will give Schnitzer
notice of any material change in the Policies;
(f) Proler will not incur additional debt (including
without limitation obligations under leases for real or personal
property whether or not required to be capitalized under
generally accepted accounting principles), incur or increase any
obligation or liability (fixed, contingent, or other, including
without limitation liabilities as a guarantor or otherwise with
respect to obligations of others) except in the ordinary and
usual course of its business and consistent with past practices,
forgive or release any material debt or claim, give any waiver of
any right of material value, or voluntarily suffer any
extraordinary loss;
(g) Proler will not make any payment to discharge or
satisfy any lien or encumbrance or pay any obligation or
liability (fixed or contingent) other than (i) current
liabilities (including the current portion of any long-term
liabilities) included in the financial statements contained in
the Proler SEC Documents and (ii) current liabilities incurred or
maturing in the ordinary course of business since the date of the
current balance sheet most recently filed as part of a Proler SEC
Document or
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(iii) payments under its revolving credit facility with Texas
Commerce Bank, N.A. made in the ordinary course of business and
consistent with past practices;
(h) Proler will not, and without prior consultation
with Schnitzer Proler will take no action to cause any Proler
Entity to, acquire any assets other than assets acquired in the
ordinary and usual course of its business and consistent with
past practices;
(i) Proler will not, and without prior consultation
with Schnitzer Proler will take no action to cause any Proler
Entity to, purchase or otherwise acquire, or agree to purchase or
otherwise acquire, any debt or equity securities of any Person
other than equity securities issued by a money market fund
registered as an investment company under the Investment Company
Act of 1940;
(j) Proler will not, and without prior consultation
with Schnitzer Proler will take no action to cause any Proler
Entity to, enter into any transaction or contract or make any
commitment to do the same, except (i) as set forth on
SCHEDULE 4.1, or (ii) in the ordinary and usual course of
business and not requiring the payment in any case of an amount
in excess of $25,000 annually;
(k) Except as set forth on SCHEDULE 4.1, Proler will
not, and without prior consultation with Schnitzer Proler will
take no action to cause any Proler Entity to, increase the wages,
salaries, compensation, pension, or other benefits payable, or to
become payable by it, to any of its officers, employees, or
agents, including without limitation any bonus payments or
severance or termination pay, other than increases in wages and
salaries required by employment arrangements existing on the
execution date of this Agreement or otherwise in the ordinary and
usual course of its business;
(l) Proler will not, and without prior consultation
with Schnitzer Proler will take no action to, cause any Proler
Entity to implement or agree to any implementation of or
amendment or supplement to any employee profit sharing, stock
option, stock purchase, pension, bonus, commission, incentive,
retirement, medical reimbursement, life insurance, deferred
compensation, or any other employee benefit plan or arrangement;
(m) Proler will not, and without prior consultation
with Schnitzer Proler will take no action to cause any Proler
Entity to, change its accounting methods, policies or practices;
(n) When the consent of any third party to the
transactions contemplated by this Agreement is required under the
terms of any Contract to which any Proler Entity is a party or by
which it is bound, Proler will use its commercially
reasonable best efforts to, and to cause any affected Proler
Entity to use its commercially
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reasonable best efforts to, obtain such consent on terms and
conditions not materially less favorable than those in effect
on the execution date of this Agreement;
(o) Proler will, and will use its commercially
reasonable best efforts to cause each Proler Entity to, maintain
its books and records in accordance with past practices;
(p) Proler will, and will use its commercially
reasonable best efforts to cause each Proler Entity to, pay and
discharge all taxes, assessments, governmental charges, and
levies imposed upon it, its income or profits, or upon any
property belonging to it, in all cases before the date on which
penalties attach thereto; and
(q) Proler will not amend its Certificate of
Incorporation or Bylaws.
4.2 NO SOLICITATION.
4.2.1 Proler and its officers, directors, employees,
representatives, and agents will immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to a Takeover
Proposal (as defined below). Unless this Agreement has been terminated in
accordance with its terms, and provided that neither Schnitzer nor Sub is in
material violation of this Agreement, Proler will not authorize or permit any
of its officers, directors, or employees or any investment banker, financial
advisor, attorney, accountant, or other representative retained by it or any
subsidiary to (i) solicit, initiate, or encourage (including by way of
furnishing non-public information about the Proler Entities), or take any
other action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal
or (ii) participate in any discussions or negotiations regarding any Takeover
Proposal; PROVIDED, HOWEVER, that, if at any time before the acceptance for
payment of Shares pursuant to the Offer, the Board of Directors of Proler
determines in good faith, after consultation with counsel, that it is
necessary to do so in order to comply with its fiduciary duties to Proler's
stockholders under applicable law, Proler may, in response to an unsolicited
Takeover Proposal, and subject to compliance with Section 4.2.3, (x) furnish
information with respect to Proler to any Person pursuant to a
confidentiality agreement in substantially the same form entered into between
Proler and Schnitzer and (y) participate in discussions and negotiations
regarding such Takeover Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any director or executive officer of Proler or any other Proler
Entity or any investment banker, financial advisor, attorney, accountant, or
other representative of Proler or any other Proler Entity will be deemed to
be a breach of this Section 4.2.1 by Proler. For purposes of this Agreement,
"Takeover Proposal" means any inquiry, proposal, or offer from any Person
relating to any direct or indirect acquisition or purchase of a substantial
amount of assets of Proler or any other Proler Entity or of over 20 percent
of any class of equity securities of Proler or any other Proler Entity, any
tender offer or exchange offer that if consummated would result in any Person
beneficially owning 20 percent or more of any class of equity securities of
Proler or any other Proler Entity, any merger, consolidation, business
combination, sale of substantially
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all the assets, recapitalization, liquidation, dissolution or similar
transaction involving Proler or any other Proler Entity, other than the
transactions contemplated by this Agreement, or any other transaction the
consummation of which could reasonably be expected to impede, interfere with,
prevent, or materially delay the Offer or the Merger or that could reasonably
be expected to dilute materially the benefits to Schnitzer of the
transactions contemplated by this Agreement.
4.2.2 Except as set forth in this Section 4.2.2, and
unless this Agreement has been terminated in accordance with its terms, and
provided that neither Schnitzer nor Sub is in material violation of this
Agreement, neither the Board of Directors of Proler nor any committee thereof
will (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Schnitzer, the approval or recommendation by such Board of
Directors or such committee of the Offer, this Agreement, or the Merger; (ii)
approve or recommend, or propose to approve or recommend, any Takeover
Proposal; or (iii) cause Proler to enter into any agreement with respect to
any Takeover Proposal. Notwithstanding the foregoing, in the event that
before the time of acceptance for payment of Shares in the Offer the Board of
Directors of Proler determines in good faith, after consultation with
counsel, that it is necessary to do so in order to comply with its fiduciary
duties to Proler's stockholders under applicable law, the Board of Directors
of Proler may withdraw or modify its approval or recommendation of the Offer,
this Agreement, and the Merger, approve or recommend a Superior Proposal (as
defined below), or cause Proler to enter into an agreement with respect to a
Superior Proposal, but in each case only at a time that is after the second
business day following Schnitzer's receipt of written notice (a "Notice of
Superior Proposal") advising Schnitzer that the Board of Directors of Proler
has received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the Person making such
Superior Proposal. In addition, if Proler proposes to enter into an
agreement with respect to any Takeover Proposal, it will concurrently with
entering into such an agreement pay, or cause to be paid, to Schnitzer the
Expenses and the Termination Fee (as such terms are defined in Section
4.8.2). For purposes of this Agreement, a "Superior Proposal" means any bona
fide Takeover Proposal to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, more than 50 percent of the shares of
Proler Common Stock then outstanding or all or substantially all the assets
of Proler and otherwise on terms which the Board of Directors of Proler
determines in its good faith judgment (after consultation with J.C. Bradford
& Co. or another financial advisor of nationally recognized reputation) to be
more favorable to Proler's stockholders than the Offer and the Merger.
4.2.3 In addition to the obligations of Proler set forth
in Sections 4.2.1 and 4.2.2, Proler will immediately advise Schnitzer orally
and in writing of any request for information or of any Takeover Proposal, or
any inquiry with respect to or that could lead to any Takeover Proposal, the
material terms and conditions of such request, Takeover Proposal, or inquiry
and the identity of the Person making such request, Takeover Proposal, or
inquiry. Proler will keep Schnitzer fully informed of the status and details
(including amendments or proposed amendments) of any such request, Takeover
Proposal or inquiry.
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4.2.4 Nothing contained in Section 4.2 will prohibit
Proler from making any disclosure to Proler's stockholders if, in the opinion
of the Board of Directors of Proler, after consultation with counsel, failure
so to disclose would be inconsistent with its fiduciary duties to Proler's
stockholders under applicable law; PROVIDED, HOWEVER, neither Proler nor its
Board of Directors nor any committee thereof will (except as permitted by
Section 4.2.2), withdraw or modify, or propose to withdraw or modify, its
position with respect to the Offer or the Merger or approve or recommend, or
propose to approve or recommend, a Takeover Proposal.
4.3 DUE DILIGENCE. For the period up to and including the
Closing Date, Proler will provide, and cause each Proler Entity other than
Proler to provide, to Schnitzer and its authorized agents access to all of
each Proler Entity's physical assets, facilities, financial information,
production records, contracts and other corporate records and documents as
Schnitzer deems necessary to conduct its due diligence into each Proler
Entity's business operations. Schnitzer will have reasonable access during
normal working hours to all Proler Entity's premises, properties, and
facilities and will be allowed to meet with each Proler Entity's management
personnel, employees, and any outside consultants of the Proler Entities,
including without limitation auditors and accountants, investment and other
bankers, tax and financial advisors, and environmental consultants. No later
than 10 days after the execution date of this Agreement, Proler will provide
to Schnitzer copies of all documents listed or referred to in any Schedule to
this Agreement. In addition, Proler will exercise its best efforts to make
available to Schnitzer any items and materials reasonably requested by
Schnitzer in connection with its due diligence efforts. No investigation by
Schnitzer or any of its authorized representatives pursuant to this Section
4.3 will effect any representation, warranty, or closing condition of any
party to this Agreement.
4.4 HART SCOTT RODINO. Each of Proler and Schnitzer will
within five days after executing this Agreement prepare and file with the
Federal Trade Commission (the "FTC") and the Department of Justice (the
"DOJ") the premerger notification form required under the Hart Scott Rodino
Antitrust Improvements Act (the "HSR Act") and a request for early
termination of the waiting period. The parties will further (i) discuss with
each other any comments the reviewing party may have; (ii) cooperate with
each other in connection with such filings, which cooperation will include,
but not be limited to, furnishing the other with such information or
documents as may be reasonably required in connection with such filings;
(iii) promptly file after any request by the FTC or the DOJ any appropriate
information or documents so requested by the FTC or the DOJ; and (iv) notify
each other of any other communications with the FTC or the DOJ that relate to
the transactions contemplated by this Agreement and, to the extent
appropriate, permit the other to participate in any conferences with the FTC
or the DOJ. The parties will use best efforts to accelerate and obtain HSR
Act clearance. Each of Proler and Schnitzer will pay its own expenses in
connection with the preparation of the premerger notification form. The
parties will each pay one-half of the filing fee required by the HSR Act and
one-half of the fees of any experts or advisers mutually retained to assist
the parties to obtain HSR Act clearance.
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4.5 OTHER GOVERNMENT CONSENTS. Promptly following the execution
of this Agreement, the parties will proceed to prepare and file with the
appropriate Governmental Entities any requests for approval or waiver (in
addition to those specifically described above), if any, that are required from
Governmental Entities in connection with the transactions contemplated by this
Agreement, and the parties will diligently and expeditiously prosecute and
cooperate fully in the prosecution of such requests for approval or waiver and
all proceedings necessary to secure such approvals and waivers.
4.6 COMMERCIALLY REASONABLE BEST EFFORTS; NO INCONSISTENT
ACTION. Subject to the terms and conditions hereof, and to the fiduciary duties
of the Proler Board under applicable law as advised by counsel, each party will
use its commercially reasonable best efforts to effect the transactions
contemplated by this Agreement and to fulfill the conditions to the obligations
of the opposing parties set forth in Article 5 of this Agreement. No party will
take any action inconsistent with its obligations under this Agreement or that
could hinder or delay the consummation of the transactions contemplated by this
Agreement, except that nothing in this Section 4.6 will limit the rights of the
parties under Article 5 of this Agreement.
4.7 CHANGED CIRCUMSTANCES. Each of Proler and Schnitzer will
notify the other party promptly of any fact or occurrence between the date of
this Agreement and the Closing Date of which it becomes aware which makes any of
its (or its subsidiary's) representations contained in this Agreement untrue or
causes any breach of its (or its subsidiary's) obligations under this Agreement.
4.8 FEES AND EXPENSES.
4.8.1 Except as provided below in Section 4.8.2, all fees
and expenses incurred in connection with the Offer and Merger, this Agreement,
and the transactions contemplated by this Agreement will be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated.
4.8.2 Proler will pay, or cause to be paid, in same day
funds to Schnitzer the sum of (i) Schnitzer's Expenses (as defined below) up to
a maximum amount of $1,000,000 and (ii) $2,000,000 (the "Termination Fee") upon
demand if (x) Schnitzer terminates this Agreement under Section 6.2.2; or (y)
Proler terminates this Agreement pursuant to Section 6.3.2. In addition, Proler
will pay, or cause to be paid, in same day funds to Schnitzer, Schnitzer's
Expenses (to the extent not otherwise payable pursuant to the preceding
sentence) up to a maximum amount of $1,000,000 upon demand if (A) the Offer is
not consummated solely by reason of the nonsatisfaction of one of the Offer
Conditions set forth in Section 2 of Annex A and (B) it was within the power of
Proler by its action or inaction to avoid the nonsatisfaction of such Offer
Condition and (C) the Agreement was not terminated by Proler pursuant to
Section 6.3.1 and (D) within twelve (12) months after termination of this
Agreement Proler consummates (or enters into a definitive agreement with respect
to and subsequently consummates) a Takeover Proposal that was made before the
termination of this Agreement. "Expenses" means documented out-of-pocket fees
and expenses incurred or paid by or on behalf
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of Schnitzer in connection with the Merger or the consummation of any of the
transactions contemplated by this Agreement, including without limitation all
HSR Act filing fees, fees and expenses of counsel, commercial banks,
investment banking firms, accountants, experts, environmental consultants,
and other consultants to Schnitzer.
4.9 RIGHTS AGREEMENT. Except as provided in Section 3.1.23,
Proler will not redeem the Rights or amend (other than to delay the Distribution
Date (as defined in the Rights Agreement) or to render the Rights inapplicable
to the Merger) or terminate the Rights Agreement before the Effective Time
unless required to do so by order of a court of competent jurisdiction.
4.10 PRESS RELEASES. No press releases or other public
announcements concerning the transactions contemplated by this Agreement may be
made by any of the parties without the prior written consent of each of the
other parties, which consent will not be unreasonably withheld; PROVIDED,
HOWEVER, that nothing in this provision will prevent a party from making such
releases or announcements as are necessary for a party to satisfy its legal
obligations or the requirements of the New York Stock Exchange or NASDAQ NMS,
but in any such case the affected party will promptly notify the other parties.
4.11 INDEMNIFICATION AND INSURANCE.
4.11.1 After the Effective Time, Proler will (and Schnitzer
will as long as it controls Proler) indemnify and hold harmless each of the
current directors of Proler (the "Indemnified Parties") in their capacities as
directors or officers to the full extent provided in Proler's Certificate of
Incorporation and Bylaws.
4.11.2 Proler will not amend, and Schnitzer will not (as
long as it controls Proler) authorize or permit the amendment of, provisions of
Proler's Certificate of Incorporation or Bylaws providing for indemnification
(as in effect as of the date of this Agreement) in any manner adverse to the
Indemnified Parties for a period of six (6) years from and after the date of
this Agreement; provided, however, that such indemnification is subject to any
limitation imposed from time to time under applicable law.
4.11.3 For six (6) years after the Closing, Proler will
(and for so long as it controls Proler, Schnitzer will cause Proler to) maintain
policies of officers' and directors' liability insurance maintained by Proler as
of the date of this Agreement (provided that Proler may substitute therefor
policies of at least the same coverage containing terms and conditions
substantially equivalent) with respect to the acts or omissions occurring before
the Closing, including but not limited to the transactions contemplated by this
Agreement, covering each of the Indemnified Parties currently covered by
Proler's officers' and directors' liability insurance policy, or who become
covered by such policy before the Closing.
4.11.4 Any determination to be made as to whether any
Indemnified Party has met any standard of conduct imposed by law or by Proler's
Certificate of Incorporation or
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Bylaws will be made by legal counsel reasonably acceptable to such
Indemnified Party and Schnitzer, retained at Proler's expense.
4.11.5 In the event any Indemnified Party is or becomes
involved in any capacity in any action, proceeding, or investigation for which
he has a claim for indemnification against Proler (including, without
limitation, the transactions contemplated by this Agreement), Proler will, and
Schnitzer will (as long as it controls Proler) cause Proler to, pay as incurred
such Indemnified Party's legal and other expenses actually and reasonably
incurred in connection therewith upon receipt of an understanding by or on
behalf of such Indemnified Party to repay such amount if it is ultimately
determined that he is not entitled to be indemnified by Proler.
4.11.6 The obligations pursuant to this Section 4.11 will
survive the Merger and will continue in full force and effect for a period of
six (6) years from the Effective Time, provided that as to any claim for
indemnification asserted pursuant to this Section 4.11 during such six-year
period, such obligations will remain in full force and effect until the final
disposition of such claim.
4.11.7 This Section 4.11 is intended to benefit the
Indemnified Parties, their heirs, executors, and personal representatives and is
binding on successors and assigns of Sub, Schnitzer and Proler.
ARTICLE 5
CONDITIONS TO THE PARTIES' OBLIGATIONS
TO CONSUMMATE THE MERGER
5.1 MUTUAL CONDITIONS. The obligations of each party to
consummate the Merger are subject to the following conditions:
5.1.1 GOVERNMENTAL AUTHORIZATIONS. Each of the parties
will have obtained all authorizations, consents, and approvals of all
governmental agencies and authorities required to be obtained in order to permit
consummation of the transactions contemplated by this Agreement, in a form
satisfactory to each of Proler, Sub, and Schnitzer in its reasonable discretion,
and the waiting period under the HSR Act will have expired or been terminated
early.
5.1.2 PROLER STOCKHOLDER APPROVAL. If necessary to
approve the Merger under applicable law, at a duly called and held Stockholders'
Meeting, acting in accordance with applicable provisions of DGCL and the
Certificate of Incorporation and Bylaws of Proler, the holders of at least a
majority of the issued and outstanding Shares of Proler Common Stock will have
given Stockholder Approval.
5.1.3 NO PROHIBITIONS. There has not been promulgated
or issued a law, statute, rule, regulation, decree, order, injunction or ruling
by any Governmental Entity that remains in effect and prohibits, restrains,
enjoins or restricts the consummation of the Merger.
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5.1.4 NO SUITS. No action, suit or other proceeding has
been overtly threatened or is pending against any party to this Agreement to
prohibit, restrain, enjoin, restrict or otherwise prevent the consummation of
the transactions contemplated by this Agreement.
5.1.5 CONSUMMATION OF OFFER. Sub has purchased Shares
pursuant to the Offer; PROVIDED that this condition will be deemed satisfied if
Sub fails to purchase Shares pursuant to the Offer in violation of the terms of
this Agreement.
ARTICLE 6
TERMINATION
6.1 TERMINATION BY SCHNITZER AND/OR PROLER. This Agreement may
be terminated without further liability at any time before the Closing Date:
6.1.1 MUTUAL CONSENT. By mutual consent of Schnitzer,
Sub, and Proler; or
6.1.2 DELAY IN HSR CLEARANCE. By either Schnitzer or
Proler, if clearance under the HSR Act is not received within 120 days after the
filing of the premerger notification and report form.
6.1.3 INJUNCTION OR RESTRAINT. By either Schnitzer or
Proler, if any Governmental Entity has promulgated or issued a law, statute,
rule, regulation, decree, order, injunction, or ruling or taken any other action
prohibiting, restraining, enjoining, restricting or otherwise prohibiting the
Offer or the Merger that has become final and nonappealable.
6.1.4 FAILURE OF OFFER. By Schnitzer or Proler if the
Offer is terminated or expires in accordance with its terms as the result of the
failure of any of the Offer Conditions without Sub having purchased any Shares
pursuant to the Offer; provided, however, that the right to terminate under this
Section 6.1.4 is not available to any party whose failure to perform any of its
covenants or agreements under this Agreement results in the failure of any
condition.
6.2 TERMINATION BY SCHNITZER. Schnitzer, if not then in
default, may terminate this Agreement at any time before the Closing Date upon
written notice to Proler of the occurrence of any of the following:
6.2.1 BREACH BY PROLER. If Proler breaches in any
material respect any of its representations or warranties or defaults in the
observance or performance of any of its covenants or agreements under this
Agreement, except for breaches or defaults which, individually or in the
aggregate, would not have a Material Adverse Effect with respect to Proler or
Schnitzer or materially impair the ability of the parties to consummate the
transactions contemplated by this Agreement.
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6.2.2 WITHDRAWAL OF PROLER BOARD APPROVAL. If (i) the
Board of Directors of Proler or any committee thereof has withdrawn or modified
in a manner adverse to Schnitzer or Sub its approval or recommendation of the
Merger or this Agreement, or approved or recommended any Takeover Proposal, or
(ii) Proler has entered into a definitive agreement with respect to any Superior
Proposal in accordance with Section 4.2.2 of this Agreement.
6.3 TERMINATION BY PROLER. Proler, if not then in default, may
terminate this Agreement at any time before the Closing Date upon written notice
to Schnitzer of the occurrence of any of the following:
6.3.1 BREACH BY SCHNITZER. A breach by Schnitzer in any
material respect of any of its representations or warranties or a default in the
observance or performance of any of its covenants or agreements under this
Agreement, except for breaches or defaults which, individually or in the
aggregate, would not have a Material Adverse Effect with respect to Proler or
Schnitzer or materially impair the ability of the parties to consummate the
transactions contemplated by this Agreement.
6.3.2 PERMITTED TAKEOVER AGREEMENT. In connection with
Proler entering into a definitive agreement in accordance with Section 4.2.2,
PROVIDED it has complied with all provisions thereof, including the notice
provisions therein, and that it makes simultaneous payment of the Expenses and
the Termination Fee.
6.4 PROCEDURE; EFFECT OF TERMINATION. If either Schnitzer or
Proler elects to terminate this Agreement pursuant to this Article 6, the
terminating party will promptly give written notice thereof to the other party.
In the event of termination pursuant to this Article 6, the parties will be
released from all liabilities and obligations under this Agreement, other than
the obligations under Section 4.8 and liability for damages to the extent
arising from a breach of this Agreement before termination. The Confidentiality
Agreement dated June 11, 1996 between Proler and Schnitzer (the "Confidentiality
Agreement") is and will remain until the Effective Time in full force and effect
and will survive any termination of this Agreement.
ARTICLE 7
GENERAL PROVISIONS
7.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement will survive the Effective Time.
This Section 7.1 will not limit any covenant or agreement of the parties that by
its terms contemplates performance after the Effective Time of the Merger.
7.2 FURTHER ACTION. Proler, Sub, and Schnitzer will execute any
documents and take any additional action reasonably required to fully implement
this Agreement.
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7.3 ENTIRE AGREEMENT. This Agreement and the Confidentiality
Agreement contain the entire agreement and understanding among Proler, Sub, and
Schnitzer regarding the subject matter hereof and thereof and supersede and
replace all prior or contemporaneous negotiations, representations, or
agreements, written or oral.
7.4 ASSIGNMENT. This Agreement may not be assigned by any party
without the prior written consent of each of Proler and Schnitzer, which consent
will not unreasonably be withheld.
7.5 BINDING EFFECT; NO THIRD PARTY BENEFIT. This Agreement will
inure to the benefit of and be binding upon each of the parties and their
respective successors and assigns, subject to the restrictions on assignment
contained in Section 7.4. Nothing express or implied in this Agreement is
intended or will be construed to confer upon or give to any Person other than
the parties to this Agreement any rights or remedies under or by reason of this
Agreement or any transaction contemplated by it, except with respect to Section
4.11.
7.6 WAIVER. Failure of any party at any time to require
performance of any provision of this Agreement will not limit such party's right
to enforce such provision, nor will any waiver of any breach of any provision of
this Agreement constitute a waiver of any succeeding breach of such provision or
a waiver of such provision itself. Any waiver of any provision of this
Agreement will be effective only if set forth in writing and signed by the party
to be bound.
7.7 GOVERNING LAW. This Agreement will be governed and
construed in accordance with the laws of the state of Delaware.
7.8 SEVERABILITY. If any term or provision of this Agreement or
the application thereof to any Person or circumstance is to any extent held to
be invalid or unenforceable, the remainder of this Agreement and the application
of such term or provision to Persons or circumstances other than those as to
which it is held invalid or unenforceable will not be affected thereby, and each
term or provision of this Agreement will be valid and enforceable to the fullest
extent permitted by law.
7.9 TIME OF ESSENCE. Proler, Sub, and Schnitzer hereby
acknowledge and agree that time is strictly of the essence with respect to each
and every term, condition, obligation, and provision of this Agreement.
7.10 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which will be deemed an original, but all of which taken
together will constitute one and the same instrument, binding on the parties.
If this Agreement is executed in counterparts, each party will transmit by
facsimile a copy of the signed counterpart upon execution and will cause an
executed original counterpart to be transmitted by courier service to the other
parties.
7.11 AMENDMENTS. This Agreement may not be modified or amended
except by the written agreement of Proler, Sub, and Schnitzer. This Agreement
may not be terminated other
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than pursuant to Article 6 except by the written agreement of Proler, Sub,
and Schnitzer. A party may waive one or more of its rights under this
Agreement only in a written instrument signed by the party.
7.12 AUTHORITY. The person executing this Agreement on behalf of
each party warrants that she/he has the authority to execute this Agreement and
to so bind that party as provided in this Agreement.
7.13 NOTICES. All notices or other communications required or
permitted under this Agreement must be in writing and must be personally
delivered, sent by registered or certified mail, postage prepaid, return receipt
requested, or sent by facsimile. Any notice, if mailed, will be deemed given
when received; any notice, if transmitted by facsimile, will be deemed given
when transmitted and electronically confirmed. Notices will be given to the
following Persons:
To Schnitzer: Schnitzer Steel Industries, Inc.
3200 NW Yeon Avenue
Portland, OR 97210
Attention: Robert W. Philip
Facsimile No.: (503) 323-2793
With a copy to: The Schnitzer Group
3200 NW Yeon Avenue
Portland, OR 97210
Attention: Anton U. Pardini
Facsimile No.: (503) 299-2277
To Proler: Proler International Corp.
4265 San Felipe, Suite 900
Houston, TX 77027
Attention: Bruce W. Wilkinson
Facsimile No.: (713) 627-2737
With a copy to: Kathleen M. Kopp
Mayor, Day, Caldwell & Keeton, L.L.P.
700 Louisiana, Suite 1900
Houston, TX 77002
Facsimile No.: (713) 225-7047
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<PAGE>
ARTICLE 8
DEFINITIONS
The following terms are defined in this Agreement in the sections
identified below:
TERM DEFINITION SECTION
---- ------------------
"1988 Plan" 2.8
"1994 Plan" 2.8
"Agreement" Preamble
"Certificate of Merger" 2.4
"Certificates" 2.7.2.2
"Closing" and "Closing Date" 2.9
"Code" 3.1.14
"Confidentiality Agreement" 6.4
"Contamination" 3.1.13.1
"Contracts" 3.1.8
"Copyrights" 3.1.20
"DGCL" Recitals
"Dissenting Stockholder" 2.7.1.4
"Dissenting Shares" 2.7.1.4
"DOJ" 4.4
"Effective Time" 2.4
"Environmental Law" 3.1.13.1
"ERISA" 3.1.16
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TERMS DEFINITION SECTION
----- ------------------
"ERISA Plans" 3.1.16
"Exchange Act" 1.1(a)
"Expenses" 4.8.2
"Expiration Date" 1.1(d)
"FTC" 4.4
"Governmental Entity" 3.1.2(b)
"Hazardous Substance" 3.1.13.1
"HSR Act" 4.4
"ITC" 3.1.14.3
"Indemnified Parties" 4.11.1
"Information Statement" 3.1.6
"Intellectual Property Assets" 3.1.20
"Leases" 3.1.10
"Licenses" 3.1.12
"Marks" 3.1.20
"Material Adverse Effect" Introduction to Article 3
"Material Properties and Assets" 3.1.9
"Merger" Recitals
"Merger Consideration" 2.7.1.3
"NOL" 3.1.14.3
"Notice of Superior Proposal" 4.2.2
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<PAGE>
TERMS DEFINITION SECTION
----- ------------------
"Offer" Recitals
"Offer Conditions" 1.1(a)
"Offer Documents" 1.1(c)
"Offer Price" 1.1(a)
"Patents" 3.1.20
"Paying Agent" 2.7.2.1
"Person" 2.7.2.4
"Policies" 3.1.19
"Proler" Preamble
"Proler Board" 1.2(a)
"Proler Entity," "Proler Entities" Introduction to Article 3
"Proler Returns" 3.1.14
"Proler SEC Documents" 3.1.5
"Proler Stock Plans" 3.1.3
"Proxy Statement" 2.2(b)
"RCRA" 3.1.13.2(b)
"Rights" Recitals
"Rights Agreement" Recitals
"Schedule 14D-1" 1.1(c)
"Schedule 14D-9" 1.2(a)
"Schnitzer" Preamble
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<PAGE>
TERMS DEFINITION SECTION
----- ------------------
"SEC" 1.1(c)
"Securities Act" 3.1.5
"Share," "Shares" 2.7.1
"Stockholder Approval" 2.2(a)
"Stockholders' Meeting" 2.2(a)
"Sub" Preamble
"Superior Proposal" 4.2.2
"Surviving Corporation" 2.5
"Taxes" 3.1.14.4
"Takeover Proposal" 4.2.1
"Tendered Shares" 1.1(d)
"Termination Fee" 4.8.2
40
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement, effective the
day and year first written above.
SCHNITZER STEEL PROLER INTERNATIONAL CORP.
INDUSTRIES, INC.
By:________________________ By:________________________
(Signature) (Signature)
Name: Name:
Title: Title:
PIC ACQUISITION CORPORATION
By:________________________
(Signature)
Name:
Title:
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<PAGE>
ANNEX A
OFFER CONDITIONS
1. DEFINED TERMS. Unless otherwise defined in this Annex A, capitalized
terms that appear in this Annex A to the Agreement and Plan of Merger among
Schnitzer Steel Industries, Inc., Proler International Corp., and PIC
Acquisition Corporation have the meanings assigned in the Agreement.
2. OFFER CONDITIONS. Notwithstanding any other provision of the Offer,
the obligation of Sub to accept for payment, and pay for, any Tendered Shares
will be subject only to the conditions (the "Offer Conditions," any or all of
which (except for (i) and (ii)) may be waived by Sub, in whole or in part, at
any time and from time to time) that:
(i) this Agreement has not been terminated;
(ii) the number of validly Tendered Shares immediately before the
Expiration Date that have not been withdrawn, when added to the
Shares already owned by Schnitzer or Sub, constitutes a majority
of the then-outstanding Shares (determined on a fully diluted
basis);
(iii) there has not occurred (v) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock
Exchange or in the U.S. over-the-counter market, (w) a
declaration of a banking moratorium or any general suspension of
payments in respect of banks in the United States, (x) any
material limitation (whether or not mandatory) imposed by any
governmental authority on the extension of credit by banks or
other financial institutions in the United States,
(y) commencement of war or armed hostilities between the United
States and any foreign power or any insurrection or armed
conflict involving the United States which makes it impracticable
to conclude the acquisition of Proler, or (z) in the case of any
of the foregoing existing at the time of the commencement of the
Offer, a material acceleration or worsening thereof;
(iv) the applicable waiting period under the HSR Act has expired or
been terminated before the Expiration Date;
(v) no statute, rule, regulation, judgment, order, decree, ruling,
injunction or other action has been entered, promulgated or
enforced by any Governmental Entity, and no action, proceeding
or claim by any Governmental Entity that has a reasonable
likelihood of success has been instituted, that purports, seeks,
or threatens to (x) challenge, prohibit, restrain, enjoin or
restrict in a material manner the purchase and sale of any
Tendered Shares or the consummation of the Merger as contemplated
by this Agreement, (y) impose material adverse terms or
conditions (not set forth herein) upon the purchase and sale
of any Tendered
ANNEX A - Page 1
<PAGE>
Shares or the consummation of the Merger as contemplated by this
Agreement, (z) prohibit or materially limit or seek to prohibit
or materially limit the ownership or operation by Schnitzer or
Sub of all or a material portion of the business or assets of
Proler and its subsidiaries, taken as a whole, or compel or seek
to compel Schnitzer or Sub to dispose of or to hold separate all
or a material portion of the business or assets of Proler and its
subsidiaries, taken as a whole;
(vi) except as to matters disclosed in the Proler SEC Documents or
included in the Schedules to this Agreement, there has been no
change resulting in a Material Adverse Effect (or any development
that, insofar as reasonably can be foreseen, is reasonably likely
to result in any Material Adverse Effect) to Proler;
(vii) (x) neither the Board of Directors of Proler nor any committee
thereof has withdrawn or modified in a manner adverse to
Schnitzer or Sub its approval or recommendation of the Offer, the
Merger or this Agreement, or approved or recommended any Takeover
Proposal and (y) Proler has not entered into any agreement with
respect to any Superior Proposal in accordance with Section 4.2.2
of this Agreement;
(viii) all representations and warranties of Proler are true and
correct, in each case as if such representation or warranty was
made as of such time on or after the date of this Agreement,
except (x) for those representations and warranties which address
matters only as of a particular date (which must remain true and
correct as of such date) and (y) for breaches of representations
and warranties which, individually or in the aggregate, would not
have a Material Adverse Effect with respect to Proler or
Schnitzer or materially impair the ability of the parties to
consummate the transactions contemplated by this Agreement;
(ix) Proler has not failed to perform any obligation or to comply with
any agreement or covenant of Proler to be performed or complied
with by it under this Agreement prior to consummation of the
Offer, except for such nonperformance or failure of compliance
which, individually or in the aggregate, would not have a
Material Adverse Effect with respect to Proler or Schnitzer or
materially impair the ability of the parties to consummate the
transactions contemplated by this Agreement.
Schnitzer and Sub will not be required to consummate the Offer in the event
any of the foregoing conditions have not been satisfied, and such failure, in
the reasonable judgment of Schnitzer and Sub, in any case and regardless of
the circumstances (other than a breach by Schnitzer or Sub of the Agreement)
causing the failure of such condition(s) makes it inadvisable to proceed with
the Offer or its consummation.
ANNEX A - Page 2
<PAGE>
ANNEX B
AMENDMENT TO RIGHTS AGREEMENT
THIS AMENDMENT, dated as of September 15, 1996, is between PROLER
INTERNATIONAL CORP., a Delaware corporation (the "Company"), and KEYCORP
SHAREHOLDER SERVICES, INC. (the "Rights Agent").
RECITALS
A. Proler and the Rights Agent are parties to a Rights Agreement dated
as of February 28, 1996 (the "Rights Agreement").
B. Schnitzer Steel Industries, Inc., an Oregon corporation
("Schnitzer), PIC Acquisition Corporation, a Delaware corporation ("Sub"),
and the Company have entered into an Agreement and Plan of Merger (the
"Merger Agreement") pursuant to which Sub will commence an offer (the
"Offer") to purchase all outstanding shares of common stock of the Company
and, following consummation of the amended offer, the Company will merge with
and into Sub (the "Merger"). The Board of Directors of the Company has
approved the Merger Agreement, the Offer and the Merger.
C. Pursuant to Section 26 of the Rights Agreement, the Board of
Directors of the Company has determined that an amendment to the Rights
Agreement as set forth herein is necessary and desirable to reflect the
foregoing and the Company and the Rights Agent desire to evidence such
amendment in writing.
Accordingly, the parties agree as follows:
1. AMENDMENT OF SECTION 1(a). Section 1(a) of the Rights Agreement is
amended to add the following sentence at the end thereof
"Notwithstanding anything in this Rights Agreement to the contrary,
neither Schnitzer nor Sub shall be deemed to be an Acquiring Person
solely by virtue of (i) the announcement or making of the Offer (as
defined in the Merger Agreement), (ii) the acquisition of Common Stock
pursuant to the Offer and the Merger (as defined in the Merger
Agreement), (iii) the execution of the Merger Agreement or (iv) the
consummation of the other transactions contemplated in the Merger
Agreement."
2. ADDITIONS TO SECTION 1. The following subsections are added to
Section 1 of the Rights Agreement:
ANNEX B - Page 1
<PAGE>
"(p) 'Merger Agreement' shall mean the Agreement and Plan of Merger
dated as of September 15, 1996, among Schnitzer, Sub and the Company,
as amended from time to time.
(q) 'Schnitzer' shall mean Schnitzer Steel Industries Inc., an Oregon
corporation."
(r) 'Sub' shall mean PIC Acquisition Corporation, a Delaware
corporation, which is a wholly owned subsidiary of Schnitzer, or any
other subsidiary of Schnitzer that is substituted for Sub pursuant to
the Merger Agreement."
3. AMENDMENT OF SECTION 3(A). Section 3(a) of the Rights Agreement is
amended to add the following sentence at the end thereof
"Notwithstanding anything in this Rights Agreement to the contrary, a
Distribution Date shall not be deemed to have occurred solely as the
result of (i) the announcement or making of the Offer, (ii) the
acquisition of Common Stock pursuant to the Offer and the Merger,
(iii) the execution of the Merger Agreement or (iv) the other
transactions contemplated in the Merger Agreement."
4. AMENDMENT OF SECTION 11(A)(II)(B). Section 11(a)(ii)(B) of the Rights
Agreement is amended and restated to read as follows:
"(B) any Person (other than the Company, any Subsidiary of the
Company or any employee benefit plan of the Company or of any
Subsidiary organized, appointed or established by the Company for or
pursuant to the terms of any such plan) alone or together with its
Affiliates and Associates, shall at any time after the Rights Dividend
Declaration Date, become the Beneficial Owner of 30% or more of the
shares of Common Stock then outstanding, unless the event causing the
30% threshold to be crossed is a transaction set forth in SECTION
13(a) hereof, is an acquisition of shares of Common Stock pursuant to
the Offer and the Merger, or is an acquisition of shares of Common
Stock pursuant to a tender offer or an exchange offer, made in the
manner prescribed in Section 14(d) of the Exchange Act, for all
outstanding shares of Common Stock (other than shares held by such
Person and its Affiliates) that is, by its terms, held open for not
less than 60 days and either (1) is at a price and on terms determined
by at least a majority of the members of the Board of Directors who
are not officers of the Company, or who are not nominees,
representatives, Affiliates or Associates of the Person making such
offer, after receiving advice from one or more investment banking
firms, to be (a) at a price that is fair to the stockholders (taking
into account all factors which the Board of Directors of the Company
deem relevant including, without limitation, prices which could
reasonably be achieved if the Company or its assets were sold on an
orderly basis designed to realize maximum value) and (b) otherwise in
the best interests of the Company and its stockholders,
ANNEX B - Page 2
<PAGE>
or (2) is for cash and (i) causes such Person, together with all
Affiliates and Associates of such Person, to be the Beneficial Owner of
80% or more of the Common Stock then outstanding and (ii) is followed,
within 90 days, by the completion of a merger or other business
combination in which all remaining stockholders of the Company (other
than the Person making such offer) receive cash consideration in a per
share amount at least equal to the highest per share amount paid in
connection with such offer; or"
5. AMENDMENT OF SECTION 13. Section 13 of the Rights Agreement is
amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary,
(i) the announcement or making of the Offer, (ii) the acquisition of
Common Stock pursuant to the Offer and the Merger, (iii) the execution
of the Merger Agreement or (iv) the consummation of the other
transactions contemplated in the Merger Agreement shall not be deemed
to be a Section 13 Event and shall not cause the Rights to be adjusted
or exercisable in accordance with Section 13."
6. EFFECTIVENESS. This Amendment shall be deemed effective as of
September 15, 1996 as if executed on such date. Except as amended hereby, the
Rights Agreement shall remain in full force and effect and shall be otherwise
unaffected hereby.
7. MISCELLANEOUS. This Amendment shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be governed
by and construed in accordance with the laws of such state applicable to
contracts to be made and performed entirely within such state. This Amendment
may be executed in any number of counterparts, each of such counterparts shall
for all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument. If any provision, covenant
or restriction of this Amendment is held by a court of competent jurisdiction or
other authority to be invalid, illegal or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Amendment shall remain in
full force and effect and shall in no way be effected, impaired or invalidated.
ANNEX B - Page 3
<PAGE>
EXECUTED as of the date set forth above.
Attest: PROLER INTERNATIONAL CORP.
- ------------------------------ -------------------------------
Name: Name:
Title: Title:
Attest: KEYCORP SHAREHOLDER SERVICES, INC.
- ------------------------------ -------------------------------
Name: Name:
Title: Title:
ANNEX B - Page 4
<PAGE>
DEPOSITARY AGENT AGREEMENT
The Bank of New York
Tender and Exchange Department
101 Barclay Street - 12 W Floor
New York, NY 10286
Gentlemen:
PIC Acquisition Corporation, a Delaware corporation (the "Offeror") is
offering to purchase all outstanding shares of common stock, par value $1.00 per
share (the "Shares") of Proler International Corp., a Delaware corporation (the
"Company") and the associated stock rights (the "Rights") issued pursuant to
the Rights Agreement dated as of February 29, 1996 between the Company and Key
Corp Shareholder Services, Inc., at $7.50 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated September 20, 1996 and the related Letter of Transmittal, copies of which
are attached hereto as Exhibits A and B, respectively, and which together, as
they may be supplemented or amended from time to time, constitute the "Offer".
All references to the Shares in this Agreement will be deemed to include the
associated Rights.
The Offeror hereby appoints The Bank of New York to act as Depositary in
connection with the Offer. References hereinafter to "you" shall refer to The
Bank of New York.
The Offer was commenced by the Offeror on September 20, 1996. The Letter
of Transmittal that accompanies the Offer to Purchase is to be used by the
shareholders of the Company to accept the Offer, and contains instructions with
respect to the delivery of certificates for Shares tendered.
The Offer shall expire at 12:00 Midnight, New York City time, on October
18, 1996 (the "Initial Expiration Date"), or on such subsequent date or time to
which the Offeror may extend the Offer. Subject to the terms of the Merger
Agreement (as defined in the Offer to Purchase), the Offeror expressly reserves
the right to extend the Offer from time to time and may extend the Offer by
giving notice to you before 9:00 a.m., New York City time, on the business day
following the scheduled Expiration Date. The later of the Initial expiration
Date or the latest time and date to which the Offer may be so extended is
hereinafter referred to as "The Expiration Date".
In carrying out your duties as Depositary, you are to act in accordance
with the following instructions:
1. You will establish and maintain a book-entry account in respect of the
Shares at the Depository Trust Company ("DTC"), the Midwest Security Trust
Company ("MSTC") and the Philadelphia Depository Trust Company ("PDTC"), in
connection with the Offer, in accordance with Rule 17AD-14 under the Securities
Exchange Act of 1934, as amended. Any financial institution that is a
participant in the DTC, MSTC, or PDTC system may make book-entry delivery
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of the Shares by causing DTC, MSTC or PDTC to transfer such Shares into the
account maintained by you, pursuant to this paragraph, in accordance with DTC's,
MSTC's or PDTC's procedure for such transfer, and you may effect a withdrawal of
Shares through such account by book-entry movement. However, although delivery
of Shares may be effected through book-entry transfer at DTC, MSTC or PDTC the
Letter of Transmittal (or facsimile thereof) with any required signature
guarantees and any other documents must, in any case, be received by you in
order for Shares to be properly tendered. The accounts shall be maintained
until all Shares tendered pursuant to the Offer shall have been either accepted
for payment or returned.
2. You are to examine each of the Letters of Transmittal and certificates
for Shares and any other documents delivered or mailed to you by or for
shareholders of the Company to ascertain whether; (i) the Letters of Transmittal
any such other documents are duly executed and properly completed in accordance
with instructions set forth therein and (ii) the Shares have otherwise been
properly tendered. In each case where the Letter of Transmittal or any other
document has been improperly completed or executed or any of the certificates
for Shares are not in proper form for transfer or some other irregularity in
connection with the acceptance of the Offer exists, you will endeavor to inform
the presenters of the need for fulfillment of all requirements and to take any
other action as may be necessary or advisable to cause such irregularity to be
corrected.
3. With the approval of an authorized officer of the Offeror, either
Robert W. Philip or Barry A Rosen, or of Stuart Chestler of Stoel Rives, special
counsel to the "Offeror ("Stoel Rives") (such approval, if given orally, to be
confirmed in writing), or any other party designated by such an officer, you are
authorized to waive any irregularities in connection with any tender pursuant to
the Offer.
4. Tenders of Shares may be made only as set forth in Section 3 of the
Offer to Purchase, and Shares shall be considered properly tendered to you only
when:
(a) Certificates for Shares (whether physically delivered or delivered
pursuant to the procedure for book-entry transfer set forth in Section
3 the Offer to Purchase, in which latter case confirmation of receipt
of such tendered Shares must be received by you) are covered by a
properly completed and duly executed Letter of Transmittal received by
you (together with any other required documents prior to the
Expiration Date, or by an appropriate Notice of Guaranteed Delivery
from an Eligible Institution received by you in accordance with
Section 3 of the Offer to Purchase prior to the expiration date). For
the purposes of these instructions: an "Eligible Institution" shall
be a financial institution that is a member of the Securities Transfer
Agents Medallion Program ("STAMP") the Stock Exchange Medallion
Program ("SEMP") or the New York Stock Exchange, Inc. Medallion
Signature Program ("MSP") (each, an "Eligible Institution"); and "an
appropriate Notice of Guaranteed Delivery" shall be a Notice of
Guaranteed Delivery
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substantially in the form attached hereto as Exhibit C, which is
either delivered to you by hand or transmitted to you by facsimile
transmission and mail or otherwise;
(b) Certificates for Shares (together with any other required documents)
are received by you, or you have received confirmation of receipt of
such Shares pursuant to the book-entry transfer procedures set forth
in the Offer to Purchase, prior to the Expiration Date or, in the case
of an appropriate Notice of Guaranteed Delivery, along with a properly
completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) any other documents required by the Letter
of Transmittal, within three New York Stock Exchange, Inc. trading
days after the date of such Notice of Guaranteed Delivery; and
(c) The adequacy of the items relating to certificates for Shares and the
related Letter of Transmittal has been favorably passed upon as above
provided.
Notwithstanding the provision of this paragraph 4, Shares which the Offeror
shall approve as having been properly tendered shall be considered to be
properly tendered.
A tender made on the basis of an appropriate Notice of Guaranteed Delivery
will not be considered to have been properly made unless stock certificates for
all of the Shares covered thereby have been deposited (either physically or
pursuant of book-entry transfer) within the time periods provided in this
paragraph 4 and Section 2 of the Offer to Purchase; and when all such stock
certificates have been so delivered and all other requirements in this paragraph
4 and the Offer to Purchase have been complied with, the tender will be deemed
effected at the time of receipt by you of the Letter of Transmittal or
appropriate Notice of Guaranteed Delivery, as the case may be, provided for in
such Section 2 and this paragraph 4.
5. You shall advise the Offeror with respect to any Shares received
subsequent to the Expiration Date and accept its instructions with respect to
disposition of such Shares.
6. You shall accept tenders:
(a) in cases where the Shares are registered in two or more
names only if signed by all named holders.
(b) in cases where the signed person (as indicated on the
Letter of Transmittal) is acting in a fiduciary or a
representative capacity only when proper evidence of his or
her authority so to act is submitted.
(c) from persons other than the registered stockholder provided
that normal transfer requirements, including any applicable
transfer taxes, are fulfilled.
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You shall accept partial tenders of Shares where so indicated in the Letter
of Transmittal and deliver certificates for Shares to the transfer agent for
split-up and return and untendered Shares to the holder as promptly as
practicable.
7. The Offeror will purchase Shares duly tendered on the terms and
subject to the conditions set forth in the Offer to Purchase and the Letter of
Transmittal. Payment for Shares duly tendered and purchased pursuant to the
Offer will be made by check on behalf of the Offeror by you at the rate of $7.50
per Share (or such higher price as is offered by the Offeror pursuant to the
Offer) as soon as practicable after notice (such notice, if given orally, to be
confirmed in writing) of acceptance of said Shares by the Offeror and the funds
referred to below are received by you; PROVIDED, HOWEVER, that in all cases,
payment for Shares tendered and purchased pursuant to the Offer will be made
only after timely receipt by you of certificates, for such Shares (or timely
confirmation of a book-entry transfer of such Shares into your account at
DTC,MSTC or PSDTC), a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) and any other required documents.
Immediately available funds will be deposited with you on the day checks
are mailed or delivered by you. After such payment, you shall promptly present
certificates for said Shares, and any applicable transfer taxes (to be furnished
by the Offeror), together with your letter of indemnity and any other documents
reasonably requested by the Offeror including a certificate by you indicating
the number of Shares validly tendered for transfer on the books of the Company,
all in accordance with written instructions from the Offeror.
8. Shares tendered pursuant to Offer are irrevocable, except that Shares
tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date, and unless theretofore purchased by the Offeror, may also be
withdrawn at any time on or after October 18, 1996, if not accepted for
purchase. See the Offer to Purchase for further details.
9. The Offeror shall not be required to purchase any Shares tendered if
any of the conditions set forth in the Offer are not met. Notice of any
decision by the Offeror not to purchase or pay for any Shares tendered shall be
given (and confirmed in writing) by the Offeror to you.
10. If, pursuant to the Offer, the Offeror does not accept and pay for all
or part of the Shares tendered, you shall as soon as practicable return those
certificates for unpurchased Shares (or effect appropriate book-entry transfer),
together with any related required documents and the Letters of Transmittal
relating thereto that are in your possession, to the persons who deposited them.
11. All certificates for unpurchased Shares and all checks or drafts for
purchased Shares shall be forwarded by first-class mail under a blanket surety
bond protecting you and the Offeror
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from loss or liability arising out of the non-receipt or non-delivery of such
checks, drafts and certificates.
12. You are not authorized to offer to pay any concessions, commissions or
solicitation fees to any broker, dealer, bank or other persons or to engage or
utilize any person to solicit tenders.
13. As Depositary hereunder you:
(a) Shall have no duties or obligations other than those specifically
set forth herein, in the Offer or the Letter of Transmittal, or
as may be subsequently agreed to between you and the Offeror;
(b) Will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or
genuineness of any of the certificates or the Shares represented
thereby deposited with you pursuant to the Offer, and will not be
required to and will make no representation as to the validity,
value or genuineness of the Offer;
(c) Shall not be obligated to take any legal action thereunder which
might in your judgment involve any expense or liability, unless
you shall have been furnished with reasonable indemnity;
(d) May reasonably rely on and shall be protected in acting in
reliance upon any certificate, instrument, opinion, notice,
letter, telegram, or other document or security delivered to you
and reasonably believed by you to be genuine and to have been
signed by the proper party or parties;
(e) May act upon any tender, statement, request, comment, agreement
or other instrument whatsoever not only as to its due execution
and validity and effectiveness of its provisions, but also as to
the truth and accuracy of any information contained therein,
which you shall in good faith believe to be genuine or to have
been signed or represented by a proper person or persons;
(f) May rely on and shall be protected in acting upon written or oral
instructions from any officer of the Offeror, and such employees
and representatives of the Offeror as the Offer may hereinafter
designate in writing unless such instruction is contrary to the
provisions of this Agreement or in conflict with the express
terms of the Offer;
(g) May consult with Anton Pardini of the Offer or Stuart Chestler or
Todd Bauman of Stoel Rives with respect to any questions relating
to your duties and responsibilities and the opinion of such
counsel shall be full and
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complete authorization and protection in respect to any action
taken, suffered or omitted by you hereunder in good faith and in
accordance with the opinion of such counsel; and
(h) Shall not advise any person tendering Shares pursuant to the
Offer as to the wisdom of making such tender or as to the market
value or decline or appreciation in market value of any Share.
14. You shall take such action as may from time to time be requested by
the Offeror (and such other action as you may deem appropriate) to furnish
copies of the Offer to Purchase, Letter of Transmittal and Notice of Guaranteed
Delivery in the forms attached hereto, or in such other forms as may be approved
from time to time by the Offeror to all persons requesting such documents and to
accept and comply with telephone requests for information relating to the Offer.
The Offeror will furnish you with copies of such documents on your request.
15. You are authorized to cooperate with and to furnish information to any
organization (and its representatives) designated from time to time by the
Offeror in any manner reasonably requested by it in connection with the Offer
and any tenders thereunder.
16. You shall advise by cable, telex, facsimile transmission or telephone,
and promptly thereafter confirm in writing to Barry A. Rosen, Treasurer of the
Offeror, Stuart Chestler of Stoel Rives (each at the address and telephone or
other number set forth on Schedule 1 hereto) and such other person or persons as
any of them may request, daily (or more frequently if requested) up to and
including the Expiration Date, as to the number of shares which have been
tendered pursuant to the Offer and the items received by you pursuant to this
Agreement, separately reporting and giving cumulative totals as to items
properly received, and items covered by Notice of Guaranteed Delivery referred
to in paragraph (b) of paragraph 4 hereof. In addition, you will also inform,
and cooperate in making available to, the aforementioned persons upon oral
request made from time to time prior to the Expiration Date of such other
information as they may reasonably request. Such cooperation shall include,
without limitation, the granting by you to the Offeror, the persons listed in
the preceding sentence, and such person as the Offeror may request, of access to
those persons on your staff who are responsible for receiving tenders, in order
to ensure that immediately prior to the Initial Expiration Date and each other
Expiration Date, if any, the Offeror shall have received information in
sufficient detail to enable it to decide whether to extend the Offer. You shall
prepare a final list of all persons whose tenders were accepted the number of
shares tendered, the amount accepted and deliver said list to Barry A. Rosen and
Anton Pardini of the Offeror.
17. Letters of Transmittal and Notices of Guaranteed Delivery submitted in
lieu thereof pursuant to Section 3 of the Offer to Purchase shall be stamped by
you as to the date, and, after the expiration of the Offer, the time, of receipt
thereof and shall be preserved by you for a period of time at least equal to the
period of time you preserve other records pertaining to the transfer of
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securities. You shall dispose of unused Letters of Transmittal and other
surplus materials by returning them to Barry A. Rosen of the Offeror.
18. You hereby expressly waive any lien, encumbrance or right of set-off
whatsoever that you may have with respect to funds deposited with you for the
purchase of Shares and the payment of stock transfer taxes by reason of amounts,
if any, borrowed by the Offeror, or any of its subsidiaries or affiliates
pursuant to any loan or credit agreement with you.
19. For services rendered as Depositary hereunder, you shall be entitled
to such compensation as set forth on Schedule I attached hereto.
20. You hereby acknowledge receipt of the Offer to Purchase and the Letter
of Transmittal and further acknowledge that you have examined each of them. Any
inconsistency between this Agreement, on the one hand, and the Offer to Purchase
and the Letter of Transmittal (as they may be amended from time to time), on the
other hand, shall be resolved in favor of the latter two documents, except with
respect of the duties, liabilities and indemnification of you as Depositary.
21. The Offeror covenants and agrees to indemnify and hold you harmless
against any loss, liability, cost or expense, including reasonable attorneys'
fees, (incurred without negligence, misconduct or bad faith on your part)
arising out of or in connection with any act, omission, delay or refusal made by
you in reasonable reliance upon any signature, endorsement, assignment,
certificate, order, request, notice, instruction or other instrument or document
believed by you to be valid, genuine and sufficient and in accepting any tender
or effecting any transfer of Shares believed by you in good faith to be
authorized, and in delaying or refusing in good faith to accept any tenders or
effect any transfer of Shares. In no case shall the Offeror be liable under
this indemnity with respect to any claim against you unless the Offeror shall be
notified by you, by letter or cable or by telex confirmed by letter, of the
written assertion of a claim against you or of any other action commenced
against you, promptly after you shall have received any such written assertion
or shall have been served with a summons in connection therewith. The Offeror
shall be entitled to participate at its own expense in the defense of any such
claim or other action and if the Offeror so elects, the Offeror shall assume the
defense of any such suit, the Offeror shall not be liable for the fees and
expenses of any additional counsel thereafter retained by you, so long as the
Offeror shall retain counsel reasonably satisfactory to you to defend such
suite.
22. You shall arrange to comply with all requirements under the tax laws
of the United States, including those relating to missing Tax Identification
Numbers, and shall file any appropriate reports with the Internal Revenue
Service (e.g., 1099, 1099B, etc.). You shall process and report to each
shareholder receiving payment for Shares a Form 1099-B detailing the proceeds
received from the sale of the Shares. The Offeror understands that you are
required to deduct 31% on payments to holders who have not supplied their
correct Taxpayer Identification Number or required certification. Such funds
will be turned over to the Internal Revenue Service.
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23. You shall deliver or cause to be delivered in a timely manner to each
governmental authority to which any stock transfer taxes are payable in respect
of the transfer of Purchased Shares to the Company your check in the amount of
all stock transfer taxes so payable, and the Company shall reimburse you for the
amount of any and all stock transfer taxes payable in respect of the transfer of
Purchased Shares to the Company; PROVIDED, HOWEVER, that you shall reimburse the
Company for amounts refunded to you in respect of your payment of any such stock
transfer taxes at such time as such refund is received by you.
24. This Agreement and your appointment as depository hereunder shall be
construed and enforced in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely within such state,
and shall inure to the benefit of, and the obligations created hereby shall be
binding upon, the successors and assigns of each of the parities hereto. This
Agreement may not be modified orally.
25. This Agreement may be executed in two counterparts, each of which
shall be deemed to be an original but which together shall constitute one and
the same agreement.
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Please acknowledge receipt of this Agreement and confirm the arrangements
herein provided by signing and returning the enclosed copy.
PIC ACQUISITION CORPORATION
By: /s/ Barry A. Rosen
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Name: Barry A. Rosen
Title: Vice President Finance
Accepted as of the date first above written.
THE BANK OF NEW YORK
By: /s/ Patrick Falciglia
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Name: Patrick Falciglia
---------------------
Title: Vice President
--------------------
<PAGE>
September 18, 1996
PIC Acquisition Corporation
3200 N.W. Yeon Ave
Portland, Oregon 97210
LETTER OF AGREEMENT
This Letter of Agreement (the "Agreement") sets forth the terms and conditions
under which Georgeson & Company Inc. ("Georgeson") has been retained by PIC
Acquisition Corporation ("PIC"), a wholly owned subsidiary of Schnitzer Steel
Industries, Inc., as Information Agent for its offer to purchase shares of
Proler International Corp. ("PROLER") Common Stock (the "Offer"). The term of
the Agreement shall be the term of the Offer, including any extensions thereof.
1. During the term of the Agreement, Georgeson will: provide advice and
consultation with respect to the planning and execution of the Offer;
assist in the preparation and placement of newspaper ads; assist in
the distribution of Offer documents to brokers, banks, nominees,
institutional investors, and other shareholders and investment
community accounts; answer collect telephone inquires from
shareholders and their representatives; and, if requested, call
individuals who are registered holders.
2. PIC will pay Georgeson a fee of $10,000, of which half is payable in
advance per the enclosed invoice and the balance at the expiration of
the Offer, plus an additional fee to be mutually agreed upon if the
Offer is extended more that fifteen days beyond the initial expiration
date or if there is a competing offer.
3. In connection with our services under this agreement, you agree to
reimburse us, or pay directly, or, where requested by us, advance
sufficient funds to us for payment for the following costs and
expenses:
--expenses incidental to the Offer, including typesetting, printing,
distribution, mailing, postage and freight charges incurred by us on
your behalf;
--expenses we incur in working with your agents or other parties,
including bank threshold lists, data processing , charges for
facsimile transmissions or other forms of electronic communications,
charges of courier, and other such services authorized by you;
<PAGE>
--expenses we incur at your request or for your convenience, including
printing additional and/or supplemental material, copying, and travel
expenses of our executives;
--fees and expenses authorized by you resulting from extraordinary
contingencies during the solicitation, including advertising, media
relations, stock watch and analytical services.
4. If requested, we will check, itemize and pay, on your behalf, from
funds provided by you, the charges of brokers and banks, with the
exception of ADP Proxy Services which will bill you directly, for
forwarding Offer material to beneficial owners. To ensure that we
have sufficient funds in your account to pay these bills promptly, you
agree to provide us, at the time we complete the initial delivery of a
preliminary payment equal to 75% of the anticipated broker and bank
charges for distributing this material. For this service, you will
pay us five dollars and fifty cents($5.50) for each broker and bank
invoice paid by us. If you prefer to pay these bills directly, please
strike out and initial this clause before returning the Agreement to
us.
5. Georgeson hereby agrees not to make any representations not included
in the Offer documents.
6. PIC agrees to indemnify and hold Georgeson harmless against any loss,
damage and reasonable expense (including, without limitation, legal
and other related fees and expenses), liability or claim arising out
of Georgeson's fulfillment of the Agreement (except for any loss,
damage, expense, liability or claim arising out of Georgeson own
negligence or misconduct). At its election, PIC may assume the
defense of any such action. Georgeson hereby agrees to advise PIC of
any such liability or claim promptly after receipt of any notice
thereof. The indemnification contained in this paragraph will survive
the term of the Agreement.
7. Georgeson agrees to preserve the confidentiality of all non-public
information provided by PIC or its agents for our use in providing
services under this Agreement, or information developed by Georgeson
based upon such non-public information.
If the above is agreed to by you, please sign and return the enclosed duplicate
of this Agreement to Georgeson & company Inc., Wall Street Plaza, New York, New
York 10005, Attention: Marcy Roth, Contract Administrator.
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ACCEPTED: Sincerely,
PIC Acquisition Corporation GEORGESON & COMPANY INC.
By: /s/ James W. Cruckshank By: /s/ Paul Henar
-------------------------- --------------------------
Title: Corporate Controller Title: Cheif Financial Officer
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Date: September 18, 1996
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