<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
STEEL OF WEST VIRGINIA, INC.
(Name of Subject Company)
SWVA ACQUISITION, INC.
AND
ROANOKE ELECTRIC STEEL CORPORATION
(Bidders)
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COMMON STOCK, $.01 PAR VALUE
(Title of Class of Securities)
858154107
(CUSIP Number of Class of Securities)
----------------------------------------------
JOHN E. MORRIS
VICE PRESIDENT - FINANCE AND ASSISTANT TREASURER
ROANOKE ELECTRIC STEEL CORPORATION
P.O. BOX 13948
ROANOKE, VIRGINIA 24038-3948
(540) 342-1831
(Name, Address, and Telephone Numbers of Person Authorized to
Receive Notices and Communications on Behalf of Bidder)
----------------------------------------------
COPIES TO:
HEMAN A. MARSHALL, III
WOODS, ROGERS & HAZLEGROVE, PLC
FIRST UNION TOWER
10 S. JEFFERSON ST., SUITE 1400
ROANOKE, VIRGINIA 24011
----------------------------------------------
CALCULATION OF FILING FEE:
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Transaction valuation* Amount of filing fee
$64,752,296.25 $12,950.46
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<PAGE>
* Estimated for purposes of calculating the amount of the filing fee only.
The amount assumes the purchase of 6,010,795 shares of Common Stock, $.01 par
value ("Shares") of Steel of West Virginia, Inc. (the "Company") (representing
all the Shares outstanding as of September 30, 1998), at a price per share of
$10.75, plus payment of an aggregate of $136,250 with respect to the 153,500
Shares issuable upon the exercise of outstanding stock options as of September
30, 1998. The amount of the filing fee, calculated in accordance with Section
14(g)(3) and Rule 0-11(d) under the Securities Exchange Act of 1934, as amended,
equals 1/50th of one percent of the aggregate of the cash offered by the
bidders.
[_] 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.
Amount Previously Paid: None
Form or Registration No.: N/A
Filing Party: N/A
Date File: N/A
<PAGE>
CUSIP No. (none; corporation formed for acquisition
purposes only)
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1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
SWVA Acquisition, Inc. (no I.R.S. Identification No.; corporation formed
for acquisition purposes only)
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2) Check the Appropriate Box if a Member of a Group (See Instructions)
[ ] (a).................................................................
[ ] (b).................................................................
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3) SEC Use Only............................................................
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4) Sources of Funds (See Instructions) - AF
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5) [ ] Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(e) or 2(f).............................................................
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6) Citizenship or Place of Organization - Virginia
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7) Aggregate Amount Beneficially Owned by Each Reporting Person - 1,290,054
(Common Stock)*
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8) [ ] Check if the Aggregate Amount in Row (7) Excludes Certain Shares (See
Instructions)...........................................................
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9) Percent of Class Represented by Amount in Row (7) - 17.8%*
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10) Type of Reporting Person - CO
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* See footnote on following page.
<PAGE>
CUSIP No. 769841107
- -------------------------------------------------------------------------------
1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
Roanoke Electric Steel Corporation (54-0585263)
- -------------------------------------------------------------------------------
2) Check the Appropriate Box if a Member of a Group (See Instructions)
[ ] (a)....................................................................
[ ] (b)....................................................................
- -------------------------------------------------------------------------------
3) SEC Use Only..............................................................
- -------------------------------------------------------------------------------
4) Sources of Funds (See Instructions) - BK, WC
- -------------------------------------------------------------------------------
5) [ ] Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(e) or 2(f)..............................................................
- -------------------------------------------------------------------------------
6) Citizenship or Place of Organization - Virginia
- -------------------------------------------------------------------------------
7) Aggregate Amount Beneficially Owned by Each Reporting Person - 1,290,054
(Common Stock)*
- -------------------------------------------------------------------------------
8) [ ] Check if the Aggregate Amount in Row (7) Excludes Certain Shares (See
Instructions).............................................................
- -------------------------------------------------------------------------------
9) Percent of Class Represented by Amount in Row (7) - 17.8%*
- ------------------------------------------------------------------------------
10) Type of Reporting Person - CO
- ------------------------------------------------------------------------------
* On November 10, 1998, in connection with the Merger Agreement (as defined
below), Roanoke Electric Steel Corporation (the "Parent") and SWVA Acquisition,
Inc., a wholly owned subsidiary of the Parent (the "Purchaser"), entered into a
Stock Option Agreement with the Company pursuant to which the Company granted
the Purchaser an irrevocable option to purchase up to 1,196,148 Shares, or
approximately 19.9% of the then outstanding Shares, at a price of $10.375 per
Share payable in cash, upon the occurrence of certain conditions specified
therein. The Stock Option Agreement is described more fully in Section 11 ("The
Merger Agreement and Other Agreements; the Rights; Employee Arrangements") of
the Offer to Purchase dated November 17, 1998.
In addition, on November 10, 1998, the Parent and the Purchaser entered into
certain Stock Tender and Voting Agreements with all of the Company's directors,
who, in the aggregate, beneficially own 93,906 Shares (36,406 of which Shares
they own directly, and 57,500 of which are issuable upon the exercise of options
held by them) that represent approximately 1.5% of the issued and outstanding
Shares on a fully-diluted basis, in which the directors agreed, among other
things, to tender their Shares in the Offer (as defined below) and vote their
Shares in favor of the Merger (as defined below). The Stock Tender and Voting
Agreements are more fully described in Section 11 ("The Merger Agreement and
Other Agreements; the Rights; Employee Arrangements") of the Offer to Purchase.
<PAGE>
This Tender Offer Statement on Schedule 14D-1 relates to the offer by SWVA
Acquisition, Inc., a Virginia corporation (the "Purchaser"), a wholly owned
subsidiary of Roanoke Electric Steel Corporation, a Virginia corporation (the
"Parent"), to purchase all of the outstanding shares of Common Stock, $.01 par
value per share ("Shares"), of Steel of West Virginia, Inc., a Delaware
corporation (the "Company"), and the associated rights to purchase Common Stock
of the Company (the "Rights") issued pursuant to the Rights Agreement dated as
of March 19, 1997, between the Company and Continental Stock Transfer and Trust
Company, as Rights Agent, as amended on November 10, 1998, at a purchase price
of $10.75 per Share, net to the seller in cash, without interest thereon, upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated November 17, 1998 (the "Offer to Purchase"), a copy of which is attached
hereto as Exhibit (a)(1), and in the related Letter of Transmittal (which
together, as amended and supplemented from time to time, constitute the
"Offer"), a copy of which Letter of Transmittal is attached hereto as Exhibit
(a)(2). Unless the context otherwise requires, all references herein to Shares
include the associated Rights.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Steel of West Virginia, Inc. The
information set forth in Section 7 ("Certain Information Concerning the
Company") of the Offer to Purchase is incorporated herein by reference.
(b) The exact title of the class of equity securities being sought in the
Offer is Common Stock, par value $.01 per share, of the Company. The information
set forth in the Introduction of the Offer to Purchase is incorporated herein by
reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is filed by the Purchaser and the Parent.
The information set forth in Section 8 ("Certain Information Concerning the
Purchaser and the Parent") of the Offer to Purchase and in Schedule I thereto is
incorporated herein by reference.
(e) and (f) During the last five years, neither the Purchaser nor the
Parent nor, to the best knowledge of the Purchaser or the Parent, any of the
persons listed in Schedule I to the Offer to Purchase (i) has been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) 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 such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 8 ("Certain Information
Concerning the Purchaser and the Parent") and Section 11 ("The Merger Agreement
and Other Agreements; the Rights; Employee Arrangements") of the Offer to
Purchase and in Exhibit (c)(1) of this Schedule 14D-1 is incorporated herein by
reference.
2
<PAGE>
(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.
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, Section 10
("Background of the Offer; Contacts with the Company"), Section 11 ("The Merger
Agreement and Other Agreements; the Rights; Employee Arrangements"), Section 12
("Purpose of the Offer; the Merger; Plans for the Company") and Section 13
("Dividends and Distributions") of the Offer to Purchase is incorporated herein
by reference.
(f)-(g) The information set forth in Section 14 ("Effect of the Offer on
the Market for the Shares; Nasdaq National Market Listing; Margin Regulations;
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 the Introduction and Section 8
("Certain Information Concerning the Purchaser and the Parent") of the Offer to
Purchase and Schedule I to the Offer to Purchase 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 8 ("Certain
Information Concerning the Purchaser and the Parent"), Section 10 ("Background
of the Offer; Contacts with the Company"), Section 11 ("The Merger Agreement and
Other Agreements; the Rights; Employee Arrangements") and Section 12 ("Purpose
of the Offer; the Merger; Plans for the Company") of the Offer to Purchase is
incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 17 ("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 and the Parent") of the Offer to Purchase is incorporated herein by
reference.
3
<PAGE>
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the Introduction, Section 8 ("Certain
Information Concerning the Purchaser and the Parent"), in Section 10
("Background of the Offer; Contacts with the Company") and in Section 11 ("The
Merger Agreement and Other Agreements; the Rights; Employee Arrangements") of
the Offer to Purchase is incorporated herein by reference.
(b) and (c) The information set forth in Section 16 ("Certain Legal Matters
and Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(d) The information set forth in Section 14 ("Effect of the Offer on the
Market for the Shares; Nasdaq National Market Listing; Margin Regulations;
Exchange Act Registration") and Section 16 ("Certain Legal Matters and
Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase dated November 17, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter from the Dealer Manager to Brokers, Dealers, Commercial
Banks, Trust Companies and Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Form of Summary Advertisement as published on November 17, 1998.
(a)(8) Form of Press Release issued jointly by the Parent and the Company
on November 10, 1998 (incorporated by reference to the Parent's Form 8-K filed
on November 16, 1998).
4
<PAGE>
(b)(1) Commitment Letter, dated November 5, 1998, from First Union National
Bank to Roanoke Electric Steel Corporation.
(b)(2) Commitment Letter, dated November 6, 1998, from Crestar Bank to
Roanoke Electric Steel Corporation.
(b)(3) Commitment Letter, dated November 6, 1998, from NationsBank, N.A.,
to Roanoke Electric Steel Corporation.
(b)(4) Commitment Letter, dated November 9, 1998, from Wachovia Bank, N.A.,
to Roanoke Electric Steel Corporation.
(c)(1) Agreement and Plan of Merger, dated as of November 10, 1998, among
Roanoke Electric Steel Corporation, SWVA Acquisition, Inc., and Steel of West
Virginia, Inc.
(c)(2) Stock Option Agreement, dated as of November 10, 1998, between Steel
of West Virginia, Inc., and SWVA Acquisition, Inc.
(c)(3) Form of Stock Tender and Voting Agreement, dated as of November 10,
1998, by and among Roanoke Electric Steel Corporation, SWVA Acquisition, Inc.,
and certain stockholders of the Company.
(c)(4) Employment Agreement, dated November 10, 1998, by and between Steel
of West Virginia, Inc., and Timothy R. Duke.
(c)(5) Confidentiality Letter Agreement dated July 20, 1998, between
Roanoke Electric Steel Corporation and Janney Montgomery Scott, Inc.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
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.
ROANOKE ELECTRIC STEEL CORPORATION
By: /s/ JOHN E. MORRIS
----------------------------------------
Name: John E. Morris
Title: Vice President - Finance and Assistant Treasurer
SWVA ACQUISITION, INC.
By: /s/ JOHN E. MORRIS
----------------------------------------
Name: John E. Morris
Title: Vice President - Finance and Assistant Treasurer
Date: November 17, 1998
6
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------------------------------------------------------------------------------
(a)(1) Offer to Purchase dated November 17, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter from the Dealer Manager to Brokers, Dealers, Commercial
Banks, Trust Companies and Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Form of Summary Advertisement as published on November 17, 1998.
(a)(8) Form of Press Release issued jointly by the Parent and the Company
on November 10, 1998 (incorporated by reference to the Parent's Form
8-K filed on November 16, 1998).
(b)(1) Commitment Letter, dated November 5, 1998, from First Union National
Bank to Roanoke Electric Steel Corporation.
(b)(2) Commitment Letter, dated November 6, 1998, from Crestar Bank to
Roanoke Electric Steel Corporation.
(b)(3) Commitment Letter, dated November 6, 1998, from NationsBank, N.A. to
Roanoke Electric Steel Corporation.
(b)(4) Commitment Letter, dated November 9, 1998, from Wachovia Bank, N.A.,
to Roanoke Electric Steel Corporation.
(c)(1) Agreement and Plan of Merger, dated as of November 10, 1998, among
Roanoke Electric Steel Corporation, SWVA Acquisition, Inc., and Steel
of West Virginia, Inc.
(c)(2) Stock Option Agreement, dated as of November 10, 1998, between
Steel of West Virginia, Inc., and SWVA Acquisition, Inc.
(c)(3) Form of Stock Tender and Voting Agreement, dated as of November 10,
1998, by and among Roanoke Electric Steel Corporation, SWVA
Acquisition, Inc., and certain stockholders of the Company.
(c)(4) Employment Agreement, dated November 10, 1998, by and between Steel
of West Virginia, Inc., and Timothy R. Duke.
(c)(5) Confidentiality Letter Agreement dated July 20, 1998, between Roanoke
Electric Steel Corporation and Janney Montgomery Scott, Inc.
7
<PAGE>
Exhibit (a)(1)
Offer to Purchase dated November 17, 1998
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
STEEL OF WEST VIRGINIA, INC.
AT
$10.75 NET PER SHARE
BY
SWVA ACQUISITION, INC.
A WHOLLY OWNED SUBSIDIARY
OF
ROANOKE ELECTRIC STEEL CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN
STANDARD TIME, ON TUESDAY, DECEMBER 15, 1998, UNLESS THE OFFER IS EXTENDED.
THIS OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SHARES REPRESENTING MORE
THAN 50% OF THE VOTING POWER (DETERMINED ON A FULLY-DILUTED BASIS) OF ALL
SECURITIES OF STEEL OF WEST VIRGINIA, INC., ENTITLED TO VOTE GENERALLY IN THE
ELECTION OF DIRECTORS OR IN A MERGER BEING VALIDLY TENDERED AND NOT PROPERLY
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER. SEE SECTIONS 1 AND 15 BELOW
FOR ADDITIONAL TERMS AND CONDITIONS OF THE OFFER.
THE BOARD OF DIRECTORS OF STEEL OF WEST VIRGINIA, INC., HAS UNANIMOUSLY
DETERMINED THAT EACH OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT,
INCLUDING THE OFFER AND THE MERGER, ARE FAIR TO AND IN THE BEST INTERESTS OF
THE STOCKHOLDERS OF STEEL OF WEST VIRGINIA, INC., AND UNANIMOUSLY RECOMMENDS
THAT YOU ACCEPT THE OFFER AND TENDER YOUR SHARES TO SWVA ACQUISITION, INC.,
PURSUANT TO THE OFFER.
IMPORTANT
IF YOU DESIRE TO TENDER ALL OR ANY PORTION OF YOUR SHARES IN THIS OFFER AND
YOUR SHARES ARE REGISTERED IN YOUR NAME, YOU SHOULD COMPLETE AND SIGN THE
LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF) IN ACCORDANCE WITH ITS
INSTRUCTIONS AND MAIL OR DELIVER IT (OR ITS FACSIMILE) AND ANY OTHER REQUIRED
DOCUMENTS TO THE DEPOSITARY, AND THEN EITHER (I) DELIVER YOUR STOCK
CERTIFICATES AND ANY OTHER REQUIRED DOCUMENTS TO THE DEPOSITARY OR (II) FOLLOW
THE PROCEDURES FOR BOOK-ENTRY TRANSFER SET FORTH IN SECTION 3 BELOW. IF YOUR
SHARES ARE REGISTERED IN "STREET NAME," YOU MUST REQUEST YOUR BROKER, DEALER,
COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO TENDER YOUR SHARES FOR YOU.
IF YOU DESIRE TO TENDER YOUR SHARES BUT YOUR STOCK CERTIFICATES ARE NOT
IMMEDIATELY AVAILABLE, OR IF YOU CANNOT COMPLY WITH THE PROCEDURES FOR BOOK-
ENTRY TRANSFER IN A TIMELY MANNER, YOU MAY TENDER YOUR SHARES BY FOLLOWING THE
PROCEDURES FOR GUARANTEED DELIVERY SET FORTH IN SECTION 3 BELOW.
QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE INFORMATION
AGENT AT ITS 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, THE NOTICE OF GUARANTEED DELIVERY AND OTHER RELATED MATERIALS MAY
BE OBTAINED FROM THE INFORMATION AGENT OR FROM BROKERS, DEALERS, COMMERCIAL
BANKS AND TRUST COMPANIES.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO OF GEORGESON & COMPANY INC. APPEARS HERE]
November 17, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
INTRODUCTION.............................................................. 1
THE TENDER OFFER.......................................................... 3
1. Term of the Offer; Expiration Date................................ 3
2. Acceptance for Payment and Payment for Shares..................... 4
3. Procedure for Tendering Shares.................................... 5
4. Withdrawal Rights................................................. 7
5. Certain Federal Income Tax Consequences........................... 8
6. Price Range of Shares; Dividends.................................. 8
7. Certain Information Concerning the Company........................ 9
8. Certain Information Concerning the Purchaser and the Parent....... 11
9. Source and Amount of Funds........................................ 12
10. Background of the Offer; Contacts with the Company................ 13
11. The Merger Agreement and Other Agreements; the Rights; Employee
Arrangements...................................................... 17
12. Purpose of the Offer; the Merger; Plans for the Company........... 27
13. Dividends and Distributions....................................... 29
14. Effect of the Offer on the Market for the Shares; Nasdaq National
Market Listing; Margin Regulations; Exchange Act Registration..... 30
15. Offer Conditions.................................................. 31
16. Certain Legal Matters and Regulatory Approvals.................... 32
17. Fees and Expenses................................................. 34
18. Miscellaneous..................................................... 34
SCHEDULE I................................................................ 37
</TABLE>
<PAGE>
TO THE STOCKHOLDERS OF STEEL OF WEST VIRGINIA, INC.:
INTRODUCTION
SWVA Acquisition, Inc., a Virginia corporation (the "PURCHASER") and a
wholly owned subsidiary of Roanoke Electric Steel Corporation, a Virginia
corporation (the "PARENT"), hereby offers to purchase all of the outstanding
shares of Common Stock, par value $0.01 per share ("SHARES"), of Steel of West
Virginia, Inc., a Delaware corporation (the "COMPANY"), and the associated
rights to purchase Common Stock of the Company (the "RIGHTS") issued pursuant
to the Rights Agreement dated as of March 19, 1997, between the Company and
Continental Stock Transfer and Trust Company, as Rights Agent, as amended on
November 10, 1998 (the "RIGHTS AGREEMENT"), at a purchase price of $10.75 per
Share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which together, as amended or supplemented from
time to time, constitute the "OFFER"). Unless the context otherwise requires,
all references herein to Shares include the associated Rights.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the transfer and sale of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses of First Union National Bank (the
"DEPOSITARY") and Georgeson & Company Inc. (the "INFORMATION AGENT") incurred
in connection with the Offer. See Section 17.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT EACH
OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT (AS DEFINED BELOW),
INCLUDING THE OFFER AND THE MERGER (AS DEFINED BELOW), ARE FAIR TO AND IN THE
BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS
THAT THE HOLDERS OF THE SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES TO THE
PURCHASER.
Janney Montgomery Scott Inc. ("JANNEY"), financial advisor to the Company,
has delivered to the Board of Directors of the Company a written opinion dated
November 10, 1998 to the effect that, as of such date, the cash consideration
to be received by the holders of the Shares pursuant to the Merger and the
Offer is fair from a financial point of view to such holders. A copy of the
Janney opinion is attached to the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 (the "SCHEDULE 14D-9"), which is being distributed
to the stockholders of the Company herewith, and stockholders are urged to
read the opinion in its entirety for a description of the assumptions made,
matters considered and limitations of the review undertaken by Janney.
THIS OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SHARES REPRESENTING MORE
THAN 50% OF THE VOTING POWER (DETERMINED ON A FULLY-DILUTED BASIS) OF ALL
SECURITIES OF THE COMPANY ENTITLED TO VOTE GENERALLY IN THE ELECTION OF
DIRECTORS OR IN A MERGER BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN
PRIOR TO THE EXPIRATION OF THE OFFER (THE "MINIMUM CONDITION"). SEE SECTIONS 1
AND 15 BELOW FOR ADDITIONAL TERMS AND CONDITIONS OF THE OFFER. IF THE
PURCHASER PURCHASES A NUMBER OF SHARES SATISFYING THE MINIMUM CONDITION, IT
WILL BE ABLE TO EFFECT THE MERGER WITHOUT THE AFFIRMATIVE VOTE OF ANY OTHER
STOCKHOLDER OF THE COMPANY. SEE SECTIONS 11 AND 12 BELOW.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of November 10, 1998 (as amended or supplemented from time to time, the
"MERGER AGREEMENT"), among the Company, the Purchaser and the Parent pursuant
to which, following the consummation of the Offer and the satisfaction or
waiver of certain conditions, the Purchaser will be merged with and into the
Company (the "MERGER"), with the Company continuing as the surviving
corporation (the "SURVIVING CORPORATION"). At the Effective Time of the Merger
(the "EFFECTIVE TIME"), each Share (other than Shares held by the Parent, the
Purchaser or any wholly owned subsidiary of the Parent or the Purchaser or
held in the treasury of the Company, which will be canceled with no payment
being made with respect thereto, and other than Shares, if any, held by
stockholders who object to the Merger and demand a right to receive payment of
the fair value of such stockholders' Shares in accordance with Section 262 of
the Delaware General Corporation law (the "DGCL"), unless such right has been
withdrawn or otherwise lost ("DISSENTING SHARES")) then issued and outstanding
will, by virtue of the Merger and without any action by the holder thereof, be
converted into the right to receive $10.75 in cash or any higher price that
<PAGE>
may be paid pursuant to the Offer (the "MERGER CONSIDERATION"), payable to the
holder thereof, without interest thereon, upon the surrender of the
certificate formerly representing such Share in the manner described in the
Merger Agreement, less any required withholding taxes.
The consummation of the Merger may be subject to the approval and adoption
of the Merger Agreement by a vote of the Company's stockholders. The DGCL
requires, except as otherwise described below, the affirmative vote of the
holders of a majority of the outstanding Shares to approve and adopt the
Merger Agreement and the Merger. If the Purchaser acquires (pursuant to the
Offer or otherwise) at least a majority of the then-outstanding Shares,
calculated on a fully-diluted basis, the Purchaser will have sufficient voting
power to approve and adopt the Merger Agreement and the Merger without the
vote of any other stockholder. Under the DGCL, however, if the Purchaser
acquires at least 90% of the then-outstanding Shares, the Purchaser will be
able to approve and adopt the Merger Agreement and the transactions
contemplated thereby without a vote of the Company's stockholders. In this
event, the Parent and the Purchaser intend, and the Company agrees in the
Merger Agreement upon the request of the Purchaser, to take all necessary and
appropriate action to cause the Merger to become effective as soon as
reasonably practicable after such acquisition without a meeting of the
Company's stockholders. If the Purchaser does not acquire at least 90% of the
then-outstanding Shares, a vote of the Company's stockholders will be required
and a significantly longer period of time will be needed to effect the Merger.
See Sections 11 and 12.
In connection with the execution of the Merger Agreement, the Parent, the
Purchaser and the Company have entered into a Stock Option Agreement, dated as
of November 10, 1998 (the "STOCK OPTION AGREEMENT"), pursuant to which the
Company has granted to the Purchaser an option to purchase from the Company up
to 1,196,148 authorized but unissued Shares (approximately 19.9% of the
Company's outstanding Shares as of November 10, 1998) (the "OPTION SHARES")
for a price per share of $10.375 (the "STOCK OPTION"), exercisable only upon
the occurrence of certain events; provided, however, that the number of Option
Shares cannot exceed 19.9% of issued and outstanding Shares (not counting the
Option Shares) and is subject to adjustment in accordance with the terms of
the Stock Option Agreement. See Section 11 for further discussion of the terms
of the Stock Option.
All of the Company's directors, who, in the aggregate, beneficially own
93,906 Shares (36,406 of which Shares they own directly, and 57,500 of which
are issuable upon the exercise of options held by them) that represent
approximately 1.5% of the issued and outstanding Shares on a fully-diluted
basis, have entered into certain Stock Tender and Voting Agreements, dated
November 10, 1998, with the Parent (the "STOCK TENDER AND VOTING AGREEMENTS")
in which they have agreed, among other things, to tender their Shares in the
Offer and vote their Shares in favor of the Merger. See Section 11 for a
discussion of the Stock Tender and Voting Agreements.
The Company has represented to the Parent that as of November 10, 1998,
there were 6,010,795 Shares issued and outstanding and 153,500 Shares reserved
for issuance upon the exercise of outstanding options to acquire Shares
granted to employees and non-employee directors of the Company ("EMPLOYEE
OPTIONS"). Therefore, the Purchaser believes that approximately 3,082,148
Shares constitute a majority of the outstanding Shares on a fully-diluted
basis. For the purposes of the Offer, "fully-diluted basis" assumes that the
Employee Options outstanding as of November 10, 1998, are exercised for Shares
and that no Shares are issued upon the exercise of the Stock Option.
The Merger Agreement is more fully described in Section 11. Certain federal
income tax consequences of the sale of the Shares pursuant to the Offer and
the exchange of Shares for the Merger Consideration pursuant to the Merger are
described in Section 5.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
2
<PAGE>
THE TENDER OFFER
1. TERM 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 validly tendered on or prior to the
Expiration Date and not properly withdrawn as permitted by Section 4.
"EXPIRATION DATE" means 12:00 Midnight, Eastern Standard Time ("EST"), on
Tuesday, December 15, 1998, or, if the Purchaser extends the period during
which the Offer is open, such later time and date at which the Offer expires.
If, on the Expiration Date, the conditions to the Offer have not been
satisfied or waived, the Purchaser will have the right, in its sole
discretion, to extend the Offer for one or more periods not to exceed an
aggregate of thirty business days, and, if all of the Offer Conditions have
been satisfied or waived and less than 90% of the outstanding Shares have been
tendered in the Offer and not withdrawn, then the Purchaser will have the
additional right, in its sole discretion, so long as the Purchaser and the
Parent each waive in writing the satisfaction of each of the Offer Conditions,
to extend the Offer for one or more periods not to exceed an aggregate of
twenty business days. Notwithstanding the foregoing, however, the Purchaser
may not extend the Expiration Date beyond February 28, 1999 (the "OUTSIDE
DATE"), without the consent of the Company.
THE OFFER IS SUBJECT TO THE CONDITIONS TO THE OFFER SET FORTH IN SECTION 15
(THE "OFFER CONDITIONS"), INCLUDING SATISFACTION OF THE MINIMUM CONDITION. IF,
AT ANY EXPIRATION DATE, THE OFFER CONDITIONS HAVE NOT BEEN SATISFIED OR
WAIVED, THE PURCHASER RESERVES THE RIGHT (BUT WILL NOT BE OBLIGATED) TO EXTEND
THE OFFER FROM TIME TO TIME BY GIVING ORAL OR WRITTEN NOTICE TO THE
DEPOSITARY. DURING ANY SUCH EXTENSION, ALL SHARES PREVIOUSLY TENDERED AND NOT
WITHDRAWN WILL REMAIN SUBJECT TO THE OFFER AND SUBJECT TO THE RIGHT OF A
TENDERING STOCKHOLDER TO WITHDRAW SUCH STOCKHOLDER'S SHARES.
Subject to the provisions of the Merger Agreement and the applicable rules
and regulations of the Securities and Exchange Commission (the "COMMISSION"),
the Purchaser also reserves the right, in its sole discretion, at any time and
from time to time, and regardless of whether or not any of the Offer
Conditions have been satisfied, to (i) terminate the Offer and return tendered
Shares to tendering stockholders; (ii) waive unsatisfied Offer Conditions and
purchase all Shares validly tendered; or (iii) amend the Offer in any respect
by giving oral or written notice of such amendment to the Depositary. Under
the terms of the Merger Agreement, however, without the written consent of the
Company, the Purchaser cannot (a) decrease the price per Share to be paid in
the Offer; change the form of consideration payable in the Offer (other than
by adding consideration) or decrease the number of Shares sought in the Offer;
(b) change or amend the Offer Conditions (other than to waive any Offer
Condition, except that the Minimum Condition may not be waived without the
consent of the Company); (c) impose additional conditions to the Offer; or (d)
amend any other term of the Offer in any manner adverse to the holders of
Shares (other than insignificant changes or amendments). The Purchaser has no
obligation to pay interest on the purchase price of tendered Shares, including
in the event the Purchaser exercises its right to extend the period of time
during which the Offer is open. The rights reserved by the Purchaser in this
paragraph are in addition to the Purchaser's rights to terminate the Offer
pursuant to Section 15.
Any extension, delay, termination, waiver or amendment will be followed as
promptly as practicable by public announcement thereof, and such announcement,
in the case of an extension, will be made in accordance with Rule 14e-1(d)
under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), no
later than 9:00 a.m., EST, on the next business day after the previously
scheduled Expiration Date. Without limiting the manner in which the Purchaser
may choose to make any public announcement, except as provided by applicable
law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which
require that material changes be promptly disseminated to holders of Shares),
the Purchaser will have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by issuing a release to
the Dow Jones News Service.
If the Purchaser makes a material change in the terms of the Offer or if it
waives a material condition of the Offer, the Purchaser will extend the Offer
and disseminate additional tender offer materials and extend the Offer to the
extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act.
The minimum period
3
<PAGE>
during which an offer must remain open following material changes in the terms
of the offer, other than a change in price or a change in the percentage of
securities sought, will depend upon the facts and circumstances, including the
materiality, of the changes. With respect to a change in price or, subject to
certain limitations, a change in the percentage of securities sought, a
minimum ten business day period from the day of such change is generally
required to allow for adequate dissemination to stockholders. For purposes of
the Offer, a "business day" means any day other than a Saturday, Sunday, or a
U.S. federal holiday and consists of the time period from 12:01 a.m. through
12:00 Midnight, EST. 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 Shares.
As of the date of this Offer to Purchase, the Rights are evidenced by the
certificates representing Shares ("SHARE CERTIFICATES") and do not trade
separately. Accordingly, by tendering a Share Certificate, a stockholder is
automatically tendering the associated Rights. If, however, pursuant to the
Rights Agreement or for any other reason, the Rights detach and separate
certificates representing Rights are issued, stockholders will be required to
tender one Right for each Share tendered in order to effect a valid tender of
such Share.
This Offer to Purchase and the related Letter of Transmittal and other
relevant materials will be mailed by the Purchaser to record holders of Shares
and 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.
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 such extension or amendment), the
Purchaser will purchase, by accepting for payment, and will pay for, all
Shares validly tendered and not properly withdrawn (in accordance with Section
4) on or prior to the Expiration Date as soon as practicable after the
Expiration Date. In addition, subject to applicable rules of the Commission,
the Purchaser expressly reserves the right to delay acceptance for payment of,
or payment for, Shares in order to comply with applicable law, including the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR ACT"). See Section 16. Any such delays
will be effected in compliance with Rule 14e-1(c) under the Exchange Act.
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)
Share Certificates or timely confirmation of a book-entry transfer of such
Shares (a "BOOK-ENTRY CONFIRMATION") into the Depositary's account at The
Depository Trust Company (the "BOOK-ENTRY TRANSFER FACILITY") 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, or an Agent's Message (as defined below) in connection
with a book-entry transfer; and (iii) any other documents required by the
Letter of Transmittal.
The term "AGENT'S MESSAGE" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility
has received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares subject to such Book-Entry Confirmation
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 such participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
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
4
<PAGE>
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 SHARES BE
PAID, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
If, for any reason whatsoever, acceptance for payment of or payment for any
Shares tendered pursuant to the Offer is delayed or the Purchaser is unable to
accept for payment or pay for Shares tendered pursuant to the Offer, then
without prejudice to the Purchaser's rights set forth herein, the Depositary
may nevertheless, on behalf of the Purchaser and subject to applicable law,
retain tendered Shares and such Shares may not be withdrawn except to the
extent that the tendering stockholder is entitled to and duly exercises
withdrawal rights as described in Section 4.
If any tendered Shares are not accepted for payment for any reason, or if
Share Certificates are submitted for more Shares than are tendered, Share
Certificates evidencing unpurchased or untendered 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 the Book-
Entry Transfer Facility pursuant to the procedures set forth in Section 3,
such Shares will be credited to an account maintained at the Book-Entry
Transfer Facility), as promptly as practicable following the expiration,
termination or withdrawal of the Offer.
3. PROCEDURE FOR TENDERING SHARES. VALID TENDERS. Except as set forth below,
in order for Shares to be validly tendered pursuant to the Offer, the Letter
of Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees, or an Agent's Message in
connection with a book-entry delivery of Shares, 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 on
or prior to the Expiration Date and either (i) Share Certificates evidencing
tendered Shares must be received by the Depositary at such address or such
Shares must be tendered pursuant to the procedure for book-entry transfer
described below and a Book-Entry Confirmation must be received by the
Depositary, in each case on or prior to the Expiration Date, or (ii) the
guaranteed delivery procedures described below must be complied with.
BOOK-ENTRY TRANSFER. The Depositary will make a request to establish an
account with respect to the Shares at the Book-Entry Transfer Facility 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 the
Book-Entry Transfer Facility may make book-entry delivery of Shares by causing
the Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at the Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. Although delivery of Shares
may be effected through book-entry transfer at the 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 in connection with a book-entry transfer, and any other
documents required by the Letter of Transmittal, 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 on or prior to the Expiration Date, or the guaranteed
delivery procedures described below must be complied with.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE
DEEMED TO BE MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN
THE CASE OF 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.
SIGNATURE GUARANTEES. Signatures on Letters of Transmittal must be
guaranteed by a firm that is a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the
Securities
5
<PAGE>
Transfer Agents Medallion Program (an "ELIGIBLE INSTITUTION"), except in cases
where Shares are tendered (i) by a registered holder of Shares who has not
completed either the box labeled "Special Payment Instructions" or the box
labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii)
for the account of an Eligible Institution. See Instructions 1 and 5 of the
Letter of Transmittal.
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, the Share Certificates must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name of the registered holder appears on such certificates,
with the signatures on such certificates or stock powers guaranteed as
aforesaid. See Instructions 1 and 5 of the Letter of Transmittal.
If Share Certificates are forwarded separately to the Depositary, a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof)
must accompany each such delivery.
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 reach the Depositary on or 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:
(a) such tender is made by or through an Eligible Institution;
(b) 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
(c) the Share Certificates (or a Book-Entry Confirmation), representing
all tendered Shares in proper form for transfer, 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 documents required
by the Letter of Transmittal are received by the Depositary within three
(3) trading days on the Nasdaq National Market of The Nasdaq Stock Market
(the "NASDAQ NATIONAL MARKET") after the date of execution of such Notice
of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram, telex or facsimile transmission to the Depositary and
must include a guarantee by an Eligible Institution and a representation that
the stockholder owns the Shares tendered within the meaning of, and that the
tender of the Shares effected thereby complies with, Rule 14e-4 under the
Exchange Act, each in the form set forth in such Notice of Guaranteed
Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Share Certificates for, or of Book-Entry
Confirmation with respect to, such Shares, a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof), together with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message), and any other documents required by the Letter of
Transmittal. Accordingly, payment might not be made to all tendering
stockholders at the same time and will depend upon when Share Certificates or
Book-Entry Confirmations of such Shares are received into the Depositary's
account at the Book-Entry Transfer Facility.
BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9. Under the
"backup withholding" provisions of the U.S. federal income tax law, the
Depositary may be required to withhold 31% of the amount of any payments of
cash pursuant to the Offer. In order to avoid backup withholding, each
stockholder surrendering Shares in the Offer must, unless an exemption
applies, provide the payor of such cash with such stockholder's correct
taxpayer identification number ("TIN") on a Substitute Form W-9 and certify,
under penalties of perjury, that such TIN is correct and that such stockholder
is not subject to backup
6
<PAGE>
withholding. If a stockholder does not provide its correct TIN or fails to
provide the certifications described above, the Internal Revenue Service may
impose a penalty on such stockholder and payment of cash to such stockholder
pursuant to the Offer may be subject to backup withholding of 31%. All
stockholders surrendering Shares pursuant to the Offer should complete and
sign the Substitute Form W-9 included in the Letter of Transmittal to provide
the information and certification necessary to avoid backup withholding
(unless an applicable exemption exists and is proved in a manner satisfactory
to the Depositary). Certain stockholders (including, among others, all
corporations and certain foreign individuals and entities) are not subject to
backup withholding. Noncorporate foreign stockholders should complete and sign
a Form W-8, Certificate of Foreign Status, a copy of which may be obtained
from the Depositary, in order to avoid backup withholding. See Instruction 9
of the Letter of Transmittal.
APPOINTMENT AS PROXY. By executing the Letter of Transmittal, a tendering
stockholder irrevocably appoints designees of the Purchaser, and each of them,
as such stockholder's attorneys-in-fact and proxies, with full power of
substitution, in the manner set forth in the Letter of Transmittal, 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, other securities or rights issued or
issuable in respect of such Shares on or after the date hereof). All such
powers of attorney and proxies will be considered irrevocable and coupled with
an interest in the tendered Shares. 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 powers of attorney and proxies
given by such stockholder with respect to such Shares (and such other Shares
and securities) will be revoked without further action, and no subsequent
powers of attorney and 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, with respect to the Shares (and such
other Shares and securities) for which such appointment is effective, 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 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 and other securities, including voting at any meeting of stockholders.
DETERMINATION OF VALIDITY. 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 will be final and binding on all parties. The Purchaser
reserves the absolute right to reject any tender that it determines is not in
proper form or of which the acceptance for payment might, in the opinion of
its counsel, be unlawful. The Purchaser also reserves the absolute right to
waive any of the Offer Conditions or any defect or irregularity in any tender
of Shares of any particular stockholder, whether or not similar defects or
irregularities are 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, the Parent,
any of their affiliates or assigns, 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 interpretation of the terms and conditions of
the Offer (including the Letter of Transmittal and the instructions thereto)
will be final and binding.
OTHER REQUIREMENTS. The Purchaser's acceptance for payment of Shares
tendered pursuant to any of the procedures described above will constitute a
binding agreement between the tendering stockholder and the Purchaser upon the
terms and subject to the conditions of the Offer, including the tendering
stockholder's representation and warranty that the stockholder is the holder
of the Shares within the meaning of, and that the tender of the Shares
complies with, Rule 14e-4 under the Exchange Act.
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4,
tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time on or 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 the
Outside Date. If the Purchaser extends the Offer, is delayed
7
<PAGE>
in its 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 in acceptance
for payment will be accompanied by an extension of the Offer to the extent
required by law.
For a withdrawal to be effective, a written, telegraphic 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 such 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 numbers shown on such certificates must be
submitted to the Depositary and the signatures 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 procedure for book-entry transfer 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, in which case a notice of withdrawal will be effective if delivered to
the Depositary by any method of delivery described in the first sentence of
this paragraph.
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, the Parent, any of their affiliates or assigns, 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.
Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn
will thereafter be deemed not to have been validly tendered for purposes of
the Offer. Withdrawn Shares, however, 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 summary of tax consequences
set forth below is for general information only and is based on the law as
currently in effect. The tax treatment of each stockholder will depend in part
upon such stockholder's particular situation. Special tax consequences not
described herein may be applicable to particular classes of taxpayers, such as
financial institutions, tax-exempt organizations, broker-dealers, persons who
are not citizens or residents of the United States, stockholders who acquired
their Shares through the exercise of an employee stock option or otherwise as
compensation, and persons who received payments in respect of options to
acquire Shares. ALL STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS
TO THE PARTICULAR TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM,
INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY
STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS AND CHANGES IN SUCH TAX
LAWS.
The receipt of cash pursuant to the Offer or the Merger will be a taxable
transaction for U.S. federal income tax purposes under the Internal Revenue
Code of 1986, as amended, and may also be a taxable transaction under
applicable state, local, foreign income or other tax laws. Generally, for U.S.
federal income tax purposes, a stockholder will recognize gain or loss in an
amount equal to the difference between the cash received by the stockholder
pursuant to the Offer or the Merger and the stockholder's adjusted tax basis
in the Shares purchased pursuant to the Offer or converted into cash in the
Merger. For U.S. federal income tax purposes, such gain or loss will be a
capital gain or loss if the Shares are a capital asset in the hands of the
stockholder, and a long-term capital gain or loss if the stockholder's holding
period is more than one year as of the date the Purchaser accepts such Shares
for payment pursuant to the Offer or the Merger, as the case may be.
6. PRICE RANGE OF SHARES; DIVIDENDS. According to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (the "COMPANY FORM
10-K"), the Shares are listed and traded principally on the Nasdaq National
Market. The following table sets forth, for the quarters indicated and
according to
8
<PAGE>
published sources, the high and low sales prices per Share on the Nasdaq
National Market. The Company has paid no cash dividends in the last five
years.
<TABLE>
<CAPTION>
PRICE
-------------
FISCAL YEAR HIGH LOW
- ----------- ---- ---
<S> <C> <C>
1996:
First Quarter................................................. $11 $8 3/4
Second Quarter................................................ 9 3/4 8 1/2
Third Quarter................................................. 9 5 1/2
Fourth Quarter................................................ 7 1/2 5 1/4
1997:
First Quarter................................................. $ 7 3/4 $6 1/4
Second Quarter................................................ 10 3/4 7 1/2
Third Quarter................................................. 11 9 5/8
Fourth Quarter................................................ 12 8
1998:
First Quarter................................................. $10 5/8 $7 7/8
Second Quarter................................................ 11 1/2 8 1/2
Third Quarter................................................. 9 11/16 5 7/8
Fourth Quarter (through November 16, 1998).................... 10 3/8 5 1/4
</TABLE>
On November 10, 1998, the last full trading day prior to announcement of the
execution of the Merger Agreement, the closing sale price per Share reported
on the Nasdaq National Market was $6.375. On November 16, 1998, the last full
trading day before commencement of the Offer, the closing sale price per Share
reported on the Nasdaq National Market was $10.375. STOCKHOLDERS ARE URGED TO
OBTAIN A CURRENT MARKET QUOTATION FOR SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning
the Company has been taken from or based upon other public reports on file
with the Commission and other public sources. The summary information set
forth below is qualified in its entirety by reference to such public reports
(available as described below) and the more comprehensive financial and other
information included therein. Although the Purchaser and the Parent do not
have any knowledge that would indicate that any statements contained in this
Offer to Purchase based upon such reports are untrue, neither do the Purchaser
or the Parent assume any responsibility for the accuracy or completeness of
the information contained in such reports 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 that are unknown to the Purchaser and the
Parent.
GENERAL. The Company was incorporated under the laws of the State of
Delaware on November 20, 1986. The Company owns and operates a steel mini-mill
in Huntington, West Virginia, and steel fabrication facilities in Huntington
and in Memphis, Tennessee. The Company customs designs and manufactures
special steel products principally for use in the construction of truck
trailers, industrial lift trucks, off-highway construction equipment (such as
bulldozers and graders), manufactured housing, guard rail post, and mining
equipment. The Company's principal executive offices are located at 17th
Street and 2nd Avenue, Huntington, West Virginia, 25703, and its telephone
number is (304) 696-8200.
FINANCIAL INFORMATION. Set forth below are certain selected consolidated
financial data with respect to the Company and its subsidiaries derived from
the Company Form 10-K and the Company's Quarterly Report on Forms 10-Q for the
quarter ended September 30, 1998. 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 data is qualified
in its entirety by reference to such reports and other documents including the
financial information and related notes contained therein. Such reports and
other documents may be examined and copies thereof may be
9
<PAGE>
obtained from the offices of the Commission and The Nasdaq Stock Market
("NASDAQ") in the manner set forth below.
STEEL OF WEST VIRGINIA, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED DECEMBER 31
SEPTEMBER 30, -------------------------
1998 1997 1996
------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................. $ 99,371 $112,776 $95,334
Cost of sales......................... 88,247 98,538 85,339
-------- -------- -------
Gross profit........................ 11,124 14,238 9,995
Selling and administrative expenses... 4,569 5,699 4,463
Interest expense...................... 2,296 847 1,273
(Gain) loss on disposal of assets..... (275) (733) 8,936
Other (income)........................ (786) (532) (365)
-------- -------- -------
Income (loss) before income taxes... 5,320 8,957 (4,312)
Income tax expense (benefit).......... 2,287 3,698 (1,374)
-------- -------- -------
Net income (loss)................... $ 3,033 $ 5,259 $(2,938)
======== ======== =======
Earnings (loss) per common share:
Basic and diluted................... $ .50 $ .88 $ (.49)
======== ======== =======
Weighted average number of common
shares outstanding:
Basic............................... 6,001 5,994 6,024
Diluted............................. 6,015 6,009 6,024
======== ======== =======
<CAPTION>
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA
Total Assets.......................... $131,613 $113,715 $79,299
Total Liabilities..................... $ 74,156 $ 59,413 $30,292
Total Stockholders' Equity............ $ 57,457 $ 54,302 $49,007
</TABLE>
AVAILABLE INFORMATION. The Company is subject to the information filing
requirements of the Exchange Act and in accordance therewith is obligated to
file periodic reports, proxy statements and other information with the
Commission relating to its business, financial condition and other matters.
Information, as of particular dates, concerning the Company's directors and
officers, their remuneration, 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 such proxy
statements and distributed to the Company's stockholders and filed with the
Commission. Such reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and should also be available for inspection and copying at prescribed rates at
the regional offices of the Commission located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade
Center, Suite 1300, New York, New York 10048. Such reports, proxy statements
and other information may also be obtained at the Website that the Commission
maintains at http://www.sec.gov. Copies of this material may also be obtained
by mail, upon payment of the Commission's customary fees, from the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. Reports, proxy statements and other information concerning the Company
should also be available for inspection at the offices of Nasdaq, Reports
Section at 1953 K Street, Washington, D.C. 20006. Except as otherwise noted in
this Offer to Purchase,
10
<PAGE>
all of the information with respect to the Company set forth in this Offer to
Purchase has been derived from publicly available information.
8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND THE PARENT. GENERAL. The
Purchaser, a Virginia corporation and a wholly-owned subsidiary of Parent, was
organized in connection with the Offer and has not carried on any activities
to date other than those incident to its formation and commencement of the
Offer. The Parent, a Virginia corporation, manufactures, fabricates and
markets merchant steel products, billets, open web steel joists and
reinforcing bars. The Parent's main plant is a mini-mill in Roanoke, Virginia.
Shares of the Parent's Common Stock are listed for trading on the Nasdaq
National Market under the symbol "RESC."
The Parent and the Purchaser have their principal executive offices at 102
Westside Blvd., N.W., Roanoke, Virginia 24017, and their telephone number is
(540) 342-1831.
The name, citizenship, residence or business address, principal occupation
or employment and five-year employment history of each of the directors and
executive officers of the Purchaser and the Parent and certain other
information are set forth in Schedule I hereto.
Except as set forth on Schedule I hereto, none of the Purchaser, the Parent
nor, to the best knowledge of the Purchaser and the Parent, any of the persons
listed on Schedule I hereto or any associate or majority-owned subsidiary of
the Purchaser, the Parent or any of the persons so listed, beneficially owns
or has a right to acquire directly or indirectly any Shares, and none of the
Purchaser, the Parent nor, to the best knowledge of the Purchaser and the
Parent, 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 Shares during the past 60
days.
Except as described in this Offer to Purchase, none of the Parent or the
Purchaser or, to the best knowledge of the Parent or the Purchaser, any of the
persons listed in Schedule I hereto has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, without limitation, any contract,
arrangement, understanding or relationship concerning the transfer or the
voting of any securities of the Company, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or
the giving or withholding of proxies. Except as described in this Offer to
Purchase, none of the Parent, or the Purchaser or, to the best knowledge of
the Parent or the Purchaser, any of the persons listed in Schedule I hereto
has had any transactions with the Company or any of its executive officers,
directors or affiliates that would require reporting under the rules of the
Commission.
Except with respect to the transactions contemplated by the Merger
Agreement, the Stock Option Agreement and the Stock Tender and Voting
Agreements and as described in this Offer to Purchase, there have been no
contacts, negotiations or transactions between the Parent or the Purchaser, or
their respective subsidiaries, or to the best knowledge of the Parent or the
Purchaser, any of the persons listed in Schedule I hereto, on the one hand,
and the Company or its executive officers, directors or affiliates, on the
other hand, concerning a merger, consolidation or acquisition, tender offer or
other acquisition of securities, election of directors or a sale or other
transfer of a material amount of assets.
FINANCIAL INFORMATION. Set forth below are certain selected consolidated
financial data relating to the Parent and its subsidiaries for the Parent's
last two fiscal years and nine months ended July 31, 1998, that have been
derived from the financial statements contained in the Parent's Annual Report
on Form 10-K for the fiscal year ended October 31, 1997 (the "PARENT FORM 10-
K"), and the Parent's Form 10-Qs for the fiscal year through July 1998, filed
by the Parent with the Commission. More comprehensive financial information is
included in the reports (including Management's Discussion and Analysis of
Financial Condition and Results of Operations) and other documents filed by
the Parent with the Commission, and the following financial data is qualified
in its entirety by reference to such reports and other documents, including
the financial information and related notes contained therein. Such reports
and other documents may be examined and copies thereof may be obtained from
the offices of the Commission and Nasdaq in the manner set forth below.
11
<PAGE>
ROANOKE ELECTRIC STEEL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED OCTOBER 31
JULY 31, -----------------------
1998 1997 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................. $218,502 $265,109 $246,287
Cost of sales............................. $178,017 $213,380 $198,372
Income (loss) before income taxes......... $ 21,316 $ 27,089 $ 24,721
Income tax expense (benefit) ............. $ 8,517 $ 10,206 $ 9,306
Net income (loss)......................... $ 12,799 $ 16,883 $ 15,415
Earnings (loss) per common share:
Basic................................... $ 1.15 $ 1.50 $ 1.30
Diluted................................. $ 1.14 $ 1.49 $ 1.30
Weighted average number of common shares
outstanding(1):
Basic................................... 11,148 11,231 11,815
Diluted................................. 11,276 11,301 11,871
<CAPTION>
JULY 31, OCTOBER 31, OCTOBER 31,
1998 1997 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total Assets.............................. $182,825 $176,860 $167,016
Total Liabilities......................... $ 68,684 $ 70,424 $ 72,583
Stockholders' Equity...................... $114,141 $106,436 $ 94,433
</TABLE>
- --------
(1) Per share information has been adjusted for a three-for-two stock split
effective March 25, 1998.
AVAILABLE INFORMATION. The Parent is subject to the information filing
requirements of the Exchange Act and in accordance therewith is obligated to
file periodic reports, proxy statements and other information with the
Commission relating to its business, financial condition and other matters.
Information, as of particular dates, concerning the Parent's directors and
officers, their remuneration, options granted to them, the principal holders
of the Parent's securities and any material interest of such persons in
transactions with the Parent is required to be disclosed in such proxy
statements and distributed to the Parent's stockholders and filed with the
Commission. Such reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and should also be available for inspection and copying at prescribed rates at
the regional offices of the Commission located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade
Center, Suite 1300, New York, New York 10048. Such reports, proxy statements
and other information may also be obtained at the Website that the Commission
maintains at http://www.sec.gov. Copies of this material may also be obtained
by mail, upon payment of the Commission's customary fees, from the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. Reports, proxy statements and other information concerning the Company
should also be available for inspection at the offices of Nasdaq, Reports
Section at 1953 K Street, Washington, D.C. 20006.
9. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the
Purchaser to acquire the tendered Shares pursuant to the Offer, and to
consummate the Merger, is approximately $65 million, plus estimated fees and
expenses related to the Offer and the Merger of approximately $4.2 million,
and approximately another $52.1 million will be required to repay the existing
indebtedness of the Company and its subsidiaries. The Purchaser expects to
obtain all funds needed to consummate the Offer and the Merger through capital
contributions or advances made by the Parent. The Parent expects to obtain
funds for such capital contributions pursuant to a Credit Agreement to be
entered into pursuant to financing commitment letters (collectively, the
"COMMITMENT LETTER") dated November 5, 1998, from First Union National Bank,
dated November 6, 1998, from each of NationsBank, N.A., and Crestar Bank and
dated November 9, 1998, from Wachiovia Bank, N.A. (collectively, the
"LENDERS").
12
<PAGE>
Pursuant to the Commitment Letter, the Lenders have committed to provide to
the Parent (i) a term loan facility of up to $150 million (the "NEW TERM LOAN
FACILITY") to finance the acquisition of Shares, pursuant to the Offer and the
Merger, to refinance certain existing indebtedness of the Parent and its
subsidiaries, (including, without limitation, the Company and its
subsidiaries), and to pay related fees and expenses, and (ii) a revolving
credit facility of up to $30 million (the "NEW REVOLVING CREDIT FACILITY" and,
together with the New Term Loan Facility, the "FACILITIES"), to provide
working capital to, and for other general corporate purposes of, the Parent
and its subsidiaries (including, without limitation, the Company and its
subsidiaries). The Commitment Letter provides for an upfront fee equal to 25
basis points on the aggregate amount of the Facilities, plus a facility fee
with respect to the New Revolving Credit Facility based on the Net Funded Debt
to EBITDA ratio (as those terms are defined in the Commitment Letter) of the
Parent and its subsidiaries (including, without limitation, the Company and
its subsidiaries).
The Commitment Letter is subject to certain customary conditions.
Obligations under the Facilities will be jointly and severally guaranteed by
all operating subsidiaries of the Parent, (including, without limitation, the
Company and its subsidiaries), and will be secured, until at least the third
anniversary of the closing of the Facilities, by a first priority, perfected
security interest in the accounts, inventory and equipment (and other assets
required by the Lenders) of the Parent and its subsidiaries (including,
without limitation, the Company and its subsidiaries).
The New Term Loan Facility would be due and payable in twenty-eight
consecutive quarterly installments, but based upon a ten-year amortization
schedule (with a balloon payment), and the new Revolving Loan Facility would
be due and payable five years after the date of the closing of the Facilities.
The Facilities would bear interest, at the Parent's option, at (i) the Base
Rate plus the Applicable Margin (as such terms are defined in the Commitment
Letter) or (ii) Adjusted LIBOR plus the Applicable Margin.
In connection with the Commitment Letter, the Parent agreed to indemnify the
Lenders against certain liabilities. The foregoing summary of the Commitment
Letter is qualified in its entirety by references to the text of the
Commitment Letter, which is filed with the Commission as an exhibit to the
Tender Offer Statement on Schedule 14D-1 by the Parent and the Purchaser (the
"TENDER OFFER STATEMENT").
It is currently anticipated that the indebtedness incurred by the Parent in
connection with the Offer and the Merger will be repaid from current funds,
additional funds generated internally by the Parent and its subsidiaries
(including, after the Merger, if consummated, funds generated by the Surviving
Corporation and its subsidiaries) and through other sources that may be
available from time to time.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. Set forth below is
a chronology of events and a description of contacts between representatives
of the Company and the Parent. The description of certain meetings of the
Company's Board of Directors has been supplied by the Company. The Parent has
followed the business activities of the Company for a period of time.
Beginning in January, 1997, representatives of the Parent and the Company have
engaged in discussions, from time to time, concerning a possible business
combination involving the Company.
The Parent understands that, in early January, 1997, CPT Holdings, Inc.
("CPT"), advised Robert L. Bunting, Jr., then Chief Executive Officer and
Chairman of the Company, that it was making an unsolicited offer to acquire
the Company for a price of $9.00 per Share. After a full review and
consideration of the proposal, the Company's Board determined that the offer
was inadequate, and that it was not in the best interests of the Company or
its stockholders to proceed with discussions concerning an acquisition of the
Company by CPT.
On January 14, 1997, Mr. Bunting and Timothy R. Duke, then the President and
Chief Operating Officer of the Company (and currently its Chief Executive
Officer and President), met with Donald G. Smith, the President, Chief
Executive Officer and Chairman of the Parent, at the offices of the Parent.
The purpose of the meeting was to discuss the possibility of the Parent being
a "white knight" in the event that CPT proceeded to attempt a hostile takeover
of the Company.
The Parent retained the services of Ewing Monroe Bemiss & Co. ("Ewing
Monroe") to evaluate the possibility of the Parent acquiring the Company and
to advise the Board of Directors of the Parent in this regard.
13
<PAGE>
After consideration of the factors affecting the Company and the Parent at
that time, and in light of the advice of Ewing Monroe, the Board of Directors
of the Parent determined to pursue discussions with the Company for the
possible acquisition of the Company.
At the meeting of the Company's Board held on March 5, 1997, Mr. Duke
advised the Company's Board that the Parent had advised him that it might have
an interest in acquiring the Company at a price to be negotiated, but in no
event greater than $11.00 per Share.
In April 1997, based on information from the Parent, Mr. Duke understood
that due to the possible entry of new competitors into the Company's markets,
the Parent's revised valuation was in the neighborhood of $10.00 per Share.
Later in April 1997, Mr. Duke informed Mr. Smith that the Company's Board had
concluded that it was not in the best interests of the Company's stockholders
to enter into a transaction with the Parent given the Parent's suggested
valuation. There were no further contacts between the Company and the Parent
until June 1998, other than with regard to the Company's purchasing of billets
from the Parent.
At a meeting of the Company's Board held on June 5, 1998, the Company's
Board reviewed the operations of the Huntington facility, including the
progress of the Company's modernization program, industry trends, potential
competitors, various possible strategic alliances and, in light of the
Company's stock trading price at the time, the possibility of the Company
receiving an unsolicited, inadequate offer to stockholders that could also
disrupt the Company's operations and employment levels, and leave the Company
unable to serve its customers. The Company's Board authorized Mr. Duke to
contact Mr. Smith to ascertain whether the Parent might have an interest in a
strategic alliance.
On June 11, 1998, Mr. Duke and Mr. Smith discussed the possible advantages
of a strategic alliance between the Company and the Parent, including that the
combined entity would have greater financial strength, that the Company's
Huntington facility would have a ready source of billets from the Parent's
facility and that the Parent would have a "built-in" customer for its billets.
At the same time, Mr. Smith expressed a concern regarding any strategic
alliance with the Company due to the possible entry of new competitors into
the Company's markets.
The Parent again consulted Ewing Monroe to evaluate a possible transaction
with the Company and to advise the Parent's Board of Directors in this regard.
On July 20, 1998, the Parent and the Company entered into the Parent
Confidentiality Agreement (defined in Section 11) preceding the Parent's
review of certain information concerning the Company. Following the execution
of this agreement, Mr. Duke and Daniel N. Pickens, a director of the Company
and a First Vice President of Janney, kept the Company's directors informed
regularly regarding discussions with the Parent's representatives.
On July 28, 1998, Mr. Duke and Mr. Pickens met with Mr. Smith, Mr. A. Hugh
Ewing III, President of Ewing Monroe, Ms. Mary Adams Bacon, a Managing
Director of Ewing Monroe, and other representatives of the Parent. At the
meeting, the parties discussed the Company's business, the Parent's business,
industry trends, potential competitors and general parameters and concerns
regarding possible terms and conditions of any transaction between the Company
and the Parent.
At a meeting of the Parent's Board of Directors on August 14, 1998, Mr.
Ewing and Ms. Bacon made a detailed presentation regarding a possible
transaction between the Company and the Parent. After considerable discussion,
the Parent's Board of Directors determined to consider the issue further at
its regularly scheduled meeting on August 18, 1998. At the meeting on August
18, the Parent's Board of Directors again met with Mr. Ewing and Ms. Bacon and
again discussed the transaction under consideration. After a further detailed
presentation by management and discussion, including consideration of the
possible benefits to the Parent of a combination of the business of the
Company and the Parent, the Parent's Board of Directors authorized management
to negotiate the terms and conditions for a possible acquisition of the
Company.
At a meeting on August 19, 1998, the Company's Board reviewed and analyzed
the discussion of July 28, 1998, together with the updated information on the
operations of the Huntington facility, including the progress
14
<PAGE>
of the Company's modernization program, competitive trends in the industry and
the Company's stock price and performance. At the meeting, the Company's Board
further discussed the identity and key characteristics of other potential
strategic partners. After considerable discussion, the Company's Board
authorized Mr. Duke and Mr. Pickens to continue discussions with the Parent.
On August 24, 1998, Mr. Duke and Mr. Pickens met again with Mr. Smith, Mr.
Ewing and Ms. Bacon to review historical and projected performance of the
Company and the Parent, strategic opportunities, valuation parameters and
terms and conditions of a possible transaction.
On September 9, 1998, the Company's Board met to discuss a possible
transaction with the Parent. The Company's Board reviewed materials prepared
by management and by Janney regarding the Company's historical performance,
projected financial results, industry trends, stock price history, stock
market data and potential competition. The Company's Board also reviewed the
meeting held with the Parent's representatives on August 24, 1998, and
authorized further discussion with the Parent.
On September 11, 1998, Mr. Duke and Mr. Pickens met with Mr. Smith, Mr.
Ewing and Ms. Bacon to discuss a possible transaction. At this meeting, Mr.
Smith indicated that the Parent was only prepared to proceed with a
transaction in which it acquired 100% of the Shares for $11.00 cash. After
considerable discussion, Mr. Smith agreed to recommend to the Parent's Board
of Directors that the Parent pay a price of $11.50 per Share in cash to
acquire the Company. Mr. Smith's willingness to recommend that price to the
Parent's Board of Directors was conditioned upon various other issues,
including protective devices such as break-up fees, an option to purchase
Shares and stockholder lock-ups, completion of due diligence and the
negotiation of definitive agreements. At a recess in the meeting, Mr. Duke,
Mr. Pickens, Albert W. Eastburn, the Chairman of the Company and Stephen A.
Albert, a director of the Company and a member of Sierchio & Albert, P.C.,
general counsel to the Company, discussed the proposed sale of the Company via
a conference call and concluded that Mr. Duke and Mr. Pickens should continue
further discussions with the Parent. Negotiations between the Company and the
Parent continued through the day.
On September 14, 1998, via a conference call, counsel to the Company and
counsel to the Parent discussed a possible transaction, including structure,
due diligence and the preparation of documents.
The Parent's Board of Directors met again on September 15, 1998, and
discussed the September 11, 1998, meeting described above. The Parent's Board
of Directors authorized the commencement of extensive due diligence activities
by the Parent's counsel and consultants and, subject to the results thereof
and satisfaction of further conditions of management, the continued
negotiation of a possible agreement.
On September 17, 1998, the Company's Board held a telephonic meeting at
which it reviewed the Company's historical and projected results, industry
trends, stock market trends and competitive factors. The Company's Board also
analyzed and discussed the proposed purchase price in light of these factors,
the Company's stock price, performance and trading volume and other possible
strategic alternatives. The Company's Board approved the Company's retention
of Janney as the Company's investment banker with regard to the transaction
and the Company's retention of legal counsel with regard to the transaction.
Legal counsel then advised the Company's Board with respect to certain legal
matters, including its fiduciary obligations in connection with any possible
sale of the Company. The Company's Board authorized the Company to continue
negotiations with the Parent.
On September 29, 1998, the Company's Board held a meeting at which Mr. Duke,
Janney and legal counsel reviewed the status of negotiations with the Parent.
Legal counsel again advised the Company's Board with respect to certain legal
matters and reviewed the principal aspects of the Merger Agreement, including
protective devices such as break-up fees, an option to purchase Shares and
stockholder lock-ups. Representatives of Janney delivered its oral opinion to
the Company's Board as to the fairness of the $11.50 cash consideration to be
paid to the holders of the outstanding Shares. The Company's Board then
analyzed and discussed the offer, the Merger Agreement and the transactions
contemplated thereby in light of the Company's historical performance,
projected
15
<PAGE>
financial results, industry trends, potential competitors, stock price history
and data, other strategic alternatives and various other matters that it
considered relevant. Thereafter, the Company's Board unanimously resolved to
recommend acceptance of the offer and approval and adoption of the Merger
Agreement by the Company's stockholders.
On October 6, 1998, the Parent's Board of Directors met again with
representatives of Ewing Monroe to consider the proposed transaction. Based
upon the Parent's due diligence investigation, as well as current competitive
conditions in the industry and the decline in the Company's stock price, all
of which were reviewed and addressed by Mr. Ewing and Ms. Bacon, the Parent's
Board of Directors determined not to proceed with consideration of a final
written agreement at that time, but did authorize Mr. Smith and other
representatives of the Parent to continue due diligence investigations, as
well as discussions and negotiations with representatives of the Company, and
determined to meet and consider the matter further after additional due
diligence and consideration of the financial aspects of the transaction.
During the following three weeks, discussions continued between the parties
and the Parent proceeded with its continuing due diligence investigation. The
Parent's Board of Directors met again on October 20, 1998, and considered the
status of the ongoing due diligence review and the differential between the
trading price of the Company's stock and $11.50. The Parent's Board determined
to reconvene to make a final decision on whether or not to proceed after
management had further discussions with the Company's representatives and
concluded other outstanding issues to management's satisfaction.
On October 26, 1998, Mr. Duke and Mr. Pickens met with Mr. Smith, Mr. Ewing
and Ms. Bacon. During that meeting, Mr. Smith reviewed the results of certain
of the Parent's due diligence investigation, industry trends and increased
competition, and proposed a revised offer price of $10.00 per share. After
discussion, although no agreement was reached regarding the possible terms and
conditions of a revised transaction, the parties narrowed their discussion of
price to a range of $10.50 to $11.00 per Share. Following the meeting, Mr.
Duke reported the results of the meeting to the other members of the Company's
Board, and a meeting of the Company's Board was scheduled for November 2,
1998.
On November 2, 1998, the Company's Board met to review the proposed
transaction in light of all relevant data, including, in particular, industry
trends, potential new competition, the operations of the Huntington facility,
including the progress of the Company's modernization program, historical and
projected results, the Company's stock price history and performance, together
with other stock market data and trends, other strategic alternatives
available to the Company and the due diligence performed by the Parent. The
Company's Board then discussed and analyzed the data, and concluded that a
sale of the Company to the Parent at a price of $10.75 per share would achieve
for stockholders a value that they would not likely be able to realize in the
foreseeable future and, accordingly, would be in the best interests of
stockholders. Janney delivered its oral opinion to the Company's Board as to
the fairness of a $10.75 price per Share to the stockholders of the Company
from a financial point of view. The Company's Board then unanimously resolved
to recommend acceptance of an offer of $10.75 per share, should the Parent
make such an offer, and directed Mr. Pickens to approach Mr. Ewing regarding
the Parent's willingness to enter into such a revised transaction who, in
turn, talked to Mr. Smith. Later that day, Mr. Smith indicated that he was
prepared to recommend an offer price of $10.75 per share to the Parent's Board
of Directors.
On November 9, 1998, the Board of Directors of the Parent met and considered
the offer price of $10.75, and the report of management on further
investigations and negotiations with the Company. Ewing Monroe delivered its
fairness opinion to the Parent's Board of Directors that stated that the Offer
Price was fair to the Parent from a financial point of view. The Parent's
Board of Directors reviewed the fairness opinion and financing commitment
letters. Following further discussion, the Parent's Board of Directors
unanimously approved the proposed transaction and directed the officers to
conclude the negotiations concerning various relevant documents and, upon
finalizing such documents, to execute the Merger Agreement. On November 10,
1998, after finalization of the various open issues, including completion of
the Commitment Letter, the Merger Agreement, the Stock Option Agreement, the
Amendment to the Rights Agreement, the Stock Tender
16
<PAGE>
Agreements and related agreements were executed and delivered, and the
transaction was announced publicly after the closing of trading on the Nasdaq
National Market on November 10, 1998.
11. THE MERGER AGREEMENT AND OTHER AGREEMENTS; THE RIGHTS; EMPLOYEE
ARRANGEMENTS. The following summaries or descriptions of the Merger Agreement,
the Stock Option Agreement, the Stock Tender and Voting Agreements, the
Rights, certain employment arrangements and other agreements are each
qualified in its entirety by reference to such agreement or arrangement as
filed with the Commission as an exhibit to the Tender Offer Statement.
THE OFFER. The Merger Agreement provides, among other things, for the
commencement of the Offer as soon as reasonably practicable, and in any event
within five business days from the date of public announcement of the
execution thereof. The obligation of the Purchaser to accept for payment
Shares tendered pursuant to the Offer is subject to (i) the Minimum Condition,
and (ii) the satisfaction or waiver of the other Offer Conditions. Under the
Merger Agreement, the Purchaser expressly reserves the right, in its sole
discretion, to waive any of the Offer Conditions (other than the Minimum
Condition) and make any other changes in the terms or conditions of the Offer.
Notwithstanding the foregoing, under the terms of the Merger Agreement,
without the written consent of the Company, the Purchaser cannot (a) decrease
the price per Share to be paid in the Offer, change the form of consideration
payable in the Offer (other than by adding consideration) or decrease the
number of Shares sought in the Offer, (b) change or amend the Offer Conditions
(other than to waive any Offer Condition, except that the Minimum Condition
may not be waived without the consent of the Company), (c) impose additional
conditions to the Offer or (d) amend any other term of the Offer in any manner
adverse to the holders of Shares (other than insignificant changes or
amendments). The Purchaser has no obligation to pay interest on the purchase
price of tendered Shares, including in the event the Purchaser exercises its
right to extend the period of time during which the Offer is open. The rights
reserved by the Purchaser in this paragraph are in addition to the Purchaser's
rights to terminate the Offer pursuant to Section 15. The Merger Agreement
provides that, subject to the terms and conditions of the Merger Agreement,
including but not limited to the Offer Conditions, Parent will accept for
payment and pay for Shares as soon as it is permitted to do so under
applicable law. If, on the Expiration Date, the Offer Conditions have not been
satisfied or waived, the Purchaser will have the right, in its sole
discretion, to extend the Offer for one or more periods not to exceed an
aggregate of thirty business days, and, if all of the Offer Conditions have
been satisfied or waived and less than 90% of the outstanding Shares have been
tendered in the Offer and not withdrawn, then the Purchaser will have the
additional right, in its sole discretion, so long as the Purchaser and the
Parent each waive in writing the satisfaction of each of the Offer Conditions,
to extend the Offer for one or more periods not to exceed an aggregate of
twenty business days. Notwithstanding the foregoing, however, the Purchaser
may not extend the Expiration Date beyond the Outside Date, without the
consent of the Company.
THE MERGER. The Merger Agreement provides, that upon the terms and subject
to the conditions thereof (and including those described in Section 15) and in
accordance with the DGCL and the Virginia Stock Corporation Act, at the
Effective Time of the Merger, the Purchaser will be merged with and into the
Company. As a result of the Merger, the separate corporate existence of the
Purchaser will cease, and the Company will continue as the Surviving
Corporation. At the Parent's election, any direct or indirect subsidiary of
the Parent other than the Purchaser may be merged with and into the Company
instead of the Purchaser.
Pursuant to the Merger Agreement, each Share issued and outstanding
immediately prior to the Effective Time (unless otherwise provided for) will
be canceled, extinguished and converted into the right to receive the Merger
Consideration, which equals $10.75 in cash, or any higher price that may be
paid pursuant to the Offer, payable to the holder thereof, without interest,
upon surrender of the certificate formerly representing such Share in the
manner described in the Merger Agreement, less any required withholding taxes.
The Merger Agreement provides that, immediately prior to the Effective Time,
each outstanding Employee Option, whether or not then exercisable, will be
canceled by the Company, and the holder thereof will be entitled
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to receive at the Effective Time or as soon as practicable thereafter from the
Company in consideration for such cancellation an amount in cash equal to the
product of (a) the number of Shares previously subject to such Employee Option
and (b) the excess, if any, of the Merger Consideration over the exercise
price per Share of the Employee Option, less any withholding taxes.
The Merger Agreement provides that, unless otherwise stipulated, Shares that
are issued and outstanding immediately prior to the Effective Time and that
are held by stockholders who have not voted in favor of or consented to the
Merger and have delivered a written demand for appraisal of such Shares in the
time and manner provided in Section 262 of the DGCL and have not failed to
perfect or have not effectively withdrawn or lost their rights to appraisal
and payment under the DGCL will not be converted into the right to receive the
Merger Consideration, but instead will be entitled to receive the
consideration determined pursuant to Section 262 of the DGCL; provided,
however, that, if such holder fails to perfect or has effectively withdrawn or
lost the holder's right to appraisal and payment under the DGCL, such holder's
Shares will thereupon be deemed to have been converted, at the Effective Time,
into the right to receive the Merger Consideration as described above without
any interest thereon.
The Merger Agreement also provides that, at the Effective Time and without
any further action on the part of the Company and the Purchaser, the Company's
Certificate of Incorporation, as amended and in effect immediately prior to
the Effective Time, will be the certificate of incorporation of the Surviving
Corporation. At the Effective Time and without any further action on the part
of the Company and the Purchaser, the Bylaws of the Company will become the
Bylaws of the Surviving Corporation. The Merger Agreement provides that the
directors of the Purchaser immediately prior to the Effective Time will be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation, and the officers of the Surviving Corporation will be Timothy R.
Duke, President; Mark G. Meikle, Vice President and Treasurer; W. Bruce Groff,
Jr., Vice President of Human Resources and Secretary; and Donald G. Smith,
Chairman of the Board; in each case until their respective successors are duly
elected or appointed (as the case may be) and qualified.
STOCKHOLDERS MEETING. The Merger Agreement provides that, if required, the
Company, acting through its Board of Directors, must, in accordance with and
subject to applicable law and its Certificate of Incorporation, as amended,
and its Bylaws, (i) duly call, give notice of, convene and hold a meeting of
its stockholders as soon as practicable following consummation of the Offer
for the purpose of adopting the Merger Agreement and the transactions
contemplated thereby (the "STOCKHOLDERS MEETING") and (ii) except if the Board
of Directors by a majority vote determines in good faith, based upon the
advice of outside legal counsel to the Company that to do so would reasonably
likely constitute a breach of fiduciary duty under applicable law, (A) include
in the proxy statement relating to the Stockholders' Meeting (the "PROXY
STATEMENT"), the unanimous recommendation of the Board of Directors that the
stockholders of the Company vote in favor of the adoption of the Merger
Agreement and the transactions contemplated thereby and the written opinion of
Janney that the consideration to be received by the stockholders of the
Company pursuant to the Offer and the Merger is fair to such stockholders from
a financial point of view and (B) use its reasonable best efforts to obtain
the necessary adoption of the Merger Agreement. At the Stockholders Meeting,
the Parent and the Purchaser will cause all Shares then owned by them and
their subsidiaries to be voted in favor of adoption of the Merger Agreement
and the transactions contemplated thereby. The Merger Agreement provides that,
notwithstanding the foregoing, in the event that the Purchaser acquires at
least 90% of the outstanding Shares, the Company agrees, at the request of the
Purchaser, subject to the respective provisions of the Merger Agreement, to
take all necessary and appropriate action to cause the Merger to become
effective as soon as reasonably practicable after such acquisition, without a
meeting of the Company's stockholders, in accordance with Section 253 of the
DGCL (a "SHORT-FORM MERGER").
PROXY STATEMENT. The Merger Agreement provides that, if required by
applicable law, as soon as practicable following the Parent's request, the
Company will prepare and file a preliminary proxy statement with respect to
the Stockholders' Meeting with the Commission under the Exchange Act and the
rules and regulations
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promulgated thereunder, and will use its reasonable best efforts to have such
proxy statement approved by the Commission. The parties will cooperate with
one another in this endeavor.
DESIGNATION OF DIRECTORS. Promptly upon the purchase by the Purchaser of
Shares pursuant to the Offer, and from time to time thereafter, the Purchaser
may designate up to such number of directors, rounded up to the next whole
number, on the Board of Directors of the Company as will give the Purchaser
representation on the Board of Directors equal to the product of the total
number of directors on such Board (giving effect to the directors elected
pursuant to this sentence and including any vacancies or unfilled newly-
created directorships) multiplied by the percentage that the aggregate number
of Shares beneficially owned by the Purchaser or any affiliate of the
Purchaser bears to the total number of Shares then outstanding, and the
Company will amend its Bylaws to provide for each of the matters set forth in
the Merger Agreement with respect to the designation of directors and will, at
such time, promptly take all action necessary to cause the Purchaser's
designees to be so elected, including either increasing the size of the Board
of Directors or securing the resignations of incumbent directors or both. At
such times, the Company will use its reasonable best efforts to cause persons
designated by the Purchaser to constitute the same percentage as is on the
board of (i) each committee of the Board of Directors, (ii) each board of
directors of each subsidiary of the Company and (iii) each committee of each
such board, in each case only to the extent permitted by law. Until the
Purchaser acquires a majority of the outstanding Shares on a fully-diluted
basis, the Company will use its reasonable best efforts to ensure that all the
members of the Board of Directors of the Company and such boards and
committees as of the date of the Merger Agreement who are not employees of the
Company will remain members of the Board of Directors and such boards and
committees.
The Company will promptly take all actions required pursuant to Section
14(f) and Rule 14f-1 in order to fulfill its obligations with respect to the
designation of directors and will include in the Schedule 14D-9 or a separate
Rule 14f-1 information statement provided to stockholders such information
with respect to the Company and its officers and directors as is required
under Section 14(f) and Rule 14f-1 to fulfill its obligations with respect to
the designation of directors. The Parent or the Purchaser will supply to the
Company and be solely responsible for the accuracy and completeness of any
information with respect to either of them and their nominees, officers,
directors and affiliates required by Section 14(f) and Rule 14f-1.
In addition to any vote of the Board of Directors required by law, the
Certificate of Incorporation, as amended, or the Bylaws of the Company, or by
the Merger Agreement, following the election or appointment of the Purchaser's
designees pursuant to the terms of the Merger Agreement and prior to the
Effective Time, the concurrence of a majority of the directors of the Company
then in office who are neither designated by the Purchaser nor are employees
of the Company (the "DISINTERESTED DIRECTORS") will be required to authorize
any amendment, or waiver of any term or condition, of the Merger Agreement or
the Certificate of Incorporation, as amended, or Bylaws of the Company, any
termination of the Merger Agreement by the Company, any extension by the
Company of the time for the performance of any of the obligations or other
acts of the Purchaser or waiver or assertion of any of the Company's rights
hereunder. The number of Disinterested Directors will be not less than two;
provided, however, that, if the number of Disinterested Directors is reduced
below two for any reason, the remaining Disinterested Director will be
entitled to designate persons to fill such vacancies who will be deemed to be
Disinterested Directors for purposes of the Merger Agreement, or if no
Disinterested Directors then remain, the other directors who were directors
prior to the date hereof will designate two persons to fill such vacancies who
cannot be officers, stockholders or affiliates of the Company, the Parent or
the Purchaser, and such persons will be deemed to be Disinterested Directors
for purposes of the Merger Agreement.
ACCESS TO INFORMATION; CONFIDENTIALITY. Pursuant to the Merger Agreement,
from the date thereof to the Effective Time, upon reasonable prior notice, the
Company will, and will cause its subsidiaries, officers, directors, employees,
auditors and other agents to, afford the officers and employees and will use
its reasonable best efforts to cause its auditors and other agents of the
Parent, and financing sources who will agree to be bound by such provisions of
the Merger Agreement as though a party thereto, complete access, consistent
with applicable law, at all reasonable times to its officers, employees,
agents, properties, offices, plants and other facilities and to all books and
records, and will furnish the Parent and such financing sources with all
financial,
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operating and other data and information as the Parent, through its officers,
employees or agents, or such financing sources may from time to time
reasonably request.
The Merger Agreement further provides that all information obtained by the
Parent and the Purchaser pursuant to the above paragraph will be kept
confidential in accordance with that certain letter agreement Confidentiality
Agreement, dated July 20, 1998 (the "PARENT CONFIDENTIALITY AGREEMENT"),
between Parent and Janney, as agent for the Company, which is filed with the
Commission as an exhibit to the Tender Offer Statement.
NO SOLICITATION OF TRANSACTIONS. The Company, its affiliates and their
respective officers, directors, employees, representatives and agents were
obligated to immediately cease any existing discussions or negotiations, if
any, with any parties conducted prior to the date of the Merger Agreement with
respect to any acquisition or exchange of all or any material portion of the
assets of, or any equity interest in, the Company or any of its subsidiaries
or any business combination with or involving the Company or any of its
subsidiaries. At any time prior to consummation of the Offer, the Company may,
directly or indirectly, furnish information and access, in each case only in
response to a request for such information or access to any person made after
the date hereof that was not solicited, initiated or knowingly encouraged by
the Company or any of its affiliates or any of its or their respective
officers, directors, employees, representatives or agents after the date
hereof, pursuant to appropriate confidentiality agreements containing terms
and conditions (including standstill provisions) that are no less favorable
than the terms and conditions contained in the Parent Confidentiality
Agreement. Additionally, the Company, its affiliates, officers, directors
employees or representatives, may participate in discussions and negotiate
with such person concerning any merger, sale of assets, sale of shares of
capital stock or similar transaction (including an exchange of stock or
assets) involving the Company or any subsidiary or division of the Company,
only if such person has submitted a proposal to the Board of Directors of the
Company relating to any such transaction and the Board by a majority vote
determines in good faith, based upon the advice of outside counsel to the
Company, that failing to take such action is reasonably likely to constitute a
breach of the Board's fiduciary duties under applicable law. The Board of
Directors must provide a copy of any such written proposal to the Parent
immediately after receipt thereof (except such written proposal must be
provided to the Parent by 10:30 a.m. on the next business day in cases where
such written proposal is not received during normal business hours) and must
notify the Parent immediately if any proposal (oral or written) is made
(except the Parent must be notified by 10:30 a.m. on the next business day in
cases where such proposal is not received during normal business hours) and
will in such notice, indicate in reasonable detail the identity of the offeror
and the terms and conditions of any proposal and will keep the Parent promptly
advised of all developments which could reasonably be expected to culminate in
the Board of Directors withdrawing, modifying or amending its recommendation
of the Offer, the Merger and the other transactions contemplated by the Merger
Agreement.
Except as set forth herein, neither the Company or any of its affiliates,
nor any of its or their respective officers, directors, employees,
representatives or agents, may, directly or indirectly, solicit, initiate or
knowingly encourage discussions or negotiations with, any corporation,
partnership, person or other entity or group (other than the Parent and the
Purchaser, any affiliate or associate of the Parent and the Purchaser or any
designees of the Parent or the Purchaser) concerning any merger, sale of any
material portion or assets, sale of any shares of capital stock or similar
transactions (including an exchange of stock or assets) involving the Company
or any subsidiary or division of the Company. None of the foregoing, however,
will prevent the Board of Directors from taking, and disclosing to the
Company's stockholders, a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with regard to any tender offer;
furthermore, the Board of Directors of the Company may not recommend that the
stockholders of the Company tender their Shares in connection with any such
tender offer unless the Board by majority vote determines in good faith, based
upon the advice of outside counsel to the Company, that failing to take such
action is reasonably likely to constitute a breach of the Board's fiduciary
duties under applicable law. The Company agreed not to release any third party
from, or waive any provisions of, any confidentiality or standstill agreement
to which the Company is a party, unless the Board of Directors determines,
based upon the advice of outside counsel, that the failure to make such
release or
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waiver is reasonably likely to constitute a breach of the Board of Director's
fiduciary duties under applicable law.
DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The Merger Agreement
provides that the Certificate of Incorporation and Bylaws of the Surviving
Corporation must contain provisions no less favorable with respect to
indemnification than are set forth in the Certificate of Incorporation and
Bylaws of the Company and these provisions may not to be materially amended,
repealed or otherwise modified for a period of six years from the Effective
Time in any manner that would adversely affect the rights thereunder of
individuals who, at or prior to the Effective Time, were directors, officers
or employees of the Company.
The Merger Agreement also provides that for six years after the Effective
Time, the Surviving Corporation will indemnify and hold harmless each present
and former director and officer of the Company (the "INDEMNIFIED PARTIES"),
against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively, the
"COSTS") (but only to the extent such Costs are not otherwise covered by
insurance and paid) incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative (a "CLAIM" or, collectively, "CLAIMS") arising out of or
pertaining to matters existing or occurring at or prior to the Effective Time,
whether asserted or claimed prior to, at or after the Effective Time, to the
fullest extent permitted under applicable law (and the Surviving Corporation
will also advance expenses as incurred to the fullest extent permitted under
applicable law provided the person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
person is not entitled to indemnification). Any of such Indemnified Parties
must promptly notify the Parent of any Claim.
For at least six years after the Effective Time, the Parent will or will
cause the Surviving Corporation to maintain the Company's existing directors'
and officers' liability insurance ("D & O INSURANCE") so long as the annual
premium for such insurance is not in excess of twice the premium on the date
of the Merger Agreement (the "MAXIMUM PREMIUM"); provided, however, that if
the existing D & O Insurance expires, or is terminated or canceled by the
insurance carrier during such period, the Surviving Corporation will use its
reasonable best efforts to obtain as much D & O Insurance and, to the extent
possible, covering substantially the same matters that were covered under the
D & O Insurance as in effect in the date thereof, as can be obtained for the
remainder of such period for a premium not in excess (on an annualized basis)
of the Maximum Premium. The Merger Agreement requires that any successor
corporation or assignee of the Surviving Corporation or the Parent assume
these insurance and indemnification obligations.
FURTHER ACTION; REASONABLE BEST EFFORTS. The Merger Agreement provides that,
upon the terms and subject to the conditions thereof, each of the parties
thereto will use its reasonable best efforts to take, or cause to be taken,
all appropriate action, and to do or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by the Merger Agreement as soon
as practicable, including but not limited to (i) cooperation in the
preparation and filing of the Offer Documents (as defined therein), the
Schedule 14D-9, the Proxy Statement, any required filings under the HSR Act
and any amendments to any thereof, (ii) cooperation with respect to
consummating the financing of the Offer and the Merger and (iii) using its
reasonable best efforts to promptly make all required regulatory filings and
applications including, without limitation, responding promptly to requests
for further information and to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental
authorities and parties to contracts with the Company and its subsidiaries as
are necessary for the consummation of the transactions contemplated by the
Merger Agreement and to fulfill the Offer Conditions.
CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the Merger Agreement,
the Company has agreed (and has agreed to cause its subsidiaries) to operate
their respective businesses in the ordinary course and in a manner consistent
with past practice. The Company and its subsidiaries will also use reasonable
best efforts to seek to preserve intact their current business organizations,
keep available the service of its current officers, employees and consultants,
and preserve its relationships with customers, suppliers and other persons
with which the Company has significant business relations.
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Pending consummation of the Merger, the Company and its subsidiaries have
also agreed not to take any of the following actions without the Parent's
consent: (i) change the Company's governing documents; (ii) issue, deliver,
sell, pledge, dispose of or encumber, or authorize or commit to the issuance,
sale, pledge, disposition or encumbrance of any shares of capital stock of any
class, or any options, warrants, convertible securities or other rights of any
kind to acquire any shares of capital stock or any other ownership interest of
the Company or any of its subsidiaries or any material assets of the Company
or any of its subsidiaries, except for sales of inventory in the ordinary
course of business and in a manner consistent with past practice; (iii)
declare or pay a dividend or other distribution, either in cash, stock
property or otherwise; (iv) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of the Company's
capital stock; (v)(A) acquire another entity, (B) incur additional debt or
assume, guarantee or endorse the obligations of another person, (C) enter into
any agreement other than in the ordinary course of business consistent with
past practice, or (D) authorize capital expenditures that are not in the
Company's budget on the date of the Merger Agreement and are above specified
dollar thresholds; (vi) increase the compensation of, or grant any severance
to, directors, officers and employees (except to the extent required under
existing plans); (vii) change accounting practices; (viii) make any material
tax election or settle or compromise any material U.S. federal, state, local
or foreign tax liability; (ix) adopt a plan of complete or partial
dissolution; (x) pay or discharge any claims, liabilities or obligations; or
(xi) settle any pending litigation.
EMPLOYEE BENEFITS MATTERS. The Merger Agreement provides that, on and after
the Effective Time, the Parent will cause the Surviving Corporation and its
subsidiaries to promptly pay or provide when due all compensation and benefits
earned through or prior to the Effective Time as provided pursuant to the
terms of any compensation arrangements, employment agreements and employee or
director benefit plans, programs and policies in existence as of the date
thereof for all employees (and former employees) and directors (and former
directors) of the Company and its subsidiaries (including all compensation and
benefits earned through the Effective Time pursuant to the Company Plans
disclosed in the Company Disclosure Letter, which is a part of and
incorporated by reference to, the Merger Agreement (the "COMPANY DISCLOSURE
LETTER")). The Parent and the Company have agreed that the Surviving
Corporation and its subsidiaries will pay promptly or provide when due all
compensation and benefits required to be paid pursuant to the terms of any
individual agreement with any employee, former employee, director or former
director in effect as of the date thereof and disclosed in the Company
Disclosure Letter.
The Merger Agreement further provides that if employees of the Surviving
Corporation and its subsidiaries become eligible to participate in a medical,
dental or health plan of the Parent or its subsidiaries, the Parent shall
cause such plan to (i) waive any preexisting condition limitations for
conditions covered under the applicable medical, health or dental plans of the
Company and its subsidiaries and (ii) honor any deductible and out of pocket
expenses incurred by the employees and their beneficiaries under such plans
during the portion of the calendar year prior to such participation.
The Merger Agreement further provides that the Surviving Corporation will
perform all of the Company's obligations under and pursuant to the Company's
collective bargaining agreement with union employees. The Surviving
Corporation will also pay management bonuses of up to an aggregate of $600,000
for the fiscal year 1998, in accordance with past practices, to the extent
that such bonuses have been accrued in the Company's unaudited interim
financial statements for the nine month period ended September 30, 1998.
Under the terms of the Merger Agreement, the Surviving Corporation is not
required to continue the employment of any person or, with respect to any
union obligations, to take any action or refrain from taking any action that
the Company and its subsidiaries, prior to the Effective Time, could have
taken or refrained from taking.
DISPOSITION OF LITIGATION. The Merger Agreement provides that the Company
agrees that it will not settle any litigation currently pending, or commenced
after the date thereof, against the Company or any of its directors by any
stockholder of the Company relating to the Offer or the Merger Agreement,
without the prior written consent of the Parent (which will not be
unreasonably withheld). The Merger Agreement further provides that
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the Company will not voluntarily cooperate with any third party which has
sought or may hereafter seek to restrain or prohibit or otherwise oppose the
Offer or the Merger and cooperate with the Parent and the Purchaser to resist
any such effort to restrain or prohibit or otherwise oppose the Offer or the
Merger.
ADVISE OF CHANGES. The Merger Agreement provides that the Company must
promptly advise the Parent, and the Parent must promptly advise the Company,
of the occurrence or non-occurrence of (i) any event the occurrence or non-
occurrence of which would be likely to cause any representation or warranty
contained in the Merger Agreement to be untrue or inaccurate in any material
respect and (ii) any failure of the Company, the Parent or the Purchaser, as
the case may be, to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
the Merger Agreement.
NOMINATION OF TIMOTHY R. DUKE. Upon acceptance and payment for the Shares in
the Offer, the Parent, acting through its Board of Directors, will cause its
Board of Directors to be expanded and shall appoint Mr. Duke to fill the
vacancy created by such expansion. Thereafter, the Parent shall cause Mr. Duke
to be nominated for such position at the next annual meeting of stockholders
of the Parent.
OPERATION OF THE PARENT'S BUSINESS. Under the Merger Agreement, the Parent
has agreed that until the Effective Time, unless the Company otherwise agrees
in writing, it will operate its business, and cause each of its subsidiaries
and affiliates, including the Purchaser, to operate their respective
businesses, in a manner so as not to materially impact its ability to borrow
the monies contemplated to be loaned to it or them. By way of example, and not
of limitation, the Parent has agreed therein that neither it, nor any of its
subsidiaries or affiliates (including the Purchaser) will (i) enter into any
financing transaction (other than the sale of common equity for cash
consideration resulting in gross proceeds per share equal to the fair market
value of such common equity) or any merger, consolidation, or purchase or sale
of a substantial portion of the equity or assets, with or of any other person
or entity, or (ii) enter into any recapitalization, reorganization,
liquidation or dissolution, to the extent that any such action under clauses
(i) or (ii) above would materially and adversely impact the Parent's ability
to borrow funds pursuant to the Commitment Letter. From and after the date
hereof and continuing until completion of the Merger, or the earlier
termination of the Merger Agreement in accordance with its terms, the Parent
and the Purchaser have agreed to use the funds currently available under the
Revolving Credit Facility, solely to fund the purchase of Shares pursuant to
the Offer and the payment of the Merger Consideration. In the Merger
Agreement, the Parent and the Purchaser jointly and severally represented and
warranted to the Company that, as of November 10, 1998, (x) at least
$30,000,000 was available under the Revolving Credit Facility and (y) the
Parent had unrestricted cash on its balance sheet of at least $20,000,000,
which $20,000,000 was agreed to only be used to fund the purchase of Shares
pursuant to the Offer and the payment of the Merger Consideration.
REPRESENTATION AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations and warranties by the Company concerning the Company's
capitalization, required filings and consents, the Board of Directors'
approval of the Merger Agreement and the transactions contemplated thereby
(including approvals so as to render inapplicable thereto the limitation on
business combinations contained in Section 203 of the DGCL), Commission
filings and financial statements, absence of certain changes or events,
compliance with law, absence of litigation, employee benefit plans,
environmental matters, tax matters, real estate matters, contracts and the
engagement of brokers in the Offer, intellectual property, contracts,
potential conflicts of interest and Year 2000 compliance. Some of the
representations are qualified to cover only those matters that would have a
Material Adverse Effect on the Company or its subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means any change or effect that would be materially
adverse to the results of operations, financial condition or business of the
Company and its subsidiaries taken as a whole.
CONDITIONS OF THE MERGER. Under the Merger Agreement, the respective
obligations of the Parent, the Purchaser and the Company to effect the Merger
are subject to the satisfaction at or prior to the Effective Time of the
following conditions: (i) if required by the DGCL, the Merger Agreement has
been approved by the affirmative vote of the stockholders of the Company by
the requisite vote in accordance with the Company's
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Certificate of Incorporation, as amended, and the DGCL (which requisite vote
the Company has represented to be solely the affirmative vote of a majority of
the outstanding Shares); (ii) no statute, rule, regulation, executive order,
decree, ruling, injunction or other order (whether temporary, preliminary or
permanent) has been enacted, entered, promulgated or enforced by any United
States, foreign, federal or state court or governmental authority that
prohibits, restrains, enjoins or restricts the consummation of the Merger;
provided, however, that each of the parties has used reasonable best efforts
to prevent entry of any such restraints and to appeal promptly any such
restraints that may be entered; (iii) the Purchaser has purchased Shares
pursuant to the Offer; and (iv) any waiting period applicable to the Merger
under the HSR Act has been terminated or expired.
TERMINATION EVENTS. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time (notwithstanding approval
thereof by the stockholders of the Company):
(a) by mutual written consent of the Parent, the Purchaser and the
Company;
(b) by the Purchaser, the Parent or the Company if, by the Outside Date,
any of the Offer Conditions has not been satisfied or (except with respect
to the Minimum Condition) has not been waived by the Purchaser;
(c) by the Company prior to the purchase of Shares pursuant to the Offer,
if (i) there has been a material breach of any representation, warranty,
covenant or agreement on the part of the Parent or the Purchaser contained
in the Merger Agreement that materially adversely affects the Parent's or
the Purchaser's ability to consummate (or materially delays commencement or
consummation of) the Offer and that has not been cured prior to the earlier
of (A) 10 business days following notice of such breach by the Company to
the Parent and the Purchaser and (B) two business days prior to the
Expiration Date or (ii) the Purchaser has (x) terminated the Offer or (y)
failed to pay for Shares pursuant to the Offer;
(d) by the Company if, prior to the purchase of Shares pursuant to the
Offer, any person has made a bona fide offer to acquire the Company (i)
that the Board of Directors of the Company determines in its good faith
judgment is more favorable to the Company's stockholders than the Offer and
the Merger and (ii) as a result of which the Board of Directors determines
in good faith, based upon the advice of outside counsel, that the failure
to terminate the Merger Agreement is reasonably likely to constitute a
breach of the Board's fiduciary obligations under applicable law, provided
that termination under this paragraph would not be effective until the
Company made payment of the Termination Fee (as defined below);
(e) by the Parent prior to the purchase of Shares pursuant to the Offer,
if (1) there has been a breach of any representation, warranty, covenant or
agreement on the part of the Company contained in the Merger Agreement that
is likely to have a Material Adverse Effect and that has not been cured
prior to the earlier of (A) 10 business days following notice of such
breach and (B) two business days prior to the date on which the Offer
expires; (2) the Board of Directors of the Company has (x) modified
(including by amendment of the Schedule 14D-9) in a manner adverse to the
Purchaser or withdrawn its approval or recommendation of the Offer, the
Merger Agreement or the Merger, (y) approved or recommended another offer
or transaction pursuant to, or otherwise knowingly and intentionally
breached in a material manner the provisions of, Section 6.5 of the Merger
Agreement (which relates to the solicitation of other offers), or (z)
amended the Rights Agreement to facilitate an offer by any other person to
acquire the Company, or has resolved to effect any of the foregoing; (3)
there has been, solely as a result of the operation of the Rights
Agreement, a material breach of any representation, warranty, covenant or
agreement contained in Section 3.3 or 3.4 of the Merger Agreement, which
material breach has not been cured by the earlier of (X) the Outside Date
or (Y) 20 days after receipt by the Company of notice of such breach from
the Parent or the Purchaser; or (4) there has been a material breach of any
representation, warranty, covenant or agreement contained in Section 3.5(c)
or 5.2 of the Merger Agreement (each of which sections relate to the Rights
Agreement); or
(f) by the Parent or the Company, upon the entry or issuance of any
order, preliminary or permanent injunction, decree, judgment or ruling in
any action or proceeding before any court or governmental, administrative
or regulatory authority or agency, or any statute, rule or regulation
enacted, entered, enforced, promulgated, amended or issued that is
applicable to the Parent, the Purchaser, the Company or any subsidiary or
affiliate of the Purchaser or the Company or the Offer or the Merger, by
any legislative body,
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court, government or governmental, administrative or regulatory authority
or agency that is likely to have the effect of (i) making illegal or
otherwise directly or indirectly restraining or prohibiting the making of
the Offer in accordance with the terms of the Merger Agreement, the
acceptance for payment of, or payment for, some of or all the Shares by the
Purchaser or any of its affiliates or the consummation of the Merger; (ii)
prohibiting the ownership or operation of the Company and its subsidiaries
by the Parent or any of the Parent's subsidiaries; (iii) imposing material
limitations on the ability of the Parent, the Purchaser or any of the
Parent's affiliates effectively to acquire or hold or to exercise in all
material respects full rights of ownership of the Shares, including without
limitation the right to vote any Shares acquired or owned by the Parent or
the Purchaser or any of its affiliates on all matters properly presented to
the stockholders of the Company, including, without limitation, the
adoption of the Merger Agreement or the right to vote any shares of capital
stock of any subsidiary directly or indirectly owned by the Company; or
(iv) requiring divestiture by the Parent or the Purchaser or any of their
affiliates of any Shares.
EFFECT OF TERMINATION. In the event of the termination of the Merger
Agreement pursuant to the foregoing, the Merger Agreement will then become
void and there will be no liability on the part of any party thereto except as
to certain provisions thereof; provided, however, that the payment of the
Termination Fee pursuant to certain provisions thereof would be considered
with respect to the calculation of any damages resulting from any such willful
breach by the Company. This, however, will not relieve any party from
liability for fraud or breach of any covenant, agreement or any other term in
the Merger Agreement. If the Merger Agreement is terminated by the Company and
a Termination Fee is paid pursuant to Sections 8.3(a)(i)(B) or 8.3(a)(ii) of
the Merger Agreement, the Termination Fee will be deemed to be liquidated
damages rather than a penalty, and will constitute the total damages and sole
remedy of the Parent and the Purchaser upon any such termination.
TERMINATION FEE AND EXPENSES. If (i) the Company terminates the Merger
Agreement (A) pursuant to paragraph (d) under the heading "Termination" above
or (B) in a manner or for a reason not expressly permitted thereby or (ii) the
Parent terminates the Merger Agreement pursuant to paragraphs (e)(2), (e)(3)
or (e)(4) under the heading "Termination" above, then the Company will pay to
the Parent, within three business days following termination a fee, in cash,
of $5,000,000 (the "TERMINATION FEE"). If, from and after July 20, 1998, and
prior to the purchase of Shares pursuant to the Offer, (i) any other person
has made a bona-fide offer to acquire at least 50% of the Shares or
substantially all of the assets of the Company, or otherwise to acquire the
Company (the "THIRD-PARTY OFFER"), at a price per Share (or the equivalent
price per Share, in the case of an asset purchase) (x) that is higher on its
face than the price per Share to be paid in the Offer or (y) that the Company
determines, based upon the advice of Janney, is higher than the price per
Share to be paid in the Offer, (ii) the Offer remains outstanding until the
Outside Date but is not consummated solely as a result of the failure of the
Minimum Condition and (iii) the Third-Party Offer is consummated within 180
days of the termination of the Merger Agreement, then the Company must pay to
the Parent, within three business days following the consummation of the Third
Party Offer, the Termination Fee. The Company in no event will be obligated to
pay more than one such fee with respect to all such agreements and
occurrences. Each party will bear its own expenses in connection with the
Merger Agreement and the transactions contemplated thereby.
STOCK OPTION AGREEMENT. Pursuant to the Stock Option Agreement, the
Purchaser has the irrevocable right (i.e., the Stock Option), under certain
circumstances, to acquire the Option Shares at a price of $10.375 per Share
(the "EXERCISE PRICE"). The Exercise Price is payable in cash. The Stock
Option Agreement could have the effect of making an acquisition of the Company
by a third party more costly because of the need to acquire in any such
transaction the Option Shares issued under the Stock Option Agreement.
The Stock Option may be exercised by the Purchaser, in whole or in part, at
any time or from time to time, for 180 days following the termination of the
Merger Agreement, upon the occurrence of a Triggering Event. Under the Stock
Option Agreement, the term "TRIGGERING EVENT" means any occurrence of (A) the
termination of the Merger Agreement under circumstances causing a Termination
Fee; (B)(i) a Third-Party Offer with a price per Share (or the equivalent
price per Share, in the case of an asset purchase) (x) that is higher on its
face than the price per Share to be paid in the Offer or (y) that the Company
determines, based upon the advice of Janney,
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is higher than the price per Share to be paid in the Offer and (ii) the Offer
remaining outstanding until the Outside Date but not being consummated solely
as a result of the failure of the Minimum Condition and (iii) the Third-Party
Offer being consummated within 180 days of the termination of the Merger
Agreement; or (C) the purchase by the Purchaser of Shares pursuant to the
Offer following satisfaction of the Minimum Condition. As a condition to the
exercise of the Stock Option, the Company must promptly notify the Purchaser
and the Parent in writing of the occurrence of any Triggering Event. The
Company's obligation to issue Option Shares upon exercise of the Stock Option
is subject to the conditions that (a) all waiting periods under the HSR Act
required for the purchase of the Option Shares upon such exercise have expired
or been waived and (b) there has not been in effect any preliminary injunction
or other order issued prohibiting the exercise of the Stock Option pursuant to
the Stock Option Agreement.
If, at any time during the period after the occurrence of a Triggering Event
and before termination of the Stock Option, any third party (a) acquires
beneficial ownership of more than 50% of the then outstanding Shares or (b)
enters into an agreement with the Company to acquire the Company, by merger,
consolidation or the purchase of all or substantially all of its assets or
other similar business combination, reorganization or recapitalization, then
the Purchaser may, in lieu of exercising the Stock Option, surrender the Stock
Option to the Company. Upon surrender of the Stock Option to the Company, the
Company will pay to the Purchaser upon the Purchaser's written demand, an
amount in cash for each of the Option Shares equal to the excess of (a) the
highest price per Share paid or to be paid by such third party pursuant to
such transaction (or such consideration paid to the Company, in the case of an
asset acquisition or similar transaction, divided by the number of Shares
outstanding on a fully-diluted basis (after taking into consideration the
exercise of all outstanding options, warrants, rights (other than the rights
issued pursuant to that Rights Agreement), convertible securities or
exchangeable securities issued by the Company), excluding Shares issuable
pursuant to the Stock Option Agreement) over (b) the Exercise Price.
In the event any additional Shares (other than the Option Shares) are either
(i) issued and become outstanding, or (ii) redeemed, repurchased, retired or
otherwise cease to be outstanding, the number of Option Shares will be
increased or decreased, as appropriate, so that, after such issuance, the
Option Shares represent 19.9% of the number of Shares then issued and
outstanding (not counting the Option Shares).
The Stock Option Agreement further provides that at any time and from time
to time after exercise of the Stock Option, if the Shares or any other
securities to be acquired upon exercise of the Stock Option are then listed on
the Nasdaq National Market (or any other national securities quotation system
or national securities exchange), then upon the request of the Purchaser, the
Company will promptly file an application to list the Shares or other
securities to be acquired upon exercise of the Stock Option on the Nasdaq
National Market (or any other national securities quotation system or national
securities exchange) and will use commercially reasonable efforts to obtain
approval of such listing as promptly as practicable. The Purchaser has agreed
to pay all fees and expenses in connection with such listing.
STOCK TENDER AND VOTING AGREEMENTS. Each of the Company's directors has
contractually agreed in a Stock Tender and Voting Agreement to tender his
Shares in the Offer and vote his Shares in favor of the Merger and against any
action or agreement that would impede the Merger or the Offer.
THE RIGHTS. On March 19, 1997, pursuant to the Rights Agreement, the Board
of Directors of the Company declared a distribution of (i) one Right for each
outstanding Share to stockholders of record at the close of business on March
28, 1997, and (ii) for each Share issued (including Shares distributed from
treasury) by the Company thereafter and prior to the Distribution Date (as
defined below). Each Right entitles the registered holder, subject to the
terms of the Rights Agreement to purchase from the Company one-half of a share
of Company Common Stock at a purchase price of $26.00 per Share, equivalent to
$13.00 for each one-half of a Share (the "PURCHASE PRICE"), subject to
adjustment. On November 2, 1998, a majority of the Independent Directors (as
defined in the Rights Agreement) voted to amend the terms of the Rights to
permit the Offer and the Merger and to provide for the termination of the
Rights upon acceptance for payment of Shares validly tendered and not
withdrawn in the Offer. A copy of the Rights Agreement, as amended, is
available free of charge from the Company.
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Stockholders are required to tender one Right for each Share tendered in
order to effect a valid tender of such Share. If the Distribution Date does
not occur prior to the Expiration Date, a tender of Shares will automatically
constitute a tender of the associated Rights. See Section 1.
SEVERANCE ARRANGEMENTS. The Company entered into Change of Control Severance
Agreements with Timothy R. Duke and Mark G. Meikle, dated July 9, 1997, and
July 7, 1997, respectively, that provide that, upon a "change of control," Mr.
Duke or Mr. Meikle will be entitled to receive an amount equal to the greater
of (i) 125% of his annual base salary for the year in which such severance of
employment occurs and (ii) 125% of his annual base salary for the year
preceding the year in which such severance of employment occurs, payable at
Mr. Duke's or Mr. Meikle's option in a lump sum or bi-monthly during the 12
months following such severance. The purchase of the Shares in the Offer and
consummation of the Merger will be deemed a change of control under these
agreements, requiring the payments set forth in the agreements to be paid by
the Surviving Corporation.
TIMOTHY R. DUKE EMPLOYMENT AGREEMENT. Timothy R. Duke, Chief Executive
Officer and President of the Company, and the Company have entered into an
Employment Agreement, dated November 10, 1998 (the "EMPLOYMENT AGREEMENT"),
which is filed with the Commission as an exhibit to the Tender Offer
Statement. The Employment Agreement becomes effective upon the acceptance and
payment for the Shares in the Offer and continuing for three years thereafter
(except that, if the Effective Time does not occur within 120 days of the
Outside Date, the Company or the Parent may declare the Employment Agreement
null and void). The Employment Agreement provides that, among other things,
Mr. Duke will be employed as the President and Chief Executive Officer of the
Company, will be appointed to the Board of Directors of the Parent and
thereafter nominated for such position at the next annual meeting of
stockholders of the Parent, and will be nominated and elected as a director of
the Company for such terms as he will serve as a director of the Parent. Mr.
Duke's annual base salary will remain at $225,000, and he will be entitled to
any incentive compensation that would be paid pursuant to an incentive formula
contained therein or, after September 30, 1999, that may be paid in the sole
discretion of the Board of the Company. Mr. Duke has agreed not to compete
with the Company during the term of the Employment Agreement. The Employment
Agreement terminates upon the death or disability of Mr. Duke or the
expiration of the term of such agreement. The Employment Agreement may also be
terminated by the Company with Cause (as defined therein), upon which in all
cases no further payments (other than accrued salary) will be payable to Mr.
Duke, or by Mr. Duke with Good Reason (as defined therein and which includes,
among other things, demotion, relocation and change of control (other than a
management buy-out)), in which case Mr. Duke will be paid his base salary for
the remainder of the term of the Employment Agreement. The Parent has
guaranteed the performance of the covenants and agreements in the Employment
Agreement made by the Company.
12. PURPOSE OF THE OFFER; THE MERGER; PLANS FOR THE COMPANY. The purpose of
the Offer is to acquire control of, and the entire equity interest in, the
Company. The Offer is being made pursuant to the Merger Agreement. As promptly
as practicable following consummation of the Offer and after satisfaction or
waiver of all conditions to the Merger set forth in the Merger Agreement, the
Purchaser intends to acquire the remaining equity interest in the Company not
acquired in the Offer by consummating the Merger.
REQUIREMENT OF VOTE TO APPROVE THE MERGER. The Board of Directors of the
Company has approved and adopted the Merger Agreement and the transactions
contemplate therein, so as to render inapplicable the limitation on business
combination contained in Section 203 of the DGCL. If required by the DGCL, the
Board will submit the Merger Agreement for approval at a stockholders' meeting
convened for that purpose, where the Merger Agreement would generally need to
be approved by the vote of the holders of a majority of the outstanding
Shares. The Minimum Condition requires that Shares representing more than 50%
of the voting power (determined on a fully-diluted basis) of all securities of
the Company entitled to vote generally in the election of directors or in a
merger be validly tendered and not properly withdrawn prior to the expiration
of the Offer. Therefore, if the Minimum Condition is satisfied, the Purchaser
will have the power to approve the Merger Agreement without the affirmative
vote of any stockholder.
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If the Purchaser acquires or controls the voting power of at least 90% of
the outstanding Shares, however, the Merger may not require the vote of
stockholders, and the Purchaser and the Company may effect a Short-Form
Merger. Pursuant to the Merger Agreement, the Company has agreed, if and to
the extent permitted by law, at the request of the Purchaser, to take all
necessary and appropriate actions to cause the Merger to become effective as
soon as reasonably practicable after the purchase of the Shares pursuant to
the Offer without a meeting of the Company's stockholders in accordance with
the DGCL.
THIS OFFER TO PURCHASE DOES NOT CONSTITUTE A SOLICITATION OF A PROXY,
CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO THE ANNUAL MEETING OR ANY
SPECIAL MEETING OF THE COMPANY'S STOCKHOLDERS OR ANY ACTION IN LIEU THEREOF.
ANY SUCH SOLICITATION THAT THE PURCHASER MAY MAKE WILL BE MADE ONLY PURSUANT
TO SEPARATE PROXY MATERIALS IN COMPLIANCE WITH THE REQUIREMENTS OF SECTION
14(A) OF THE EXCHANGE ACT.
APPRAISAL RIGHTS IN CONNECTION WITH THE OFFER. Stockholders do not have
appraisal rights as a result of the Offer. If the Merger is consummated,
however, stockholders of the Company at the time of the Merger who do not vote
in favor of the Merger, including any stockholders at the time of a Short-Form
Merger, will have the right under the DGCL to dissent and demand appraisal of,
and receive payment in cash of the fair value of, their Shares outstanding
immediately prior to the Effective Date in accordance with Section 262 of the
DGCL.
Under the DGCL, 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 such merger or similar business
combination) and to receive payment of such fair value in cash. Any such
judicial determination of the fair value of such Shares could be based upon
considerations other than or in addition to the price paid in the Offer and
the Merger and the market value of the Shares. In WEINBERGER V. UOP, INC., the
Delaware Supreme Court stated, among other things, that "proof of value by any
techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered in
an appraisal proceeding. Stockholders should recognize that the value so
determined could be higher or lower than the price per Share paid pursuant to
the Offer or the consideration per Share to be paid in the Merger or other
similar business combination.
In addition, several decisions by Delaware courts have held that in certain
circumstances a controlling stockholder of a corporation involved in a merger
has a fiduciary duty to other stockholders that requires that the merger be
fair to other stockholders. In determining whether a merger is fair to
minority stockholders, Delaware courts have considered, among other things,
the type and amount of the consideration to be received by the stockholders
and whether there was fair dealing among the parties. The Delaware Supreme
Court stated in WEINBERGER AND RABKIN V. PHILIP A. HUNT CHEMICAL CORP. that
the remedy ordinarily available to minority stockholders in a cash-out merger
is the right to appraisal described above. A damages remedy or injunctive
relief may be available if a merger is found to be the product of procedural
unfairness, including fraud, misrepresentation or other misconduct.
THE FOREGOING SUMMARY OF THE RIGHTS OF OBJECTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS. THE
PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE TO THE
APPLICABLE PROVISIONS OF THE DGCL. THE FOREGOING DESCRIPTION OF THE DGCL IS
NOT NECESSARILY COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DGCL.
RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act
that is applicable to certain "going private" transactions and that may under
certain circumstances be applicable to the Merger following the purchase of
Shares pursuant to the Offer in which the Purchaser seeks to acquire any
remaining Shares. Rule 13e-3 should not be applicable to the Merger if the
Merger is consummated within one year after the expiration or termination of
the Offer and the price paid in the Merger is not less than the price per
Share paid pursuant to the Offer. However, in the event that the Purchaser is
deemed to have acquired control of the Company pursuant to the Offer and if
the Merger is consummated more than one year after completion of the Offer or
an alternative acquisition transaction is effected whereby stockholders of the
Company receive consideration less than that paid
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pursuant to the Offer, in either case at a time when the Shares are still
registered under the Exchange Act, the Purchaser may be required to comply
with Rule 13e-3 under the Exchange Act. If applicable, Rule 13e-3 would
require, among other things, that certain financial information concerning the
Company and certain information relating to the fairness of the Merger or such
alternative transaction and the consideration offered to minority stockholders
in the Merger or such alternative transaction, be filed with the Commission
and disclosed to stockholders prior to consummation of the Merger or such
alternative transaction. The purchase of a substantial number of Shares
pursuant to the Offer may result in the Company being able to terminate its
Exchange Act registration. See Section 14. If such registration were
terminated, Rule 13e-3 would be inapplicable to any such future Merger or such
alternative transaction.
PLANS FOR THE COMPANY. It is expected that, initially following the Merger,
the business and operations of the Company and its subsidiaries will continue
without substantial change. The Parent intends to conduct a detailed review of
the Company and its subsidiaries and their assets, corporate structure,
dividend policy, capitalization, operations, properties, policies, management
and personnel and to consider, subject to the terms of the Merger Agreement,
what, if any, changes would be desirable in light of the circumstances then
existing. The Parent reserves the right to take such actions and make such
changes as it deems desirable. Such changes could include changes in the
Company's business, corporate structure, capitalization, management or
dividend policy.
Except as otherwise described in this Offer to Purchase, the Purchaser and
the Parent have no current, definite plans or proposals that would relate to,
or result in, any extraordinary corporate transaction involving the Company,
such as a merger, reorganization or liquidation involving the Company or any
of its subsidiaries, a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries, any change in the Company's capitalization
or dividend policy (except that, after consummation of the Merger, the Parent
may cause a change in the Company's dividend policy to reflect the fact that
it would be a wholly owned subsidiary of the Parent) or any other material
change in the Company's business, corporate structure present Board of
directors or management or personnel.
The Merger Agreement provides that, commencing upon the purchase of the
tendered Shares pursuant to the Offer, and from time to time thereafter, the
Parent will be entitled to designate directors to serve on the Board of
Directors of the Company as described above under "The Merger Agreement and
Other Agreements; the Rights; Employee Arrangements--Designation of
Directors." The Merger Agreement also provides that the directors of the
Purchaser, at the effective time of the Merger, will be the initial directors
of the Company after the Merger. For the potential effects of the Offer and
the Merger on the listing of the Shares on Nasdaq and their registration under
the Exchange Act, see Section 14.
13. DIVIDENDS AND DISTRIBUTIONS. If the Company should, on or after the date
of the Merger Agreement, (i) split, combine or otherwise change the Shares or
its capitalization, or disclose that it has taken any such action, (ii) issue
or sell any additional securities of the Company or otherwise cause an
increase in the number of outstanding securities of the Company or (iii)
acquire currently outstanding Shares or otherwise cause a reduction in the
number of outstanding Shares, then without prejudice to the Purchaser's rights
as set forth herein, the Purchaser may make such adjustments to the purchase
price and other terms of the Offer as it deems appropriate to reflect such
split, combination or other change.
If, on or after the date of the Merger Agreement, the Company should declare
or pay any cash or stock dividend or other distribution on, or issue any
rights with respect to, the Shares that is payable or distributable to
stockholders of record on a date prior to the transfer to the name of the
Purchaser or the nominee or transferee of the Purchaser on the Company's stock
transfer records of such Shares that are purchased pursuant to the Offer, then
without prejudice to the Purchaser's rights as set forth herein, (i) the
purchase price payable per Share by the Purchaser pursuant to the Offer will
be reduced to the extent any such dividend or distribution is payable in cash
and (ii) any non-cash dividend, distribution (including additional Shares) or
right received and held by a
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tendering stockholder will be required to be promptly remitted and transferred
by the tendering stockholder to the Depositary for the account of the
Purchaser, accompanied by appropriate documentation of transfer. Pending such
remittance or appropriate assurance thereof, the Purchaser will, subject to
applicable law, be entitled to all rights and privileges as owner of any such
non-cash dividend, distribution or right 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.
14. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; NASDAQ NATIONAL MARKET
LISTING; MARGIN REGULATIONS; EXCHANGE ACT REGISTRATION. The purchase of Shares
pursuant to the Offer will reduce the number of Shares that might otherwise
trade publicly and could reduce the number of holders of Shares, which could
adversely affect the liquidity and market value of the remaining Shares by the
public. Following completion of the Offer, at least a majority of the
outstanding Shares will be owned by the Purchaser.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the standards of the National Association of
Securities Dealers, Inc. ("NASD"), for continued inclusion in the Nasdaq
National Market (the top tier market). If, as a result of the purchase of
Shares pursuant to the Offer, the Shares no longer meet the criteria for
quotation on the Nasdaq National Market, the market for the Shares could be
adversely affected. According to the Nasdaq National Market's published
guidelines, in order for the Shares to be eligible for continued quotation on
the Nasdaq National Market, there must continue to be, among other things,
either (i) at least 750,000 publicly held Shares, held by at least 400 round
lot shareholders, with a market value of at least $5,000,000, net tangible
assets of at least $4,000,000 and at least two registered and active market
makers for the Shares, or (ii) at least 1,100,000 publicly held Shares, held
by at least 400 round lot shareholders, with a market value of at least
$15,000,000, either (x) market capitalization of at least $50,000,000 or (y)
total assets and total revenue of $50,000,000 each for the most recently
completed fiscal year or two of the last three most recently completed fiscal
years, and at least four registered and active market makers for the Shares.
Shares held directly or indirectly by directors, officers or beneficial owners
of more than 10% of the Shares are not considered as being publicly held for
this purpose. If the Shares were no longer eligible for quotation on the
Nasdaq National Market, they may nevertheless continue to be included in The
Nasdaq SmallCap Market unless, among other things, the number of publicly held
Shares (excluding Shares held by officers, directors and beneficial owners of
more than 10% of the Shares) was less than 100,000, or there were fewer than
300 round lot holders in total. If the Shares are no longer eligible for
inclusion in the Nasdaq National Market or The Nasdaq SmallCap Market, the
Shares might still be quoted on the OTC Bulletin Board. The extent of the
public market for the Shares and availability of such quotations would,
however, depend upon such factors as the number of holders and/or the
aggregate market value of the publicly-held Shares at such time, the interest
in maintaining a market in the Shares on the part of securities firms, the
possible termination of registration of the Shares under the Exchange Act and
other factors. According to the Company, there were 183 holders of record of
Shares as of November 16, 1998, and 6,010,795 Shares were outstanding. If, as
a result of the purchase of Shares pursuant to the Offer or otherwise, the
Shares no longer meet NASD requirements for continued inclusion in the Nasdaq
National Market or in any other tier of The Nasdaq Stock Market, the market
for such Shares could be adversely affected.
The Shares are currently "margin securities" under the rules of the Board of
Governors of the Federal Reserve System (the "FEDERAL RESERVE BOARD"), which
has the effect, among other things, of allowing brokers to extend credit on
the collateral of such Shares for the purpose of buying, carrying, or trading
in securities ("purpose loans"). Depending upon factors similar to those
described above with respect to listing and market quotations, it is possible
that, following the Offer, the Shares might no longer constitute "margin
securities" for the purposes of the Federal Reserve Board's margin regulations
and therefore could no longer be used as collateral for purpose loans made by
brokers.
The Shares are currently registered under the Exchange Act. The purchase of
Shares pursuant to the Offer may result in the Shares becoming eligible for
deregistration 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
record holders. The termination of the registration of the Shares
30
<PAGE>
under the Exchange Act would substantially reduce the information required to
be furnished by the Company to holders of the Shares and would make certain
provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b), the requirement of furnishing a proxy statement
in connection with stockholders' meetings and the requirements of Rule 13e-3
under the Exchange Act with respect to "going private" transactions, no longer
applicable to the Shares. Furthermore, "affiliates" of the Company and persons
holding "restricted securities" of the Company may be deprived of the ability
to dispose of the securities pursuant to Rule 144 under the Securities Act of
1933.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be "margin securities" or eligible for quotation on the
Nasdaq National Market. The Purchaser intends to seek to cause the Company to
terminate the registration of the Shares as soon after the consummation of the
Offer or the Merger as the requirements for termination of registration are
met.
15. OFFER CONDITIONS. Notwithstanding any other provision of the Offer, the
Purchaser will not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to the Purchaser's obligation to pay for or
return tendered Shares promptly after termination or withdrawal of the Offer),
pay for any Shares tendered pursuant to the Offer, and may postpone the
acceptance for payment or payment for any Shares tendered pursuant to the
Offer, and may terminate the Offer (whether or not the Purchaser has purchased
or paid for any Shares) to the extent permitted by the Merger Agreement unless
the following conditions (the "OFFER CONDITIONS") have been satisfied:
(a) at the expiration of the Offer, a number of Shares that constitutes
more than 50% of the voting power (determined on a fully-diluted basis) on
the date of purchase of all the securities of the Company entitled to vote
generally in the election of directors or in a merger has been validly
tendered in the Offer and not properly withdrawn prior to the expiration of
the Offer (i.e., the Minimum Condition);
(b) all of the representations and warranties of the Company set forth in
the Merger Agreement that are qualified by reference to a Material Adverse
Effect are true and correct, and any such representations and warranties
that are not so qualified are true and correct in all respects except in
any respect that is not likely to have a Material Adverse Effect, in each
case as if such representations and warranties were made at the time of
such determination; or
(c) at any time on or after the date of the Merger Agreement, none of the
following events has occurred:
(1) the entry or issuance of any order, preliminary or permanent
injunction, decree, judgment or ruling in any action or proceeding
before any court or governmental, administrative or regulatory
authority or agency, or any statute, rule or regulation enacted,
entered, enforced, promulgated, amended or issued that is applicable to
the Parent, the Purchaser, the Company or any subsidiary or affiliate
of the Purchaser or the Company or the Offer or the Merger, by any
legislative body, court, government or governmental, administrative or
regulatory authority or agency that is likely to have the effect of:
(i) making illegal or otherwise directly or indirectly restraining or
prohibiting the making of the Offer in accordance with the terms of the
Merger Agreement, the acceptance for payment of, or payment for, some
of or all the Shares by the Purchaser or any of its affiliates or the
consummation of the Merger; (ii) prohibiting the ownership or operation
of the Company and its subsidiaries by the Parent or any of the
Parent's subsidiaries; (iii) imposing material limitations on the
ability of the Parent, the Purchaser or any of the Parent's affiliates
effectively to acquire or hold or to exercise in all material respects
full rights of ownership of the Shares, including without limitation
the right to vote any Shares acquired or owned by the Parent or the
Purchaser or any of its affiliates on all matters properly presented to
the stockholders of the Company, including, without limitation, the
adoption of the Merger Agreement or the right to vote any shares of
capital stock of any subsidiary directly or indirectly owned by the
Company; or (iv) requiring divestiture by the Parent or the Purchaser
or any of their affiliates of any Shares;
(2) (i) any general suspension of trading in, or limitation on prices
(other than suspensions or limitations triggered on Nasdaq National
Market by price fluctuations on a trading day) for, securities
31
<PAGE>
on any national securities exchange, (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the
United States, (iii) a commencement of a war or material armed
hostilities or other material national calamity directly involving the
entire United States or materially adversely affecting the consummation
of the Offer or (v) in the case of any of the foregoing existing at the
time of commencement of the Offer, a material acceleration or worsening
thereof;
(3) (i) the Board of Directors of the Company or any committee
thereof has withdrawn or modified in a manner adverse to the Parent or
the Purchaser the approval or recommendation of the Offer, the Merger
or the Merger Agreement, or approved or recommended any takeover
proposal or any other acquisition of Shares other than the Offer, (ii)
any such person or group has entered into a definitive agreement or an
agreement in principle with the Company with respect to a tender offer
or exchange offer for any Shares or a merger, consolidation or other
business combination with or involving the Company or any of its
subsidiaries, or (iii) the Board of Directors of the Company or any
committee thereof has resolved to do any of the foregoing;
(4) the Company fails to perform in any material respect any material
obligation or to comply in any material respect with any material
agreement or material covenant of the Company to be performed or
complied with by it under the Merger Agreement;
(5) the Merger Agreement has been terminated in accordance with its
terms or the Offer has been terminated with the consent of the Company;
or
(6) any waiting periods under the HSR Act applicable to the purchase
of Shares pursuant to the Offer or the Merger have not expired or been
terminated;
and, upon the failure of any of the conditions set forth in paragraphs (b) or
(c) above, the Purchaser determines, in its reasonable judgment, that it is
inadvisable for the Purchaser to proceed with the Offer or with the acceptance
for payment of or payment for Shares.
The Offer Conditions (other than the Minimum Condition) are for the sole
benefit of the Purchaser and may be waived by the Purchaser in whole or in
part at any time and from time to time in its sole discretion.
16. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS. GENERAL. Except as set
forth below, based upon its examination of publicly available filings by the
Company with the Commission and other publicly available information
concerning the Company, neither the Purchaser nor the Parent is aware of any
licenses or other regulatory permits that appear to be material to the
business of the Company and its subsidiaries, taken as a whole, that might be
adversely affected by the Purchaser's acquisition of Shares (and the indirect
acquisition of the stock of the Company's subsidiaries) as contemplated
herein, or of any filings, approvals or other actions by or with any domestic
(U.S. federal or state), foreign or supranational governmental authority or
administrative or regulatory agency that would be required prior to the
acquisition of Shares (or the indirect acquisition of the stock of the
Company's subsidiaries) by the Purchaser pursuant to the Offer as contemplated
herein. Should any such approval or other action be required, it is the
Purchaser's present intention to seek such approval or action. However, the
Purchaser does not presently intend to delay the purchase of Shares tendered
pursuant to the Offer pending the receipt of any such approval or the taking
of any such action (subject to the Purchaser's right to delay or decline to
purchase Shares if any of the conditions in Section 15 will have occurred).
There can be no assurance that any such approval or other action, if needed,
would be obtained without substantial conditions or that adverse consequences
might not result to the business of the Company, the Parent or the Purchaser
or that certain parts of the businesses of the Company, the Parent or the
Purchaser might not have to be disposed of or held separate or other
substantial conditions complied with in order to obtain such approval or other
action or in the event that such approval was not obtained or such other
action was not taken, any of which could cause the Purchaser to elect to
terminate the Offer without the purchase of the Shares hereunder. 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 16.
32
<PAGE>
STATE TAKEOVER LAWS. A number of states have adopted takeover laws and
regulations that purport to varying degrees to be applicable to attempts to
acquire securities of corporations that are incorporated in such states or
which have or whose business operations have substantial economic effects in
such states, or which have substantial assets, security holders, principal
executive offices or principal places of business therein. To the extent that
certain provisions of certain of these state takeover statutes purport to
apply to the Offer, the Purchaser believes that such laws conflict with U.S.
federal law and constitute an unconstitutional burden on interstate commerce.
In 1982, the Supreme Court of the United States, in EDGAR V. MITE CORP.,
invalidated on constitutional grounds the Illinois Business Takeovers Act,
which as a matter of state securities law made takeovers of corporations
meeting certain requirements more difficult, and the reasoning in such
decision is likely to apply to certain other state takeover statutes. In 1987,
however, in CTS CORP. V. DYNAMICS CORP. OF AMERICA, the Supreme Court of the
United States held that the State of Indiana could, as a matter of corporate
law and in particular those aspects of corporate law concerning corporate
governance, constitutionally disqualify a potential acquirer from voting on
the affairs of a target corporation without the prior approval of the
remaining stockholders, provided that such laws were applicable only under
certain conditions. Subsequently, in TLX ACQUISITION CORP. V. TELEX CORP., a
federal district court in Oklahoma ruled that the Oklahoma statutes were
unconstitutional insofar as they applied to corporations incorporated outside
Oklahoma in that they would subject such corporations to inconsistent
regulations. Similarly, in TYSON FOODS, INC. V. MCREYNOLDS, a federal district
court in Tennessee ruled that four Tennessee takeover statutes were
unconstitutional as applied to corporations incorporated outside Tennessee.
This decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December 1988, a federal district court in Florida held in GRAND
METROPOLITAN PLC V. BUTTERWORTH that the provisions of the Florida Affiliated
Transactions Act and the Florida Control Share Acquisition Act were
unconstitutional as applied to corporations incorporated outside of Florida.
Except as described herein, the Purchaser has not attempted to comply with
any state takeover statutes in connection with the Offer. The Purchaser
reserves the right to challenge the validity or applicability of any state law
allegedly applicable to the Offer and nothing in this Offer to Purchase nor
any action taken in connection herewith is intended as a waiver of that right.
In the event that any state takeover statute is found applicable to the Offer,
the Purchaser might be unable to accept for payment or purchase Shares
tendered pursuant to the Offer or be delayed in continuing or consummating the
Offer. In such case, the Purchaser may not be obligated to accept for purchase
or pay for, any Shares tendered. See Section 15.
ANTITRUST. Under the HSR Act, certain acquisition transactions may not be
consummated unless certain information has been furnished to the United States
Department of Justice's Antitrust Division ("ANTITRUST DIVISION") and the
Federal Trade Commission (the "FTC") and certain waiting period requirements
have been satisfied. The acquisition of Shares pursuant to the Offer and the
Merger is subject to such requirements. See Section 2.
The Parent has filed, on November 12, 1998, with the FTC and the Antitrust
Division, a Premerger Notification and Report Form in connection with the
purchase of Shares pursuant to the Offer. Under the provisions of the HSR Act,
the purchase of Shares pursuant to the Offer may not be consummated until the
expiration of a 15-calendar day waiting period following the filing by the
Parent. Accordingly, the waiting period under the HSR Act applicable to such
purchases of Shares pursuant to the Offer will expire at 11:59 p.m., EST, on
November 27, 1998, unless such waiting period is terminated early by the FTC
or the Antitrust Division or unless such waiting period is extended by a
request from the FTC or the Antitrust Division for additional information or
documentary material prior to the expiration of the waiting period.
The Merger would not require an additional filing under the HSR Act if the
Purchaser owns 50% or more of the outstanding Shares at the time of the
Merger.
If either the FTC or the Antitrust Division were to request additional
information or documentary material from the Parent, the waiting period would
expire at 11:59 p.m., EST, on the tenth calendar day after the date of
substantial compliance by the Parent with such request. Thereafter, the
waiting period may be extended only by court order or agreement of the
parties. If the acquisition of Shares is delayed pursuant to a request by the
FTC
33
<PAGE>
or the Antitrust Division for additional information or documentary material
pursuant to the HSR Act, the Offer may, but need not, be extended, and in any
event the purchase of and payment for Shares will be deferred until ten days
after the request is substantially complied with, unless the waiting period is
sooner terminated by the FTC and the Antitrust Division. See Section 2. Any
such extension of the waiting period will not give rise to any withdrawal
rights not otherwise provided for by applicable law. See Section 4.
Under the HSR Act, the FTC and the Antitrust Division frequently scrutinize
the legality under the antitrust laws of transactions such as the proposed
acquisition of Shares by the Purchaser pursuant to the Offer. At any time
before or after the purchase by the Purchaser of Shares pursuant to the Offer,
either the FTC or the Antitrust Division 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
seeking the divestiture of Shares purchased by the Purchaser or the
divestiture of substantial assets of the Parent, its subsidiaries or the
Company. Private parties and state attorneys general also may bring legal
action under U.S. federal or state antitrust laws under certain circumstances.
Based upon an examination of publicly available information relating to the
businesses in which the Parent and SWVA are engaged, the Parent and the
Purchaser believe that the acquisition of Shares by the Purchaser will not
violate the antitrust laws. Should the FTC or the Antitrust Division raise any
concerns, the Purchaser and the Parent are prepared, in order to expedite the
Offer and the Merger, to address those concerns promptly. Of course, there is
no guarantee that the Purchaser and the FTC or the Antitrust Division would
reach an agreement with respect to such concerns. See Section 15 for the Offer
Conditions, including conditions with respect to litigation and certain
government actions. The parties to the Merger Agreement will consult and
cooperate with one another, and consider in good faith the views of one
another, with respect to any actions taken in connection with proceedings
under or relating to the HSR Act or any other U.S. federal, state or foreign
antitrust or fair trade law.
17. FEES AND EXPENSES. Ewing Monroe is serving as financial advisor to the
Parent and the Purchaser in connection with the proposed acquisition of the
Company. The Parent agreed to pay Ewing $250,000 for the preparation of a
fairness opinion and a fee of $900,000 upon the successful closing of a
purchase of the Company or upon payment of the Termination Fee. The Parent has
also agreed to pay Ewing Monroe reasonable out-of-pocket expenses. The Parent
also agreed to indemnify Ewing Monroe against certain liabilities and expenses
in connection with the Offer.
The Purchaser has retained Georgeson & Company, Inc. to act as the
Information Agent and First Union National Bank to act as the Depositary in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, telephone, telex, telegraph and personal interview and may request
brokers, dealers and other nominee stockholders to forward the Offer materials
to beneficial owners. The Information Agent and the Depositary will receive
reasonable and customary compensation for services relating to the Offer and
will be reimbursed for certain out-of-pocket expenses. The Purchaser and the
Parent have also agreed to indemnify the Information Agent and the Depositary
against certain liabilities and expenses in connection with the Offer,
including certain liabilities under the federal securities laws.
The Purchaser will not pay any fees or commissions to any broker or dealer
or any other person for soliciting tenders of Shares pursuant to the Offer
(other than to the Information Agent and the Depositary). Brokers, dealers,
commercial banks and trust companies will, upon request, be reimbursed by the
Purchaser for customary mailing and handling expenses incurred by them in
forwarding offering materials to their customers.
18. MISCELLANEOUS. The Offer is being made solely by this Offer to Purchase
and the related Letter of Transmittal and is being made to all holders of
Shares. The Purchaser is not aware of any state where the making of the Offer
is prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with any such state statute.
If after such good faith effort, the Purchaser cannot comply with such state
statute, the Offer will not be made to nor will tenders be
34
<PAGE>
accepted from or on behalf of the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of the Purchaser by one or more registered brokers or dealers that
are licensed under the laws of such jurisdiction.
The Purchaser and the Parent have filed with the Commission a Tender Offer
Statement on Schedule 14D-1 (including exhibits) pursuant to Rule 14d-3 under
the Exchange Act, furnishing certain additional information with respect to
the Offer. Such statement and any amendments thereto, including exhibits, may
be inspected and copies may be obtained from the offices of the Commission
(except that they will not be available at the regional offices of the
Commission) in the manner set forth in Section 7 of this Offer to Purchase.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR THE PARENT NOT CONTAINED HEREIN
OR IN THE LETTER OF TRANSMITTAL AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
SWVA ACQUISITION, INC.
November 17, 1998
35
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
36
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
THE PURCHASER AND THE PARENT
1. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The Purchaser and the
Parent share the same directors and executive officers. Accordingly, each of
the directors and executive officers of the Parent has the same position with
the newly-created Purchaser. The required information with respect to each
such person is set forth under "Directors and Executive Officers of the
Parent" below. All such directors and executive officers are citizens of the
United States.
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT. The name, residence or
business address, present principal occupation or employment and material
occupations, positions, offices or employments during the last five years of
each director and executive officer of the Parent and certain other
information are set forth below. Unless otherwise indicated, the business
address of each such director and executive officer is: c/o Roanoke Electric
Steel Corporation, P.O. Box 13948, Roanoke, Virginia 24038-3948. Unless
otherwise indicated, each occupation set forth opposite an individual's name
refers to employment with the Parent. All directors and executive officers
listed below are citizens of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
NAME AND ADDRESS EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- ---------------- -----------------------------------------------
<S> <C>
Frank A. Boxley.......... President of Southwest Construction, Inc., a general
P.O. Box 917 contractor since 1993.
Vinton, VA 24179
George B. Cartledge, Jr.. President, Grand Home Furnishings, Inc., a retailer
4235 Electric Road Suite of home and office furnishings.
100 Roanoke, VA 24014
Thomas J. Crawford....... Vice President--Administration of the Parent since
1998; Secretary of the Parent since January 1985;
Assistant Vice President since January 1993; prior
thereto, he had served as Manager of Inside Sales
since 1984 and as a Sales Representative since 1977.
He has 21 years of service with the Parent.
Donald R. Higgins........ Vice President--Sales of the Parent since January
1986; prior thereto, he had served as General Sales
Manager since 1984 and Assistant Sales Manager since
1978. He has 33 years of service with the Parent.
George W. Logan.......... Chairman of Valley Financial Corporation, a holding
P.O. Box 1190 company for general commercial and retail banking
Salem, VA 24153 business, since 1994; Chairman of Warsaw Industrial
Centers, a developer of commercial distribution
warehouses; Director, Valley Financial Corporation
since 1997.
Charles I. Lunsford, II.. Retired since January 1998. Previously, Chairman,
1812 Diamond Hill Road Charles Lunsford Sons & Associates, a general
Moneta, VA 24121 insurance firm and agency.
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
NAME AND ADDRESS EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- ---------------- -----------------------------------------------
<S> <C>
John E. Morris............. Vice President--Finance of the Parent since October
1988 and as Assistant Treasurer since 1985; prior
thereto, he had served as Controller since 1971. He
has 27 years of service with the Parent.
Thomas L. Robertson........ President and Chief Executive Officer, Carilion
P.O. Box 13727 Health System, a provider of healthcare services.
Roanoke, VA 24026 Director, Roanoke Gas Company, an energy provider,
since 1992.
Donald G. Smith............ Chairman of the Board, President, Treasurer and
Chief Executive of the Parent. Director, American
Electric Power Company, Inc. Chairman of the Board
of the Parent since February 1989, as Chief
Executive Officer since November 1986, as President
and Treasurer since January 1985 and as Director of
the Parent since April 1984; prior thereto, he had
served as Vice President--Administration since
September 1980 and as Secretary since January 1967.
He has 41 years of service with the Parent.
Paul E. Torgerson.......... President, Virginia Polytechnic Institute and State
VPI & SU University since 1994; Prior thereto,
210 Burress Hall President,Virginia Tech Corporate Research Center,
Blacksburg, VA 24061 Inc.
John D. Wilson............. Retired since May, 1995. Previously, President,
3211 Laurel Drive Washington & Lee University.
Blacksburg, VA 24060
</TABLE>
3. OWNERSHIP OF SUBJECT COMPANY'S SECURITIES BY DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT AND PURCHASER. To the best knowledge of the Parent and the
Purchaser, none of the Parent's and the Purchaser's other directors or
executive officers beneficially owns any equity securities, or rights to
acquire any equity securities of the Company and none has been involved in any
transactions with respect to any class of the Company's Securities or with the
Company or any of its directors, executive officers, affiliates or associates
during the past 60 days.
38
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each
stockholder of the Company or his broker, dealer, commercial bank, trust
company or other nominee to the Depositary as follows:
THE DEPOSITARY FOR THE OFFER IS:
FIRST UNION NATIONAL BANK
By Overnight Courier: By Mail or Hand Delivery:
First Union Customer Information First Union Customer Information
Center Center
Corporate Trust Operations Corporate Trust Operations
1525 West W.T. Harris Blvd. 3C3 1525 West W.T. Harris Blvd., 3C3
Charlotte, North Carolina 28262-1153 Charlotte, North Carolina 28288-1153
Attn: Mike Klotz, Reorganization Attn: Mike Klotz, Reorganization
Department Department
By Facsimile Transmission:
(for Eligible Institutions Only)
(704) 590-7628
For Information or Confirmation:
(704) 590-7408
CONFIRM BY TELEPHONE:
Any questions and requests for assistance may be directed to the Information
Agent at its telephone numbers and address listed below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may also be obtained from the Information Agent. You may also contact
your broker, dealer, commercial bank or trust company for assistance
concerning the Offer.
The Information Agent for the Offer is:
[LOGO OF GEORGESON & COMPANY INC. APPEARS HERE]
Wall Street Plaza
88 Pine Street 30th Floor
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll-Free: (800) 223-2064
FAX: (212) 440-9009
<PAGE>
Exhibit (a)(2)
Letter of Transmittal
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
STEEL OF WEST VIRGINIA, INC.
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
PURSUANT TO THE OFFER TO PURCHASE
DATED NOVEMBER 17, 1998
BY
SWVA ACQUISITION, INC.
A WHOLLY OWNED SUBSIDIARY OF
ROANOKE ELECTRIC STEEL CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN
STANDARD
TIME, ON TUESDAY, DECEMBER 15, 1998, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer Is:
FIRST UNION NATIONAL BANK
By Overnight Courier: By Mail or Hand Delivery:
First Union Customer Information First Union Customer Information Center
Center Corporate Trust Operations
Corporate Trust Operations 1525 West W.T. Harris Blvd., 3C3
1525 West W.T. Harris Blvd., 3C3 Charlotte, North Carolina 28288-1153
Charlotte, North Carolina 28262- Attn: Mike Klotz, Reorganization
1153 Department
Attn: Mike Klotz, Reorganization
Department
By Facsimile Transmission:
(for Eligible Institutions Only)
(704) 590-7628
For Information or Confirmation:
(704) 590-7408
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS
SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS
LETTER OF TRANSMITTAL WHERE INDICATED AND COMPLETE THE SUBSTITUTE FORM W-9
PROVIDED BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders, either if
certificates for Shares (as defined below) are to be forwarded herewith or,
unless an Agent's Message (as defined in the Offer to Purchase) is sent to the
Transfer Facility, if tenders of Shares are to be made by book-entry transfer
into the account of First Union National Bank, as Depositary (the
"Depositary"), at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in Section 3 of the Offer to
Purchase (as defined below). Stockholders who tender Shares by book-entry
transfer are referred to herein as "Book-Entry Stockholders".
<PAGE>
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 delivery procedure set forth
in Section 3 of the Offer to Purchase. See Instruction 2. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Depositary.
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) &
ADDRESS(ES) OF
REGISTERED
HOLDER(S)
(PLEASE FILL
IN, IF BLANK,
EXACTLY AS
NAME(S)
APPEAR(S) ON SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- --------------------------------------------------------------------------------
TOTAL NUMBER
SHARE OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
----------------------------------------------
<S> <C> <C> <C>
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTAL SHARES
</TABLE>
- -------------------------------------------------------------------------------
* 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.
- --------------------------------------------------------------------------------
The names and addresses of the registered holders should be printed, if not
already printed above, exactly as they appear on the certificates representing
Shares tendered hereby. The certificates and number of Shares that the
undersigned wishes to tender should be indicated.
[_]CHECK HERE IF SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY
AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER
FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution: _____________________________________________
The Depository Trust Company
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:
Name(s) of Registered Owner(s): ____________________________________________
Window Ticket Number (if any): _____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution that Guaranteed Delivery: ______________________________
If delivered by book-entry transfer, please complete the following:
The Depository Trust Company
Account Number __________________ Transaction Code Number __________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
2
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to SWVA Acquisition, Inc., a Virginia
corporation (the "Purchaser"), a wholly owned subsidiary of Roanoke Electric
Steel Corporation, a Virginia corporation (the "Parent"), the above-described
shares of Common Stock, $0.01 par value per share ("Shares"), of Steel of West
Virginia, Inc., a Delaware corporation (the "Company"), and the associated
rights to purchase Common Stock of the Company (the "Rights") issued pursuant
to the Rights Agreement dated as of March 19, 1997, between the Company and
Continental Stock Transfer and Trust Company, as Rights Agent, as amended on
November 10, 1998, at a purchase price of $10.75 per Share, net to the seller
in cash without interest thereon, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated November 17, 1998 (the "Offer to
Purchase") and in this Letter of Transmittal (which together, as amended or
supplemented from time to time, constitute the "Offer"). Unless the context
otherwise requires, all references herein to Shares include the associated
Rights. The undersigned understands that the Purchaser reserves the right to
transfer or assign, in whole or from time to time in part, to one or more of
its affiliates, the right to purchase all or any portion of the Shares
tendered pursuant to the Offer, receipt of which is hereby acknowledged.
Subject to, and effective upon, acceptance for payment for the Shares
tendered herewith in accordance with the terms of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), 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 that are being tendered hereby and any and all non-cash dividends,
distributions (including additional Shares) or rights declared, paid or issued
with respect to the tendered Shares on or after November 17, 1998 and payable
or distributable to the undersigned on a date prior to the transfer to the
name of the Purchaser or nominee or transferee of the Purchaser on the
Company's stock transfer records of the Shares tendered herewith
(collectively, a "Distribution"), and 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 (and any Distribution) or transfer
ownership of such Shares (and any Distribution) on the account books
maintained by the Book-Entry Transfer Facility, together in either case with
appropriate evidences of transfer, 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 (c) 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, 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 November 17, 1998. 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 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 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 (and
any Distribution) tendered hereby and (b) when the Shares are accepted for
payment by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title to the 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 any 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.
3
<PAGE>
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, 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 (as defined in the Offer to Purchase) and, unless
theretofore accepted for payment by the Purchaser pursuant to the Offer, may
also be withdrawn at any time after December 15, 1998. 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 representation that the
undersigned owns the Shares being tendered.
Unless otherwise indicated herein under "Special Payment Instructions",
please issue the check for the purchase price and/or issue or return any
certificate(s) for Shares not tendered or not accepted for payment in the
name(s) of the registered holder(s) appearing under "Description of Shares
Tendered". Similarly, unless otherwise indicated herein under "Special
Delivery Instructions", please mail the check for the purchase price and/or
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 the Special Payment Instructions
are completed, please issue the check for the purchase price and/or any
certificate(s) for Shares not tendered or accepted for payment in the name of,
and deliver such check and/or such certificates 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.
SPECIAL PAYMENT INSTRUCTIONS (SEE
INSTRUCTIONS 1, 5, 6 AND 7 OF
THIS LETTER OF TRANSMITTAL)
To be completed ONLY if certifi-
cate(s) for Shares not tendered
or not accepted for payment
and/or the check for the purchase
price of Shares accepted for pay-
ment are to be issued in the name
of someone other than the under-
signed.
Issue check and/or certificate(s)
to:
Name _____________________________
(PLEASE PRINT)
Address __________________________
__________________________________
(INCLUDE ZIP CODE)
__________________________________
(TAX ID. OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON THE
REVERSE SIDE)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7
OF THIS LETTER OF TRANSMITTAL)
To be completed ONLY if
certificate(s) for Shares not
tendered or not accepted for
payment and/or the check for the
purchase price of Shares accepted
for payment are to be sent to
someone other than the
undersigned, or to the
undersigned at an address other
than that shown above.
Mail check and/or certificates
to:
Name _____________________________
(PLEASE PRINT)
Address __________________________
__________________________________
__________________________________
(INCLUDE ZIP CODE)
4
<PAGE>
SIGN HERE
(SIGN AND COMPLETE SUBSTITUTE FORM W-9 BELOW)
X ............................................................................
X ............................................................................
(SIGNATURE(S) OF HOLDER(S))
Dated: ................................................................, 199
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
Share 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 trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the following information
and see Instruction 5.)
Name(s).......................................................................
.......................................................................
(PLEASE PRINT)
Capacity (full title).........................................................
Address.......................................................................
.......................................................................
(INCLUDE ZIP CODE)
Area Code and Telephone Number................................................
Tax Identification or Social Security No. ....................................
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature..........................................................
Name..........................................................................
(PLEASE PRINT)
Title.........................................................................
Name of Firm..................................................................
Address.......................................................................
(INCLUDE ZIP CODE)
Area Code and Telephone Number................................................
Dated: ................................................................, 199
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) of Shares tendered herewith, unless such holder(s) has
completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" above, or (b) if such Shares are
tendered for the account of a firm that is a bank, broker, dealer, credit
union, savings association or other entity which is a member in good standing
of the Securities Transfer Agents Medallion Program (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 of this Letter of Transmittal.
2. Requirements of Tender. This Letter of Transmittal is to be completed by
stockholders either if certificates are to be forwarded herewith or, unless an
Agent's Message is transmitted, 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 the 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, or an Agent's Message in connection
with a book-entry transfer, 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 (as defined in Section 1 of the
Offer to Purchase). 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, 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 thereof), properly completed and duly executed, with any required
signature guarantees (or, in the case of a book-entry delivery, an Agent's
Message) and any other documents required by this Letter of Transmittal, must
be received by the Depositary within three Nasdaq National Market trading days
after the date of execution of such Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE 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 hereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate signed schedule attached hereto.
4. Partial Tenders. (NOT APPLICABLE TO BOOK-ENTRY STOCKHOLDERS.) If fewer
than all of 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 Expiration Date. 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(s) without alteration, enlargement or any
change whatsoever.
6
<PAGE>
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, 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 certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and proper evidence satisfactory
to the Purchaser of their authority so to act must be submitted.
If 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 is to be made to or
certificates for Shares not tendered or not 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(s) on the
certificate(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6,
the Purchaser will pay any stock transfer taxes with respect to the transfer
and sale of Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price is to be made to, or if certificate(s) for
Shares not tendered or accepted for payment are to be registered in the name
of, any person other than the registered holder(s), or if tendered
certificate(s) are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of any stock transfer
taxes (whether imposed on the registered holder(s) or such person) payable on
account of the transfer to such person will be deducted from the purchase
price unless satisfactory evidence of the payment of such taxes or an
exemption therefrom, is submitted.
Except as otherwise 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.
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
returned to a person other than the person(s) signing this Letter of
Transmittal or to an address other than that shown in this Letter of
Transmittal, the appropriate box(es) on this Letter of Transmittal must be
completed.
8. Waiver of Conditions. Subject to the terms and conditions of the Merger
Agreement, the conditions of the Offer (other than the Minimum Condition (as
defined in the Offer to Purchase)) may be waived by the Purchaser in whole or
in part at any time and from time to time in its sole discretion.
9. 31% Backup Withholding; Substitute Form W-9. Under U.S. Federal income
tax law, a stockholder whose tendered Shares are accepted for payment is
required to provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") (e.g., social security number or employer
identification number) on Substitute Form W-9 below. If the Depositary is not
provided with the correct TIN, the Internal Revenue Service may subject the
stockholder or other payee to a $50 penalty. In addition, payments that are
made to such stockholder or other payee with respect to Shares purchased
pursuant to the Offer may be subject to 31% backup withholding.
Certain stockholders (including, among others, all 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, the stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for more
instructions.
7
<PAGE>
If backup withholding applies, the Depositary is required to withhold 31% of
any such payments made to the stockholder or other payee. 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 from
the Internal Revenue Service.
The box in Part 3 of the Substitute Form W-9 must be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is
checked, the stockholder or other payee must also complete the Certificate of
Awaiting Taxpayer Identification Number below in order to avoid backup
withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% of all payments made prior to the time a properly certified TIN
is provided to the Depositary.
The stockholder is required to give the Depositary the TIN of the record
owner of the Shares or of the last transferee appearing on the transfers
attached to, or endorsed on, 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.
10. Requests for Assistance or Additional Copies. Questions or requests for
assistance may be directed to the Information Agent at its respective address
and telephone numbers 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 from brokers, dealers,
commercial banks or trust companies.
11. Lost, Destroyed or Stolen Certificates. If any certificate representing
Shares has been lost, destroyed or stolen, the stockholder should promptly
notify the Depositary. The stockholder will then be instructed as to the steps
that must be taken in order to replace the certificate. This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost or destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED WITH ANY REQUIRED SIGNATURE GUARANTEED OR AN
AGENT'S MESSAGE (TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER OR THE NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED
DOCUMENTS), MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE.
8
<PAGE>
PAYER'S NAME: FIRST UNION NATIONAL BANK, AS DEPOSITARY
- --------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR
SUBSTITUTE TIN IN THE BOX AT THE RIGHT -----------------------
FORM W-9 AND CERTIFY BY SIGNING AND Social security number
DATING BELOW.
OR
-----------------------
Employer identification
number
--------------------------------------------------------
PART 2--Certification--Under penalties of perjury, I
certify that:
DEPARTMENT OF (1) The number shown on this form is my correct
THE TREASURY Taxpayer Identification Number (or I am waiting
INTERNAL for a number to be issued to me) and
REVENUE
SERVICE (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 Revenue Service
(the "IRS") that I am subject to backup withholding
as a result of a failure to report all interest or
or (c) the IRS has notified me that I am no longer
subject to backup withholding.
--------------------------------------------------------
Certification Instructions--You must
cross out item (2) above if you have
been notified by the IRS that you are
currently subject to backup withhold-
ing because of under-reporting inter-
est or dividends on your tax return.
PAYER'S REQUEST FOR However, if after being notified by PART 3--
TAXPAYER IDENTIFICATION the IRS that you were subject to
NUMBER backup withholding you received an- Awaiting
other notification from the IRS that TIN [_]
you are no longer subject to backup
withholding, do not cross out such
Item (2).
Signature: _________ Date: _____, 199
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN 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.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
9
<PAGE>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable payments made to me will be withheld.
Signature: ______________________________ Date: __________________, 199
Questions and requests for assistance or additional copies of the Offer to
Purchase, the Letter of Transmittal and other tender offer materials may be
directed to the Information Agent as set forth below:
THE INFORMATION AGENT FOR THE OFFER IS:
GEORGESON & COMPANY INC.
Wall Street Plaza
88 Pine Street, 30th Floor
New York, New York 10005
Bankers & Brokers Call Collect: (212) 440-9800
All Others Call Toll-Free: (800) 223-2064
FAX: (212) 440-9009
November 17, 1998
10
<PAGE>
Exhibit (a)(3)
Notice of Guaranteed Delivery
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
STEEL OF WEST VIRGINIA, INC.
TO
SWVA ACQUISITION, INC.
A WHOLLY OWNED SUBSIDIARY
OF
ROANOKE ELECTRIC STEEL CORPORATION
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
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 mail or transmitted by facsimile
transmission to First Union National Bank (the "Depositary").
The Depositary for the Offer is:
FIRST UNION NATIONAL BANK
<TABLE>
<S> <C>
By Overnight Courier: By Mail or Hand Delivery:
First Union Customer Information Center First Union Customer Information Center
Corporate Trust Operations Corporate Trust Operations
1525 West W.T. Harris Blvd., 3C3 1525 West W.T. Harris Blvd., 3C3
Charlotte, North Carolina 28262-1153 Charlotte, North Carolina 28288-1153
Attn: Mike Klotz, Reorganization Department Attn: Mike Klotz, Reorganization Department
</TABLE>
By Facsimile Transmission:
(for Eligible Institutions Only)
(704) 590-7628
For Information or Confirmation:
(704) 590-7408
DELIVERY OF THIS FORM TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tender(s) to SWVA Acquisition, Inc., a Virginia
corporation and a wholly owned subsidiary of Roanoke Electric Steel
Corporation, a Virginia corporation, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated November 17, 1998 (the
"Offer to Purchase"), and the related Letter of Transmittal (which
together, as amended or supplemented from time to time, constitute the
"Offer"), receipt of each of which is hereby acknowledged, the number of
shares of Common Stock, $0.01 par value per share (including the
associated Common Stock purchase rights) ("Shares"), of Steel of West
Virginia, Inc., a Delaware corporation, pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase.
Signature(s) ______________________________________________________________
Address(es) _______________________________________________________________
(ZIP CODE)
Name(s) of Record Holder(s) _______________________________________________
___________________________________________________________________________
(PLEASE TYPE OR PRINT)
Area Code and Tel. No.(s) _________________________________________________
Number of Shares _________________________________________________________
Certificate Nos. (If Available) ___________________________________________
___________________________________________________________________________
___________________________________________________________________________
Check the following box if Shares will be tendered by book-entry
transfer: [_]
Dated _____________, 199 //The Depository Trust Company
Account Number ____________________________________________________________
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a bank, broker, dealer, credit union,
savings association or other entity that is a member in good standing of
the Securities Transfer Agents Medallion Program, (a) represents that the
above named person(s) "own(s)" the Shares tendered hereby within the
meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as
amended ("Rule 14e-4"), (b) represents that such tender of Shares complies
with Rule 14e-4, and (c) guarantees to deliver to the Depositary either
the certificates evidencing all tendered Shares, in proper form for
transfer, or to deliver Shares pursuant to the procedure for book-entry
transfer into the Depositary's account at The Depository Trust Company, in
either case together with the Letter of Transmittal (or a manually signed
facsimile thereof), properly completed and duly executed, with any
required signature guarantees or an Agent's Message (as defined in the
Offer to Purchase) in the case of a book-entry delivery, and any other
required documents, all within three Nasdaq National Market trading days
after the date hereof.
Name of Firm ______________________________________________________________
Authorized Signature ______________________________________________________
(NAME)
Address ___________________________________________________________________
(PLEASE TYPE OR PRINT) (ZIP CODE)
Title _____________________________________________________________________
Area Code and Tel. No. ____________________________________________________
Date ______________, 199
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE>
Exhibit (a)(4)
Letter from the Dealer Manger to Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
STEEL OF WEST VIRGINIA, INC.
AT
$10.75 NET PER SHARE
BY
SWVA ACQUISITION, INC.
A WHOLLY OWNED SUBSIDIARY OF
ROANOKE ELECTRIC STEEL CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN
STANDARD TIME, ON TUESDAY, DECEMBER 15, 1998, UNLESS THE OFFER IS EXTENDED.
November 17, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by SWVA Acquisition, Inc., a Virginia corporation
(the "Purchaser"), and a wholly owned subsidiary of Roanoke Electric Steel
Corporation, a Virginia corporation (the "Parent"), to act as Information
Agent in connection with the Purchaser's offer to purchase for cash all the
outstanding shares of Common Stock, par value $0.01 per share ("Shares"), of
Steel of West Virginia, Inc., a Delaware corporation (the "Company") and the
associated rights to purchase Common Stock of the Company (the "Rights")
issued pursuant to the Rights Agreement dated as of March 19, 1997, between
the Company and Continental Stock Transfer and Trust Company, as Rights Agent,
as amended on November 10, 1998, at a purchase price of $10.75 per Share, net
to the seller in cash without interest thereon, upon the terms and subject to
the conditions set forth in the Offer to Purchase, dated November 17, 1998
(the "Offer to Purchase"), and in the related Letter of Transmittal (which
together, as amended or supplemented from time to time, constitute the
"Offer") enclosed herewith. Unless the context otherwise requires, all
references herein to Shares include the associated Rights. 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 (as defined below) prior to the
Expiration Date (as defined in the Offer to Purchase), or who cannot complete
the procedures for book-entry transfer on a timely basis, must tender their
Shares according to the guaranteed delivery procedures set forth in Section 3
of the Offer to Purchase.
Enclosed herewith for your information and for forwarding to those of your
clients for whose accounts you hold Shares registered in your name or in the
name of your nominee are copies of the following documents:
1. The Offer to Purchase, dated November 17, 1998.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
may be used to tender Shares.
3. The Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if Share Certificates are not immediately available or if such
certificates and all other required documents cannot be delivered to First
Union National Bank (the "Depositary") by the Expiration Date or if the
procedure for book-entry transfer cannot be completed by the Expiration
Date.
4. The Letter to Stockholders of the Company from the President and Chief
Executive Officer of the Company, accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9.
<PAGE>
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to the Depositary.
Your prompt action is requested. We urge you to contact your clients as
promptly as possible. Please note that the offer and withdrawal rights expire
at 12:00 midnight, Eastern Standard Time, on Tuesday, December 15, 1998,
unless the Offer is extended. The Offer is conditioned upon, among other
things, Shares representing more than 50% of the voting power (determined on a
fully-diluted basis) of all securities of the Company entitled to vote
generally in the election of directors or in a merger being validly tendered
and not properly withdrawn prior to the expiration of the Offer (excluding
Shares issuable pursuant to the Stock Option Agreement, as defined in the
Offer to Purchase). The Offer is also subject to other terms and conditions
contained in the Offer to Purchase.
In order to accept the Offer, (i) a duly executed and properly completed
Letter of Transmittal and any required signature guarantees, or an Agent's
Message (as defined in the Offer to Purchase) in connection with a book-entry
delivery of Shares, and other required documents should be sent to the
Depositary, and (ii) either Share 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 maintained at the Book-
Entry Transfer Facility (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 Share Certificates or other required documents on or prior to
the Expiration Date 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.
The Purchaser will not pay any commissions or fees to any broker, dealer or
other person (other than to the Depositary and the Information Agent (as
described in the Offer to Purchase)) for soliciting tenders of Shares pursuant
to the Offer. The Purchaser will, however, upon request, reimburse brokers,
dealers, commercial banks and trust companies for customary clerical and
mailing expenses incurred in forwarding any of the enclosed materials to
clients. The Purchaser will pay or cause to be paid any stock transfer taxes
payable on the transfer of Shares to it, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
the Information Agent, at its address and telephone numbers set forth on the
back cover of the Offer to Purchase. Additional copies of the enclosed
materials may be obtained from the Information Agent.
Very truly yours,
[Georgeson & Company Inc. Logo]
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL MAKE YOU OR ANY
OTHER PERSON THE AGENT OF THE PURCHASER, THE PARENT, THE COMPANY, THE
DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
ENCLOSURES
2
<PAGE>
Exhibit (a)(5)
Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
STEEL OF WEST VIRGINIA, INC.
AT
$10.75 NET PER SHARE
BY
SWVA ACQUISITION, INC.
A WHOLLY OWNED SUBSIDIARY OF
ROANOKE ELECTRIC STEEL CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN
STANDARD TIME, ON TUESDAY, DECEMBER 15, 1998, UNLESS THE OFFER IS EXTENDED.
November 17, 1998
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated November 17,
1998 (the "Offer to Purchase"), and the related Letter of Transmittal relating
to an offer by SWVA Acquisition, Inc., a Virginia corporation (the
"Purchaser") and a wholly owned subsidiary of Roanoke Electric Steel
Corporation, a Virginia corporation (the "Parent"), to purchase all of the
outstanding shares of Common Stock, $0.01 par value per share (the "Shares"),
of Steel of West Virginia, Inc., a Delaware corporation (the "Company"), and
the associated rights to purchase Common Stock of the Company (the "Rights")
issued pursuant to the Rights Agreement dated as of March 19, 1997, between
the Company and Continental Stock Transfer and Trust Company, as Rights Agent,
as amended on November 10, 1998 , at a purchase price of $10.75 per Share, net
to the seller in cash without interest thereon, upon the terms and subject to
the conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal (which together, as amended or supplemented from time to time,
constitute the "Offer"). Unless the context otherwise requires, all references
herein to Shares include the associated Rights.
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 subject to the conditions set forth in the Offer to Purchase.
Your attention is directed to the following:
1. The tender price is $10.75 per share, net to the seller in cash
without interest thereon.
2. The Offer is made for all of the outstanding Shares, and is
conditioned upon, among other things, Shares representing more than 50% of
the voting power (determined on a fully-diluted basis) of all securities of
the Company entitled to vote generally in the election of directors or in a
merger being validly tendered and not properly withdrawn prior to the
expiration of the Offer (excluding Shares issuable pursuant to the Stock
Option Agreement, as defined in the Offer to Purchase). The Offer is also
subject to other terms and conditions set forth in the Offer to Purchase.
3. The Board of Directors of the Company has unanimously determined that
each of the transactions contemplated by the Merger Agreement (as defined
below) including each of the Offer and the Merger (as defined below), are
fair to
<PAGE>
and in the best interests of the stockholders of the Company and
unanimously recommends that holders of the Shares accept the Offer and
tender their Shares to the Purchaser.
4. The Offer and withdrawal rights will expire at 12:00 midnight, Eastern
Standard Time, on Tuesday, December 15, 1998, 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 being made solely by the Offer to Purchase and the related
Letter of Transmittal and is being made to all holders of Shares. The
Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with any such state statute.
If, after such good faith effort, the Purchaser cannot comply with such state
statute, the Offer will not be made to (nor will tenders be accepted from or
on behalf of) any holders of Shares in such state. In any jurisdiction whose
securities, "blue sky" or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed made on behalf of the
Purchaser by or one or more registered brokers or dealers that are licensed
under the laws of such jurisdiction.
If you wish to have us tender any or all of your Shares, please instruct us
by completing, executing and returning to us the instruction form contained in
this letter. If you authorize a tender of your Shares, all such Shares will be
tendered unless otherwise specified in such instruction form.
YOUR INSTRUCTIONS 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.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
STEEL OF WEST VIRGINIA, INC.
The undersigned acknowledge(s) receipt of your letter enclosing the Offer to
Purchase dated November 17, 1998 (the "Offer to Purchase"), and the related
Letter of Transmittal pursuant to an offer by SWVA Acquisition, Inc., a
Virginia corporation and a wholly owned subsidiary of Roanoke Electric Steel
Corporation, a Virginia corporation, to purchase all outstanding shares of
Common Stock, $0.01 par value per share (including the associated Common Stock
purchase rights) ("Shares"), of Steel of West Virginia, Inc., a Delaware
corporation, at a price of $10.75 per Share net to the seller in cash without
interest thereon, upon the terms and subject to the conditions set forth in
the Offer.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) that 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.
NUMBER OF SHARES TO BE SIGN HERE
TENDERED*
----------------------------------
SHARES:
-------------------------- ----------------------------------
SIGNATURE(S)
ACCOUNT NUMBER:
------------------ ----------------------------------
----------------------------------
Dated , 199
---------- - ----------------------------------
PLEASE PRINT NAME(S)
----------------------------------
----------------------------------
ADDRESS
----------------------------------
AREA CODE AND TELEPHONE NUMBER
----------------------------------
TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER
- -------
* Unless otherwise indicated, it will be assumed that all of your Shares held
by us for your account are to be tendered.
3
<PAGE>
Exhibit (a)(6)
Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
<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.
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
GIVE THE NAME AND
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ---------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, any one
of the
individuals(2)
3. Husband and wife (joint The actual owner
account) of the account
or, if joint
funds, either
person(2)
4. Custodian account of a The minor(3)
minor
(Uniform Gift to Minors
Act)
5. Adult and minor (joint The adult or, if
account) the minor is
only
contributor, the
minor(1)
6. Account in the name of The ward, minor,
guardian or committee or incompetent
for a designated ward, person(4)
minor, or incompetent
person
7. a. The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b. So-called trust The actual
account that is not a owner(1)
legal or valid trust
under State law
8. Sole proprietorship The owner(5)
account
- ---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GIVE THE NAME AND
EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
---
<S> <C>
9. A valid trust, estate, Legal entity (Do
or pension trust not furnish the
identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.)(1)
10. Corporate account The organization
11. Religious, charitable, The organization
or educational
organization account
12. Partnership account The partnership
held in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public
Department of entity
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 legal trust, estate, or pension
trust.
(2) List first and circle the name of the person whose number you furnish.
(3) Circle the minor's name and furnish the minor's social security number.
(4) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(5) Show the name of the owner.
NOTE: If no name is circled when there is more than one name, 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
PAGE 2
OBTAINING A NUMBER
If you don't have a TIN or you don't know your number, obtain Internal Revenue
Service Form SS-5, Application for a Social Security Number Card, or Form SS-
4, Application for Employer Identification Number, at your local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
. A middleman known in the investment community as a nominee or who is
listed in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
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 U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
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 taxpayer identification number 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.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT
TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM. IF YOU ARE A NONRESIDENT ALIEN OR A FOREIGN
ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL
REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1984, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer.
Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, 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) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and
convincing evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
Exhibit (a)(7)
Form of Summary Advertisement as published on November 17, 1998.
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated November
17, 1998, and the related Letter of Transmittal, and is being made to all
holders of Shares, except in any jurisdiction where the making of such would be
illegal. The Purchaser is not aware of any state in which the making of the
Offer is prohibited by administrative or judicial action pursuant to a state
statute. If the Purchaser becomes aware of any state where the making of the
Offer is so prohibited, the Purchaser will make a good faith effort to comply
with any such statute or seek to have such statute declared inapplicable to the
Offer. If, after such good faith effort, the Purchaser cannot comply with any
applicable statute, the Offer will not be made to (nor will tenders be accepted
from or on behalf of) holders of Shares in such state. In any jurisdiction
whose securities laws or blue sky laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
STEEL OF WEST VIRGINIA, INC.
AT
$10.75 NET PER SHARE
BY
SWVA ACQUISITION, INC.
A WHOLLY-OWNED SUBSIDIARY OF
ROANOKE ELECTRIC STEEL CORPORATION
SWVA Acquisition, Inc., a Virginia corporation (the "Purchaser") and a wholly-
owned subsidiary of Roanoke Electric Steel Corporation, a Virginia corporation
(the "Parent"), is offering to purchase any and all of the outstanding shares of
Common Stock, par value $0.01 per share (including the associated common stock
purchase rights) ("Shares"), of Steel of West Virginia, Inc., a Delaware
corporation (the "Company"), at a purchase price of $10.75 per Share, net to the
seller in cash without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated November 17, 1998 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which together,
as amended or supplemented from time to time, constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN
STANDARD TIME, ON TUESDAY, DECEMBER 15, 1998, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SHARES REPRESENTING MORE
THAN 50% OF THE VOTING POWER (DETERMINED ON A FULLY-DILUTED BASIS) OF ALL
SECURITIES OF THE COMPANY ENTITLED TO VOTE GENERALLY IN THE ELECTION OF
DIRECTORS OR IN A MERGER BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR
TO THE EXPIRATION OF THE OFFER (THE "MINIMUM CONDITION"). SEE SECTIONS 1 AND 15
OF THE OFFER TO PURCHASE FOR ADDITIONAL TERMS AND CONDITIONS OF THE OFFER.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated as
of November 10, 1998 (as amended or supplemented from time to time, the "Merger
Agreement"), among the Company, the Purchaser and the Parent pursuant to which,
following the consummation of the Offer and the satisfaction or waiver of
certain conditions, the Purchaser will be merged with and into the Company (the
"Merger"), with the Company continuing as the surviving corporation (the
"Surviving Corporation"). At the effective time of the Merger (the "Effective
Time"), each Share (other than Shares held by the Parent, the Purchaser or any
wholly-owned subsidiary of the Parent or the Purchaser or held in treasury of
the Company, which will be canceled with no payment being made in respect
thereto, and other than Shares, if any, held by stockholders who object to the
Merger and demand a right to receive payment of the fair value of such
stockholders' Shares in accordance with Section 262 of the Delaware General
Corporation law (the "DGCL"), unless such right has been withdrawn or otherwise
lost ("Dissenting Shares")) then issued and outstanding will, by virtue of the
Merger and without any action by the holder thereof, be converted into the right
to receive $10.75 in cash or any higher price that may be paid pursuant to the
Offer, payable to the holder thereof, without interest thereon, upon the
surrender of the certificate formerly representing such Share in the manner
described in the Merger Agreement, less any required withholding taxes.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT EACH OF
THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE OFFER AND
THE MERGER, ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS
<PAGE>
AND UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES TO THE PURCHASER.
In all cases, payment for Shares tendered and accepted for payment pursuant to
the Offer will be made only after timely receipt by First Union National Bank
(the "Depositary") of (i) certificates for such Shares ("Share Certificates") or
timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company (the "Book-Entry Transfer
Facility") 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 (or an
Agent's Message, as set forth in the Offer to Purchase in connection with a
book-entry transfer), and (iii) any other documents required by the Letter of
Transmittal.
"Expiration Date" means 12:00 Midnight, Eastern Standard Time ("EST"), on
Tuesday, December 15, 1998, or, if the Purchaser extends the period during which
the Offer is open, such later time and date at which the Offer expires. The
Purchaser may, under the circumstances described in the Offer to Purchase,
extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any Shares, by giving oral or
written notice of such extension to the Depositary, followed as promptly as
practicable by public announcement no later than 9:00 A.M., EST, on the next
business day after the previously scheduled Expiration Date. THE PURCHASER HAS
NO OBLIGATION TO PAY INTEREST ON THE PURCHASE PRICE OF TENDERED SHARES,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING PAYMENT FOR SUCH
SHARES. If, on the Expiration Date, the conditions to the Offer (the "Offer
Conditions") have not been satisfied or waived, the Purchaser will have the
right, in its sole discretion, to extend the Offer for one or more periods not
to exceed an aggregate of thirty business days, and, if all of the Offer
Conditions have been satisfied or waived and less than 90% of the outstanding
Shares have been tendered in the Offer and not withdrawn, then the Purchaser
will have the additional right, in its sole discretion, so long as the Purchaser
and the Parent each waive in writing the satisfaction of each of the Offer
Conditions, to extend the Offer for one or more periods not to exceed an
aggregate of twenty business days. Notwithstanding the foregoing, however, the
Purchaser may not extend the Expiration Date beyond February 28, 1999 (the
"Outside Date") without the consent of the Company. During any such extension,
subject to the right of tendering stockholders to withdraw their Shares, all
Shares previously tendered and not withdrawn will remain subject 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 properly
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.
If for any reason whatsoever acceptance for payment of or payment for any
Shares tendered pursuant to the Offer is delayed or the Purchaser is unable to
accept for payment or pay for Shares tendered pursuant to the Offer, then
without prejudice to the Purchaser's rights set forth herein, the Depositary may
nevertheless, on behalf of the Purchaser and subject to Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), retain
tendered Shares, and such Shares may not be withdrawn except to the extent that
the tendering stockholder is entitled to and duly exercises withdrawal rights as
described in Section 4 of the Offer to Purchase. Any such delay in acceptance
for payment will be accompanied by an extension of the Offer to the extent
required by law.
If any tendered Shares are not accepted for payment for any reason or if Share
Certificates are submitted for more Shares than are tendered, Share Certificates
evidencing unpurchased or untendered 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 the Book-Entry Transfer Facility
pursuant to the procedures set forth in Section 3 of the Offer to Purchase, such
Shares will be credited to an account maintained at the Book-Entry Transfer
Facility), as promptly as practicable following the expiration, termination or
withdrawal of the Offer.
Except as set forth in Section 4 of the Offer to Purchase, tenders of Shares
made pursuant to the Offer are irrevocable, except that Shares tendered pursuant
to the Offer may be withdrawn at any time on or 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 the Outside Date. For a
withdrawal to be effective, a written, telegraphic 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 such 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
<PAGE>
Certificates to be withdrawn have been delivered or otherwise identified to the
Depositary, then prior to the physical release of such certificates, the serial
numbers shown on such certificates must be submitted to the Depositary and the
signatures 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 procedures for book-entry transfer set forth
in Section 3 of the Offer to Purchase, the 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. 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. Withdrawals of Shares may not be rescinded. None of the Purchaser, the
Parent, any of their affiliates or assigns, 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. Withdrawn Shares, however, may be re-tendered at any time prior to the
Expiration Date by following the procedures described in Section 3 of the Offer
to Purchase.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) under the
Exchange Act is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided its stockholder list and security position listings
to the Purchaser for the purpose of disseminating the Offer to stockholders. The
Offer to Purchase and the related Letter of Transmittal and, if required, other
relevant materials, will be mailed to stockholders whose names appear on the
Company's stockholder list and will be furnished for subsequent transmittal to
beneficial owners of Shares, 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 listing.
STOCKHOLDERS ARE URGED TO READ THE OFFER TO PURCHASE AND THE RELATED LETTER OF
TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR SHARES.
Requests for copies (at the Purchaser's expense) of the Offer to Purchase or
the related Letter of Transmittal may be directed to the Information Agent at
its address and telephone numbers set forth below. The Purchaser will not pay
any fees or commissions to brokers, dealers or other persons (other than the
Information Agent and the Depositary) for soliciting tenders of Shares pursuant
to the Offer.
The Information Agent for the Offer is:
[Georgeson & Company Inc. Logo]
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212)440-9800
ALL OTHERS CALL TOLL-FREE:(800) 223-2064
November 17, 1998
<PAGE>
Exhibit (b)(1)
Commitment Letter, dated November 5, 1998, from First Union National
Bank to Roanoke Electric Steel Corporation.
<PAGE>
November 5, 1998
Roanoke Electric Steel Corporation
102 Westside Boulevard
Roanoke, Virginia 24017
Attention: Mr. John E. Morris
Vice President-Finance
Gentlemen:
Roanoke Electric Steel Corporation (the "Company") has advised First Union
National Bank ("First Union") that the Company intends to acquire Steel of West
Virginia, Inc. ("Steel of West Virginia") by merger or stock/asset acquisition
(the "Steel Acquisition") pursuant to merger or stock/asset acquisition
documents (the "Acquisition Documents") to be negotiated and entered into
between the Company and Steel of West Virginia. Based on First Union's
understanding of the proposed transaction, First Union anticipates that the
Company would enter into a Credit Agreement with certain financial institutions,
having substantially the terms set forth on the summary of terms and conditions
attached hereto (the "Term Sheet"), providing for credit facilities in an
aggregate amount not to exceed $180 million (the "Facilities"), up to $30
million of which would be a revolving credit facility and up to $150 million of
which would be a term loan facility.
First Union understands that the borrowings under the Facilities will
provide funds sufficient to enable the Company to consummate the Steel
Acquisition, to refinance certain existing indebtedness of the Company, to pay
related fees and expenses and to provide for working capital and other general
corporate purposes.
Based upon and subject to the foregoing and to the terms and conditions set
forth below and in the Term Sheet, First Union is pleased to confirm its
commitment (this "Commitment") (1) to provide up to $10 million of the revolving
credit facility and up to $50 million of the term loan facility, and (2) to
serve as administrative agent for the syndicate of financial institutions
(collectively with First Union, the "Lenders") arranged by the Company. First
Union's obligations hereunder are subject to (i) the Company's written
acceptance of the letter from First Union to the Company of even date herewith
(the "Fee Letter"), pursuant to which the Company agrees to pay First Union
certain fees in connection with the Facilities as more particularly set forth
therein, (ii) the completion of a definitive credit agreement and related
documentation for the Facilities, customary for transactions of this type, in
form and substance satisfactory to First Union, (iii) satisfactory completion of
all documentation relating to the Steel Acquisition
<PAGE>
including the Acquisition Documents in form and substance reasonably
satisfactory to First Union; (iv) compliance with all applicable laws and
regulations (including compliance of this Commitment and the transactions
described herein with all applicable federal banking laws, rules and
regulations), (v) the absence of any condition in the financial or capital
markets prior to the execution of such definitive credit documentation that
could reasonably be expected to have a material adverse effect on the primary
syndication of the Facilities, (vi) the receipt by the Company of commitments
from other Lenders acceptable to First Union for the entire amount of the
Facilities not committed for by First Union, and (vii) the satisfaction of all
other conditions described herein, in the Term Sheet and in such definitive
documentation.
It is agreed that First Union will act as the sole administrative agent
(the "Agent") for the Lenders under the Facilities. First Union reserves the
right to engage the services of its affiliates in furnishing the services to be
performed by First Union as contemplated herein and to allocate (in whole or in
part) to any such affiliates any fees payable to it in such manner as First
Union and its affiliates may agree in their sole discretion. The Company agrees
that First Union may share with any of its affiliates and advisors any
information related to the transaction or any other matter contemplated hereby,
on a confidential basis.
First Union reserves the right, prior to or after the execution of
definitive documentation with respect to the Facilities, and as part of any
syndication thereof or otherwise, to arrange for the assignment of a portion of
this Commitment, in accordance with the Term Sheet, to one or more mutually
acceptable financial institutions that will become Lenders and party to such
definitive documentation. It is agreed that no Lender will receive compensation
from or on behalf of the Company outside the terms contained herein and the Fee
Letter in order to obtain its commitment to participate in the Facilities.
The Company also agrees that First Union and its affiliates will be
afforded an opportunity to offer proposals to provide (i) any interest rate
caps, currency swaps and other hedging transactions to be entered into by the
Company, any of its subsidiaries, or any of their respective affiliates and (ii)
cash management, funds transfer, trade, corporate trust and securities services
to be obtained by the Company, any of its subsidiaries or their respective
affiliates.
By executing this letter, the Company agrees to reimburse First Union from
time to time on demand for all reasonable out-of-pocket fees, syndication
expenses and other expenses (including, but not limited to, the reasonable fees,
disbursements and other charges of Mays & Valentine, L.L.P., as counsel to First
Union) incurred in connection with the Facilities, including the preparation of
definitive documentation for the Facilities and the transactions contemplated
hereby. By executing this letter, the Company further agrees to indemnify and
hold harmless First Union, each other Lender and each director, officer,
employee, attorney and affiliate of First Union and each other Lender (each such
person or entity referred to hereafter as an "Indemnified Person") from any
losses, claims, costs, damages, expenses or liabilities (or actions, suits or
proceedings, including any inquiry or investigation, with respect thereto) to
which any Indemnified Person may become liable to any third party, insofar as
such losses, claims, costs, damages, expenses or liabilities (or actions, suits
or proceedings, including any inquiry or investigation, with respect thereto)
arise out of, in any way relate to, or result from, this letter, the
<PAGE>
Facilities or the transactions contemplated hereby and thereby and to reimburse
upon demand each Indemnified Person for any and all legal and other expenses
incurred in connection with investigating, preparing to defend or defending any
such loss, claim, cost, damage, expense or inquiry or investigation with respect
thereto; provided that the Company shall have no obligation under this indemnity
provision for liabilities resulting from the gross negligence or willful
misconduct of any Indemnified Person. The foregoing provisions of this paragraph
shall be in addition to any right that an Indemnified Person shall have at
common law or otherwise. No Indemnified Person shall be responsible or liable
for consequential damages which may be alleged as a result of this letter or any
of the transactions referred to herein. The provisions of this paragraph shall
remain in full force and effect until the definitive documentation shall be
executed and delivered and notwithstanding the termination of this letter or the
commitment of First Union hereunder or the failure of the Facilities, or either
of them, to close.
Except as required by applicable law, this letter, the Term Sheet, the Fee
Letter and the contents hereof and thereof will not be disclosed by the Company
or any of its subsidiaries to any third person or entity without the prior
written consent of First Union, other than to the Company's attorneys, financial
advisors and accountants, in each case in connection with the Company's
evaluation hereof and to the extent necessary in the Company's reasonable
judgment. The Company acknowledges and agrees that First Union may share with
its affiliates, on a confidential basis, any information relating to the
Facilities and the Company and its subsidiaries. First Union may disclose
information relating to the Facilities to Gold Sheets and other similar bank
-----------
trade publications, with such information to consist of deal terms and other
information customarily found in such publications.
This Commitment shall terminate at 5:00 p.m. (Roanoke, Virginia time) on
November 9, 1998, unless this Commitment is accepted by the Company in writing
prior to such time and, if accepted prior to such time, shall expire at the
earlier of (i) consummation of the Steel Acquisition or another transaction or
series of transactions in which the Company acquires all or a substantial
portion of the stock or assets of Steel of West Virginia, (ii) termination of
the Acquisition Documents regarding the Acquisition, (iii) the occurrence of any
event that has, or could be expected to have, a material adverse effect on the
business, properties, operations or conditions (financial or otherwise) of the
Company or any of its subsidiaries or Steel of West Virginia, and (iv) 5:00 p.m.
(Roanoke, Virginia time) on February 28, 1999, if the closing of the Steel
Acquisition and the Facilities shall not have occurred by such time.
This Commitment, the Term Sheet and the Fee Letter shall be governed by and
construed in accordance with the internal laws of the Commonwealth of Virginia
without reference to conflict of law principles thereof, and together constitute
the entire agreement between the parties relating to the subject matter hereof
and thereof and supersede any previous agreement, written or oral, between the
parties with respect to the subject matter hereof and thereof. This Commitment
supersedes any prior or contemporaneous agreement or understanding between any
parties hereto with respect to the subject matter hereof. No party or person
has been authorized by First Union to make any oral or written statements
inconsistent with this letter. This Commitment may not be assigned without the
prior written consent of First Union.
<PAGE>
This letter may be executed in any number of counterparts by the parties
hereto, each of which so executed shall be deemed to be an original binding on
such parties, and all of which taken together shall constitute one and the same
instrument.
This letter replaces and supersedes any and all earlier commitment letters
delivered to the Company by First Union in connection with the proposed Steel
Acquisition and all such earlier commitment letters are of no further force and
effect.
If the Company is in agreement with the foregoing, please sign the enclosed
copy of this Commitment and return it to First Union, together with an executed
copy of the Fee Letter, by no later than 5:00 p.m. (Roanoke, Virginia time) on
November 9, 1998.
Sincerely,
FIRST UNION NATIONAL BANK
By: /s/ Laurence M. Levy
------------------------------
Name: Laurence M. Levy
----------------------------
Title: Vice President
---------------------------
Agreed to and accepted this 9th
day of November, 1998
ROANOKE ELECTRIC STEEL
CORPORATION
By: /s/ John E. Morris
-------------------------------
Name: John E. Morris
-----------------------------
Title: Vice President - Finance
-----------------------------
<PAGE>
ROANOKE ELECTRIC STEEL CORPORATION
SUMMARY OF TERMS AND CONDITIONS
----------------------------------
BORROWER: Roanoke Electric Steel Corporation (the "Company")
ADMINISTRATIVE AGENT: First Union National Bank ("First Union" or the
"Agent")
LENDERS: First Union and a group of lenders arranged by the Company
and acceptable to the Agent. First Union has committed up
to $10 million of the revolving credit facility not to
exceed $30 million and up to $50 million of the term loan
facility not to exceed $150 million.
FACILITIES/AMOUNTS: (1) $30 million five-year revolving credit facility
(the "revolving Credit Facility")
(2) Up to $150 million ten-year term loan (the "Term Loan
Facility")
PURPOSE: (1) The proceeds of the Revolving Credit Facility will
be used by the Company to provide working capital and
for other general corporate purposes.
(2) The proceeds of the Term Loan Facility will be used by
the Company to finance the acquisition of Steel of
West Virginia (the "Steel Acquisition"), to pay
related fees and expenses and to refinance certain
existing term debt.
MATURITY: (1) The Revolving Credit Facility will mature five
years after the date of closing.
(2) The principal amount of the Term Loan Facility will
amortize as provided below, and the Term Loan Facility
will mature seven years after the date of closing.
SECURITY: The Revolving Credit Facility and the Term Loan Facility
will be secured by a first priority, perfected security
interest in the accounts, inventory and equipment (and
other assets required by the Lenders) of the Company and
its subsidiaries, including, without limitation, Steel of
West Virginia and its subsidiaries.
In the event that no Event of Default (or event or
condition which, with the giving of notice or the passage
of time, or both, would constitute such an Event of
Default) has occurred or exists under the Credit Agreement
after the third anniversary of the closing of
<PAGE>
the Revolving Credit Facility and the Term Loan Facility,
the Lenders will, upon request of the Company and the
Company's sole expense, release the Lender's security
interest in accounts, inventory, equipment and other
assets. All such accounts, inventory, equipment and other
assets so released will remain subject to the negative
pledge provisions of the Credit Agreement.
GUARANTORS: The Revolving Credit Facility and the Term Loan Facility
will be jointly and severally guaranteed by all operating
subsidiaries of the Company, including, without
limitation, John W. Hancock, Jr., Incorporated, Socar,
Inc., RESCO Steel Products Corporation, Shredded Products
Corp., Roanoke Technical Treatment and Services, Inc.,
Socar of Ohio, Inc., Steel of West Virginia and all
operating subsidiaries of Steel of West Virginia, pursuant
to one or more guaranty agreements (the "Guaranties") in
form and substance acceptable to First Union.
UPFRONT FEE: The Company will pay an upfront fee equal to 25 basis
points on the aggregate amount of the Facilities payable
at closing. The upfront fee will be fully earned and non-
refundable once paid.
PREPAYMENTS: (1) The Company may prepay amounts outstanding under
the Revolving Credit Facility, without premium or
penalty (other than breakage costs in the event that
any such prepayment occurs during a LIBOR interest
period), and reborrow such amounts up to the maximum
amount of the Revolving Credit Facility upon the terms
and subject to the conditions to be set out in the
Credit Agreement.
(2) The Company may prepay amounts outstanding under the
Term Loan Facility, without premium or penalty (other
than breakage costs in the event that any such
prepayment occurs during a LIBOR interest period),
upon the terms and subject to the conditions to be set
out in the Credit Agreement, and, except as provided
in the next sentence, all such prepayments of the Term
Loan Facility will be applied to reduce the remaining
payments of principal due under the Term Loan Facility
in their inverse chronological order of maturity. In
the event that the Company makes a prepayment of
principal of the Term Loan Facility equal to or
greater than $10.0 million, such prepayment will be
applied to reduce by an equal amount each of the
remaining payments of principal due under the Term
Loan Facility.
<PAGE>
VOLUNTARY REDUCTION
OF REVOLVING CREDIT
COMMITMENT: The Company will have the option from time to time during
the term of the Revolving Credit Facility to reduce the
maximum amount available under the Revolving Credit Facility
(with a corresponding reduction in the facility fee due
under the Credit Agreement) upon the terms and subject to
the Conditions to be set out in the Credit Agreement,
without premium or penalty (other than breakage costs in the
event that any such reduction causes a prepayment to occur
during a LIBOR interest period).
AMORTIZATION OF
FACILITIES: There will be no required amortization under
the Revolving Credit Facility prior to maturity.
The principal amount of the Term Loan Facility will be due
and payable in twenty-eight (28) consecutive quarterly
installments, the first twenty-seven (27) of which will be
based on a ten year amortization schedule and the last of
which will be equal to the entire remaining principal
balance of the Term Loan Facility.
INTEREST RATE
OPTIONS: Principal advances under the revolving Credit
Facility and the outstanding principal balance of the Term
Loan Facility will bear interest, at the option of the
Company, at either (i) the Base Rate plus the Applicable
Margin, or (ii) Adjusted one, two or three month LIBOR plus
the Applicable Margin.
The Base Rate means the higher of (i) First Union's Prime
Rate, or (ii) the Federal Funds Rate plus 0.50%. Adjusted
LIBOR means the London Interbank Offered Rate, as reported
by Telerate, adjusted for applicable reserves, if any.
Interest rates will be selected and set as provided in the
Credit Agreement. Accrued interest on Base Rate Loans will
be due and payable quarterly, and accrued interest on LIBOR
Loans will be due and payable on the last day of each
interest period.
The Credit Agreement will include provisions protecting the
Lenders in the event of unavailability of funding,
illegality, capital adequacy requirements, increased costs,
withholding taxes and funding losses.
INTEREST RATE
MARGINS: The Applicable Margin for Base Rate Loans and LIBOR Loans
will vary based on the Net Funded Debt to EBITDA ratio of
the Company and its subsidiaries (Funded Debt minus cash and
cash equivalents divided by EBITDA) in effect from time to
time as provided in the following table:
<PAGE>
<TABLE>
<CAPTION>
NET FUNDED BASE RATE LIBOR REVOLVING LIBOR TERM LOAN
DEBT TO APPLICABLE CREDIT APPLICABLE
EBITDA MARGIN APPLICABLE MARGIN MARGIN
------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than 1.00 0.00% 0.30% 0.65%
------------------------------------------------------------------------------
1.01 to 1.50 0.00% 0.30% 0.85%
------------------------------------------------------------------------------
1.51 to 2.00 0.00% 0.40% 1.05%
------------------------------------------------------------------------------
2.01 to 2.50 0.00% 0.50% 1.25%
------------------------------------------------------------------------------
Greater than 2.51 0.00% 0.60% 1.45%
------------------------------------------------------------------------------
</TABLE>
Notwithstanding anything to the contrary contained herein,
for purposes of determining the Applicable Margin from
closing through the end of the second full fiscal quarter of
the Company occurring after closing, the Net Funded Debt to
EBITDA Ratio will be deemed to be in the 2.01 to 2.50 range.
INTEREST RATE
PROTECTION: The Company will be required to enter into and maintain an
interest rate swap or other hedging transaction with First
Union (or other counterparty acceptable to First Union),
which covers at least one-half of the Company's floating
interest expense exposure under the Term Loan Facility. The
swap will be governed by an ISDA Master Agreement, will be
secured by all collateral and will be guaranteed by the
Guarantor(s) described herein.
DEFAULT RATE: After the occurrence and during the existence of an Event of
Default under the Credit Agreement, interest on the
Revolving Credit Facility and the Term Loan Facility will
accrue at a rate equal to the then highest rate (including
the Applicable Margin) which may be applicable plus 2.0%.
FACILITY FEES: (1) The Company will pay a facility fee with respect to
the Revolving Credit Facility based on the maximum
amount thereof, which facility fee will vary based on
the Net Funded Debt to EBITDA ratio of the Company and
its subsidiaries (Funded Debt minus cash and cash
equivalents divided by EBITDA) in effect from time to
time as provided in the following table:
<TABLE>
<CAPTION>
NET FUNDED DEBT TO EBITDA REVOLVING CREDIT FACILITY FEE
-----------------------------------------------------------------------
<S> <C>
Less than 1.00 0.125%
-----------------------------------------------------------------------
1.01 to 1.50 0.20%
-----------------------------------------------------------------------
1.51 to 2.00 0.25%
-----------------------------------------------------------------------
2.01 to 2.50 0.30%
-----------------------------------------------------------------------
Greater than 2.51 0.35%
-----------------------------------------------------------------------
</TABLE>
Notwithstanding anything to the contrary contained herein,
for the purposes of determining the Revolving Credit
Facility Fee from
<PAGE>
closing through the end of the second full fiscal quarter of
the Company occurring after closing, the Net Funded Debt to
EBITDA Ratio will be deemed to be in the 2.01 to 2.50 range.
The facility fee with respect to the Revolving Credit
Facility will be payable quarterly in arrears.
REPRESENTATIONS AND
WARRANTIES: The Credit Agreement will contain representations and
warranties which are usual and customary for borrowers of
this size and type or usual and customary for credit
facilities of this size, type and purpose, including, but
not limited to, representations relating to the following:
(a) Organization, Power, Qualification
(b) Ownership
(c) Authorization
(d) Compliance of Agreement, Etc.
(e) Compliance with Law, Governmental Approvals
(f) Tax Returns and Payments
(g) Intellectual Property Matters
(h) Environmental Matters
(i) ERISA
(j) Margin Stock
(k) Governmental Regulation
(l) Material Contracts
(m) Employee Relations
(n) Burdensome Provisions
(o) Financial Statements
(p) No Material Adverse Change
(q) Solvency
(r) Title to Properties
(s) Liens
(t) Debt and Contingent Obligations
(u) Litigation
(v) Absence of Defaults
(w) Year 2000 Compliance
(x) Accuracy and Completeness of Information
FINANCIAL
REPORTING: The Credit Agreement will contain provisions
requiring the Company to provide periodic financial reports
and information with respect to the Company and its
subsidiaries, including, but not limited to, provisions
requiring the following:
(a) Annual, audited financial statements, including, but
not limited to, a consolidated balance sheet, profit
and loss
<PAGE>
statement and statement of cash flows, with
supporting schedules, and SEC 10K report, as soon as
available and in any event within ninety (90) days
after the close of each fiscal year of the Company.
(b) Quarterly, unaudited financial statements, including,
hut not limited to, a consolidated balance sheet,
profit and loss statement and statement of cash flows,
with supporting schedules, and SEC 10Q report, as soon
as available and in any event within forty-five (45)
days after the close of each fiscal quarter of the
Company.
All financial Statements will be in reasonable detail,
prepared in conformity with generally accepted accounting
principles, applied on a basis consistent with the preceding
year, and accompanied by a covenant compliance certificate
in form and detail satisfactory to First Union. Such
Statements will be certified as to their correctness by a
principal financial officer of the Company.
AFFIRMATIVE
COVENANTS: The Credit Agreement will contain affirmative covenants
which are usual and customary for borrowers of this size and
type or usual and customary for credit facilities of this
size, type and purpose, including but not limited to,
affirmative covenants relating to the following:
(a) Preservation of Corporate Existence and Related Matters
(b) Maintenance of Property
(c) Insurance
(d) Accounting Methods and Financial Records
(e) Payment and Performance of Obligations
(f) Compliance with Laws and Approvals
(g) Environmental Laws
(h) Environmental Liability Insurance
(i) Compliance with ERISA
(j) Compliance with Agreements
(k) Conduct of Business
(l) Visits and Inspections
(m) Additional Guarantors
(n) Year 2000 Compliance
(o) Further Assurances
NEGATIVE COVENANTS: The Credit Agreement will contain negative covenants which
are usual and customary for borrowers of this size and type
or usual and customary for credit facilities of this size,
type and purpose,
<PAGE>
including, but not limited to, negative covenants relating
to the following:
(a) Limitations on Debt
(b) Limitations on Contingent Obligations
(c) Limitations on Liens
(d) Limitation on Loans, Advances, Investments and
Acquisitions
(e) Limitations on Mergers and Liquidation
(f) Limitation on Sale of Assets
(g) Limitations on Exchange and Issuance of Capital Stock
(h) Transactions with Affiliates
(i) Certain Accounting Changes
(j) Restrictive Agreements
FINANCIAL COVENANTS:The Credit Agreement will contain the following
financial covenants:
(a) Fixed Charge Coverage Ratio; the ratio, measured
quarterly, of Consolidated EBITDA for the four-quarter
period ending on the date of measurement to the sum of
Consolidated Current Maturities of Long-Term Debt as of
the beginning of such four-quarter period and
Consolidated Interest Expense for such four-quarter
period, will not be less than (i) 1.5 to 1 at any time
from closing through October 30, 2001, or (ii) 1.75 to
l at October 31, 2001, or at any time thereafter.
(b) Funded Debt to Cash Flow Ratio; the ratio, measured
quarterly, of Funded Debt to Cash Flow will not be
greater than (i) 3.0 to 1 from closing through October
30, 2000, or (ii) 2.5 to 1 at October 31, 2000, or at
any time thereafter. "Funded Debt to Cash Flow" shall
mean the sum of all funded debt divided by earnings
before interest, taxes, depreciation and amortization.
(c) Debt to Capital Ratio: the ratio, measured quarterly,
of Consolidated Funded Debt to Consolidated Total
Capitalization (Consolidated Funded Debt plus
Consolidated Net Worth), will not be greater than (i)
.60 to 1 at any time from closing through October 30,
1999, (ii) .55 to 1 at October 31, 1999, or at any time
thereafter through October 30, 2000, (iii) .50 to 1 at
October 31, 2000, or at any time thereafter.
<PAGE>
(d) Current Ratio: the ratio, measured quarterly, of
Consolidated Current Assets to Consolidated Current
Liabilities, will not be less than l.5 to l at anytime.
EVENTS OF DEFAULT: The Credit Agreement will contain events of default usual
and customary for borrowers of this size and type or usual
and customary for credit facilities of this size, type and
purpose, including, but not limited to, events of default
relating to the following:
(a) Nonpayment of Principal
(b) Other Payment Defaults
(c) Misrepresentation
(d) Default in Performance of Certain Covenants
(e) Default in Performance of Other Covenants
(f) Hedging Agreement
(g) Debt Cross-Default
(h) Other Cross-Defaults
(i) Change in Control
(j) Voluntary Bankruptcy
(k) Involuntary Bankruptcy
(l) Failure of Agreements
(m) ERISA
(n) Judgments
CONDITIONS PRECEDENT: The Credit Agreement will contain conditions precedent
usual and customary for borrowers of this size and type or
usual and customary for credit facilities of this size,
type and purpose, including but not limited to, conditions
precedent relating to the following:
(a) Due authorization, execution, delivery and filing of
the Credit Agreement, the Security Agreements, the
financing statements, the Guaranties and all other
credit documents
(b) Consummation of the Steel Acquisition
(c) Prepayment and cancellation of existing Bank lines of
credit
(d) UCC search reports satisfactory to Lenders
(e) Corporate certificates and resolutions and legal
opinions reasonably satisfactory to the Lenders and
their counsel
(f) Required approvals and consents
(g) Representations and warranties are true and correct
as of closing in all material respects
(h) Payment of fees due at closing
<PAGE>
(i) No event or condition in the financial or capital
markets that could reasonably be expected to have a
material adverse effect on the primary syndication
EXPENSES: The Company will pay all reasonable out-of-pocket costs
and expenses (including, but not limited to, syndication
expenses and the reasonable fees and disbursements of
counsel) incurred by First Union in connection with the
Revolving Credit Facility and the Term Loan Facility and
the enforcement and maintenance of the respective rights
of First Union and the Lenders under the Credit Agreement
and related documents.
VOTING RIGHTS: Lenders representing 100% of the commitments and/or Loans
shall be required for changes in commitment amounts, time
of payments, interest rates, facility fees and changes in
the definition of Majority Lenders. Majority Lender
approval will be required for all other modifications or
amendments.
MAJORITY LENDERS: 66 2/3%
PARTICIPATIONS AND
ASSIGNMENTS: Lenders will be permitted to assign their commitments
in minimum amounts of $10,000,000 subject to the
Agent's and (as long as no default or event of
default has occurred) the Company's consent, which
consent will not be unreasonably withheld. An
assignment fee of $3,500 will be paid to the Agent by
the assigning Lender with respect to each such
assignment. Participations will also be permitted in
minimum amounts of $5,000,000 and upon the other
terms and subject to the other conditions to be
contained in the Credit Agreement; provided that no
participant may be granted voting rights except with
respect to matters that require the consent of all
Lenders.
GOVERNING LAW: Commonwealth of Virginia
AGENT'S COUNSEL: Mays & Valentine, L.L.P., Richmond, Virginia
MISCELLANEOUS: This summary of terms and conditions is intended as a
summary only and does not purport to set forth all of
the conditions, covenants, representations,
warranties and other provisions which will be
contained in the Credit Agreement and the other
related documentation for the Revolving Credit
Facility and the Term Loan Facility described herein.
<PAGE>
Exhibit (b)(2)
Commitment Letter, dated November 6, 1998, from Crestar Bank to
Roanoke Electric Steel Corporation.
<PAGE>
November 6, 1998
Roanoke Electric Steel Corporation
102 Westside Boulevard
Roanoke, Virginia 24017
Attention: Mr. John E. Morris
Vice President - Finance
Gentlemen:
This letter will confirm that Crestar Bank (the "Lender") has committed to
provide to Roanoke Electric Steel Corporation (the "Company") up to $5,000,000
of the Revolving Credit Facility and up to $25,000,000 of the Term Loan Facility
described in the commitment letter to the Company from First Union National Bank
dated November 5, 1998, including the Roanoke Electric Steel Corporation Summary
of Terms and Conditions (the "First Union Commitment").
The commitments described above are expressly subject to the Lender's
satisfaction with each of the condition's set forth in the First Union
Commitment including, without limitation, the completion of a definitive credit
agreement and related documentation acceptable to the Lender.
Further, we understand that all costs and expenses associated with the closing
of the Facilities, including legal fees, will be paid by Roanoke Electric Steel
Corporation. Crestar agrees to accept Mays & Valentine as the sole legal counsel
for the bank group.
Sincerely,
s/Martha D. Shifflett
Martha D. Shifflett
Senior Vice President
ACCEPTED:
ROANOKE ELECTRIC STEEL CORPORATION
By: s/ John E. Morris
Title: Vice President - Finance
<PAGE>
Exhibit (b)(3)
Commitment Letter, dated November 6, 1998, from NationsBank, N.A. to
Roanoke Electric Steel Corporation.
<PAGE>
November 6, 1998
Roanoke Electric Steel Corporation
102 Westside Boulevard
Roanoke, Virginia 24017
Attention: Mr. John E. Morris
Vice President - Finance
Dear John:
This letter will confirm that NationsBank, N.A. (the "Lender") has committed to
provide to Roanoke Electric Steel Corporation (the "Company") up to $7.5 million
of the Revolving Credit Facility and up to $37.5 million of the Term Loan
Facility described in the commitment letter dated November 5, 1998, from First
Union National Bank to the Company (the "First Union Commitment Letter").
The Lender's commitments described above are expressly subject to (i)
satisfaction of each of the conditions precedent set forth in the First Union
Commitment Letter, including, without limitation, the completion of a definitive
credit agreement and related documentation acceptable to the Lender, and (ii)
each of the other terms and conditions contained in the First Union Commitment
Letter.
Sincerely,
s/ James D. Cockey
James D. Cockey
Senior Vice President
bc
<PAGE>
Exhibit (b)(4)
Commitment Letter, dated November 9, 1998, from Wachovia Bank, N.A.,
to Roanoke Electric Steel Corporation.
<PAGE>
November 9, 1998
Roanoke Electric Steel Corporation
102 Westside Boulevard
Roanoke, Virginia 24017
Attention: Mr. John E. Morris
Vice President - Finance
Gentlemen:
Reference is made to that certain letter dated November 5, 1998 from First
Union National Bank to Roanoke Electric Steel Corporation, a copy of which is
attached hereto as Exhibit A (the "First Union Commitment"). Unless otherwise
defined herein, capitalized terms used in this letter which are defined in the
First Union Commitment shall have the meaning set forth therein.
Based upon and subject to the terms and conditions set forth below and in
the Term Sheet (as modified herein), Wachovia is pleased to confirm its
commitment (this "Wachovia Commitment") to provide up to $7.5 million of the
revolving credit facility and up to $37.5 million of the term loan facility.
Wachovia's obligations hereunder are subject to (i) the Company's written
acceptance of this commitment letter, (ii) the completion of a definitive credit
agreement and related documentation for the Facilities, customary for
transactions of this type, in form and substance satisfactory to Wachovia, (iii)
completion of all documentation relating to the Steel Acquisition including the
Acquisition Documents in form and substance reasonably satisfactory to Wachovia;
(iv) compliance with all applicable laws and regulations (including compliance
of the Wachovia commitment and the transactions described herein with all
applicable federal banking laws, rules and regulations), (v) the absence of any
material adverse condition or change in the financial or capital markets prior
to the execution of such definitive credit documentation, (vi) the receipt by
the Company of commitments from other Lenders acceptable to Wachovia for the
entire amount of the Facilities not committed for by Wachovia, and (vii) the
satisfaction, in Wachovia's discretion, of all other conditions described
herein, in the Term Sheet (as modified herein) and in such definitive
documentation.
By executing this letter, the Company agrees to indemnify and hold harmless
Wachovia and each director, officer, employee, attorney and affiliate of
Wachovia (each such person or entity referred to hereinafter as a "Indemnified
Person") from any losses, claims, costs, damages, expenses or liabilities (or
actions, suits or proceedings, including any inquiry or investigation, with
respect thereto) to which any Indemnified Person may become liable to any third
party, insofar as such losses, claims, costs, damages, expenses or liabilities
(or actions, suits or proceedings, including any inquiry or investigation, with
respect thereto) arise out of, in any way relate to, or result from, this
letter, the Facilities or the transactions contemplated hereby and thereby and
to reimburse upon demand each Indemnified Person for any and all legal and other
<PAGE>
expenses incurred in connection with investigating, preparing to defend or
defending any such loss, claim, cost, damage, expense or inquiry or
investigation with respect thereto; provided that the Company shall have no
obligation under this indemnity provision for liabilities resulting from the
gross negligence or willful misconduct of any Indemnified Person. The foregoing
provisions of this paragraph shall be in addition to any right that Indemnified
Person shall have at common law or otherwise. No Indemnified Person shall be
responsible or liable for consequential damages which may be alleged as a result
of this letter or any of the transactions referred to herein. The provisions of
this paragraph shall remain in full force and effect until the definite
documentation shall be executed and delivered and notwithstanding the
termination of this letter or the commitment of Wachovia hereunder or the
failure of the Facilities or either of them, to close.
The Term Sheet, as attached to the First Union Commitment shall be amended
as follows:
1. The reference to "First Union" in the last line of the paragraph
entitled "Guarantors" shall be changed to "the Lenders".
2. The paragraph entitled "Upfront Fee" shall be amended and restated to
read in its entirety as follows: "The Company will pay to First Union, for the
ratable benefit of each of the Lenders, an Upfront Fee equal to 25 basis points
on the aggregate amount of the Facilities; payable at closing. The Upfront Fee
will be fully earned and non-refundable once paid.
3. The paragraph entitled "Interest Rate Protection" shall be amended to
provide that the reference to "First Union" in the second line of said paragraph
shall be replaced by the phrase "one or more of the Lenders"; and the references
to "First Union" in the third line of said paragraph shall be replaced with the
phrase "the Lenders".
4. The paragraph entitled "Expenses" shall be amended to add after the
term "First Union" the phrase "and the Lenders".
5. The paragraph entitled "Voting Rights" shall be amended to provide that
Lenders representing 100% of the commitments and/or loans shall be required for
any changes or releases in or to any collateral, except for the automatic
release referenced in the Security section of the Term Sheet, or the release of
any Guarantor.
The Company further agrees that Wachovia and its affiliates will be
afforded an opportunity to offer proposals to provide (i) any interest rate
caps, currency swaps and other hedging transactions to be entered into by the
Company, any of its subsidiaries, or any of their respective affiliates and (ii)
cash management, funds transfer, trade, corporate trust and securities services
to be obtained by the Company, any of its subsidiaries or their respective
affiliates.
The Company shall reimburse Wachovia from time to time on demand for all
reasonable out-of-pocket fees and other expenses (including, but not limited to,
the reasonable fees, disbursements and other charges of counsel to Wachovia)
incurred in connection with the
<PAGE>
Facilities, including the preparation and/or review of definitive documentation
for the Facilities and the transactions contemplated hereby.
The Wachovia Commitment shall terminate at 5:00 p.m. (Roanoke, Virginia
time) on November 13,1998, unless the Wachovia Commitment is accepted by the
Company in writing prior to such time and, if accepted prior to such time, shall
expire at the earlier of (i) consummation of the Steel Acquisition or another
transaction or series of transactions in which the Company acquires all or a
substantial portion of the stock or assets of Steel of West Virginia, (ii)
termination of the Acquisition Documents regarding the Steel Acquisition, (iii)
the occurrence of any event that has, or could be expected to have, a material
adverse effect on the business, properties, operations or conditions (financial
or otherwise) of the Company or any of its subsidiaries or Steel of West
Virginia, and (iv) 5:00 p.m. (Roanoke, Virginia time) on February 28, 1999, if
the closing of the Steel Acquisition and the Facilities shall not have occurred
by such time.
The Wachovia Commitment and the Term Sheet (as modified herein) shall
constitute the entire agreement between the parties relating to the subject
matter hereof and thereof and supersede any previous agreement, written or oral,
between the parties with respect to the subject matter hereof and thereof. No
party or person has been authorized by Wachovia to make any oral or written
statements inconsistent with this letter. The Wachovia Commitment may not be
assigned by the Company or relied upon by any person or entity (other than the
Company) without the prior written consent of Wachovia.
[The remainder of this page intentionally left blank]
<PAGE>
This letter replaces and supersedes any and all earlier commitment letters
delivered to the Company by Wachovia in connection with the proposed Steel
Acquisition and all such earlier commitment letters are of no further force or
effect.
Sincerely,
WACHOVIA BANK, N.A.
By: /s/ Michael H. Trainor
----------------------------
Name: Michael H. Trainor
--------------------------
Title: Vice President
-------------------------
Agreed to and accepted this 9th
day of November, 1998.
ROANOKE ELECTRIC STEEL
CORPORATION
By: /s/ John E. Morris
-----------------------------
Name: John E. Morris
---------------------------
Title: Vice President - Finance
--------------------------
<PAGE>
Exhibit (c)(1)
Agreement and Plan of Merger, dated as of November 10, 1998, among
Roanoke Electric Steel Corporation, SWVA Acquisition, Inc., and Steel
of West Virginia, Inc.
<PAGE>
AGREEMENT AND PLAN OF MERGER
AMONG
ROANOKE ELECTRIC STEEL CORPORATION
SWVA ACQUISITION, INC.
AND
STEEL OF WEST VIRGINIA, INC.
DATED AS OF NOVEMBER 10, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
ARTICLE I
THE OFFER................................................................... 2
Section 1.1: The Offer..................................................... 2
Section 1.2: Company Action................................................ 3
ARTICLE II
THE MERGER.................................................................. 4
Section 2.1: The Merger.................................................... 4
Section 2.2: Closing; Effective Time....................................... 5
Section 2.3: Effects of the Merger......................................... 5
Section 2.4: Certificate of Incorporation; By-Laws......................... 5
Section 2.5: Directors and Officers of the Surviving Corporation........... 5
Section 2.6: Conversion of Securities...................................... 6
Section 2.7: Treatment of Options.......................................... 6
Section 2.8: Dissenting Shares and Section 262 Shares...................... 7
Section 2.9: Surrender of Shares; Stock Transfer Books..................... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................... 9
Section 3.1: Organization and Qualification; Subsidiaries.................. 9
Section 3.2: Certificate of Incorporation and By-Laws...................... 9
Section 3.3: Capitalization................................................ 9
Section 3.4: Authority Relative to This Agreement.......................... 10
Section 3.5: No Conflict; Required Filings and Consents.................... 11
Section 3.6: Compliance.................................................... 12
Section 3.7: SEC Filings; Financial Statements............................. 12
Section 3.8: Absence of Certain Changes or Events.......................... 13
Section 3.9: Absence of Litigation......................................... 14
Section 3.10: Employee Benefit Plans........................................ 14
Section 3.11: Tax Matters................................................... 15
Section 3.12: Offer Documents; Proxy Statement.............................. 17
Section 3.13: Environmental Matters......................................... 17
Section 3.14: Title and Condition of Properties............................. 19
Section 3.15: Brokers....................................................... 21
Section 3.16: Intellectual Property......................................... 21
Section 3.17: Contracts..................................................... 22
Section 3.18: Potential Conflicts of Interest............................... 23
Section 3.19: Year 2000 Compliance.......................................... 23
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER....................... 24
Section 4.1: Corporate Organization......................................... 24
Section 4.2: Authority Relative to This Agreement........................... 24
Section 4.3: No Conflict; Required Filings and Consents..................... 24
Section 4.4: Offer Documents; Proxy Statement............................... 25
Section 4.5: Brokers........................................................ 25
Section 4.6: Funds.......................................................... 25
Section 4.7: No Prior Activities............................................ 26
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER....................................... 26
Section 5.1: Conduct of Business of the Company Pending the Merger.......... 26
Section 5.2: No Amendment of the Rights Agreement........................... 28
ARTICLE VI
ADDITIONAL AGREEMENTS........................................................ 28
Section 6.1: Stockholders Meeting........................................... 28
Section 6.2: Proxy Statement................................................ 29
Section 6.3: Company Board Representation; Section 14(f).................... 29
Section 6.4: Access to Information; Confidentiality......................... 30
Section 6.5: No Solicitation of Transactions................................ 31
Section 6.6: Employee Matters............................................... 32
Section 6.7: Directors' and Officers' Indemnification and Insurance......... 33
Section 6.8: Nomination of Timothy R. Duke.................................. 34
Section 6.9: Notification of Certain Matters................................ 34
Section 6.10: Further Action; Reasonable Best Efforts........................ 34
Section 6.11: Public Announcements........................................... 35
Section 6.12: Disposition of Litigation...................................... 35
Section 6.13: Commitment Letter.............................................. 35
ARTICLE VII
CONDITIONS OF MERGER......................................................... 36
Section 7.1: Conditions to Obligation of Each Party to Effect the Merger.... 36
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER............................................ 37
Section 8.1: Termination.................................................... 37
Section 8.2: Effect of Termination.......................................... 38
Section 8.3: Fees and Expenses.............................................. 38
Section 8.4: Amendment...................................................... 39
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 8.5: Waiver.......................................................... 39
ARTICLE IX
GENERAL PROVISIONS............................................................ 39
Section 9.1: Non-Survival of Representations, Warranties and Agreements...... 39
Section 9.2: Notices......................................................... 39
Section 9.3: Certain Definitions............................................. 41
Section 9.4: Severability.................................................... 42
Section 9.5: Entire Agreement; Assignment.................................... 42
Section 9.6: Parties in Interest............................................. 42
Section 9.7: Governing Law................................................... 42
Section 9.8: Headings........................................................ 42
Section 9.9: Counterparts; Facsimile Signatures.............................. 43
Section 9.10: Specific Performance............................................ 43
ANNEX A............................................................................ 45
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of November 10, 1998 (this
"Agreement"), among Roanoke Electric Steel Corporation, a Virginia corporation
("Parent"), SWVA Acquisition, Inc., a Virginia corporation and a wholly owned
subsidiary of Parent ("Purchaser"), and Steel of West Virginia, Inc., a Delaware
corporation (the "Company").
B A C K G R O U N D
A. The Board of Directors of the Company has determined that it is in the
best interests of the Company and the stockholders of the Company to enter into
this Agreement with Parent and Purchaser, providing for a tender offer (as may
be amended from time to time, the "Offer") for all of the issued and outstanding
shares of common stock, par value $0.01 per share, of the Company (being
6,010,795) (the "Shares"), including the associated rights to purchase common
stock of the Company (the "Rights") issued pursuant to the Rights Agreement
dated as of March 19, 1997, between Steel of West Virginia, Inc., and
Continental Stock Transfer & Trust Company, as Rights Agent (the "Rights
Agreement"), to be made by Purchaser, followed by the merger of Purchaser with
the Company (the "Merger") in accordance with the General Corporation Law of the
State of Delaware (the "DGCL"), and the Virginia Stock Corporation Act (the
"VSCA"), in each case upon the terms and subject to the conditions set forth
herein.
B. The Board of Directors of Parent and Purchaser have each approved the
Offer and the Merger, in each case, upon the terms and subject to the conditions
set forth herein.
C. Concurrently with the execution and delivery of this Agreement, and as
an inducement to Parent and Purchaser to enter into this Agreement, the Company
has entered into a Stock Option Agreement with Parent and Purchaser (the "Stock
Option Agreement"), pursuant to which the Company has granted to Purchaser an
option to purchase Shares upon the terms and subject to the conditions set forth
in the Stock Option Agreement.
D. Concurrently with the execution and delivery of this Agreement, and as
an inducement to Parent and Purchaser to enter into this Agreement, certain
stockholders of the Company have each entered into a Stock Tender and Voting
Agreement, dated as of the date hereof, among Parent, Purchaser and the
stockholders named therein providing, among other things, that each such
stockholder will tender such Shares beneficially owned by such stockholder
pursuant to the Offer and will vote such Shares beneficially owned by such
stockholder in favor of the Merger.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Purchaser and the Company hereby agree as follows:
<PAGE>
ARTICLE I
THE OFFER
SECTION 1.1: THE OFFER.
-----------------------
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.1 and no event shall have occurred and no circumstance
shall exist that would result in a failure to satisfy any of the conditions set
forth in Annex A hereto (the "Offer Conditions," as defined in Annex A),
Purchaser shall, as soon as reasonably practicable after the date hereof (and in
any event within five business days from the date of public announcement of the
execution hereof), commence the Offer to purchase for cash all of the Shares,
together with the associated Rights (all references herein to Shares in the
context of the transactions contemplated by this Agreement shall be deemed to
include such Rights), at a price of $10.75 per Share, net to the seller in
cash. The obligation of Purchaser to accept for payment Shares tendered
pursuant to the Offer shall be subject to the terms and conditions of this
Agreement and to the satisfaction or waiver by Purchaser of the Offer
Conditions. Purchaser shall not, without the prior written consent of the
Company, (i) decrease the price per Share to be paid in the Offer, change the
form of consideration payable in the Offer (other than by adding consideration)
or decrease the number of Shares sought in the Offer, (ii) change or amend the
Offer Conditions (other than to waive any condition, except that the Minimum
Condition (as defined in Annex A) may not be waived without the consent of the
Company), (iii) impose additional conditions to the Offer or (iv) amend any
other term of the Offer in any manner adverse to the holders of Shares (other
than insignificant changes or amendments). The Offer shall expire at 12:00
midnight, Eastern Standard Time, on the 20/th/ business day following
commencement of the Offer (such date and time, as may be extended in accordance
with the terms hereof, is referred to as the "Expiration Date"); provided,
--------
however, that if, on the Expiration Date, the Offer Conditions have not been
- -------
satisfied or waived, Purchaser shall have the right, in its sole discretion, to
extend the Offer for one or more periods not to exceed an aggregate of thirty
business days; provided further that if all of the Offer Conditions have been
----------------
satisfied or waived and less than 90% of the outstanding Shares have been
tendered in the Offer and not withdrawn, then Purchaser shall have the
additional right, in its sole discretion, so long as Purchaser and Parent each
waives in writing the satisfaction of each of the Offer Conditions, to extend
the Offer for one or more periods not to exceed an aggregate of twenty business
days; and provided further that in no event shall the Expiration Date be
----------------
extended beyond February 28, 1999 (the "Outside Date") without the consent of
the Company.
The Offer Conditions shall be for the benefit of Purchaser and, except
with respect to the Minimum Condition, may be waived by Purchaser, in whole or
in part at any time and from time to time, in its sole discretion.
(b) As soon as reasonably practicable after the date hereof (and in
any event within five business days from the date of public announcement of the
execution hereof), Purchaser shall file a Tender Offer Statement on Schedule
14D-1 (together with all amendments and supplements thereto, collectively the
"Schedule 14D-1") with respect to the Offer with the Securities and Exchange
Commission (the "SEC"). The Schedule 14D-1 shall contain an offer to
2
<PAGE>
purchase (together with all amendments and supplements thereto collectively the
"Offer to Purchase"), form of the related letter of transmittal, together with
all amendments and supplements thereto (collectively the "Letter of
Transmittal"), and the form of summary advertisement (which Schedule 14D-1,
Offer to Purchase, Letter of Transmittal and other documents, together with any
supplements or amendments thereto, are referred to herein collectively as the
"Offer Documents"). The Company and its counsel shall be given an opportunity to
review the Offer Documents before they are filed with the SEC. Parent and
Purchaser jointly represent and warrant that the Offer Documents will, in all
material respects, comply with the requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder and all other applicable laws, and will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained therein not misleading; provided, however, that the
-------- -------
representations and warranties in this subsection shall not apply to statements
in or omissions from the Offer Documents made in reliance upon and in conformity
with information furnished to Parent in writing by or on behalf of the Company.
Parent and Purchaser shall promptly provide to the Company a copy of any written
comments received by them from the SEC with respect to the Offer Documents.
Parent and Purchaser shall promptly correct any information provided by it for
use in the Offer Documents that have become false or misleading in any material
respect, and Parent and Purchaser further agree to take all steps necessary to
cause the Offer Documents as so corrected to be filed with the SEC and the Offer
Documents (other than the Schedule 14D-1), as so corrected, to be disseminated
to holders of Shares, in each case as and to the extent required by applicable
federal securities laws.
SECTION 1.2: COMPANY ACTION.
----------------------------
(a) The Company hereby approves of and consents to the Offer and
represents and warrants that: (i) its Board of Directors, at a meeting duly
called and held on September 29, 1998, has unanimously (A) determined that this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, are advisable and in the best interests of the Company and the holders
of Shares, (B) approved this Agreement, the Stock Option Agreement, and the
transactions contemplated hereby and thereby, including each of the Offer and
the Merger, and (C) resolved to recommend that the stockholders of the Company
accept the Offer, tender their Shares to Purchaser thereunder and adopt this
Agreement; provided, however, that prior to the consummation of the Offer, if
-------- -------
the Company's Board of Directors by majority vote shall have determined in good
faith, based upon the advice of outside counsel to the Company, that failure to
modify or withdraw its recommendation is reasonably likely to constitute a
breach of the Board's fiduciary duty under applicable law, then the Board of
Directors may so modify or withdraw its recommendation; and (ii) Janney
Montgomery Scott, Inc. (the "Financial Adviser"), has delivered to the Board of
Directors of the Company its opinion that the consideration to be paid to the
holders of Shares, other than Parent and Purchaser, pursuant to each of the
Offer and the Merger is fair to such holders from a financial point of view.
The Company has been authorized by the Financial Adviser to permit, subject to
prior review and consent by such Financial Adviser, the inclusion of such
fairness opinion, in its entirety, in the Schedule14D-9 (as defined in
subsection (b) hereof) and the Proxy Statement (as defined in Section 3.12).
The Company hereby consents to the inclusion in the Offer Documents of the
recommendations of the Company's Board of Directors described in this Section
1.2(a).
3
<PAGE>
(b) As soon as reasonably practicable after the date hereof (and in
any event within five business days from the date of public announcement of the
execution hereof), the Company shall file with the SEC, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9"), containing the
recommendations of the Company's Board of Directors described in and subject to
Section 1.2(a)(i) and shall promptly mail the Schedule 14D-9 to the stockholders
of the Company. The Company represents and warrants that the Schedule 14D-9
will comply in all material respects with all applicable laws, including without
limitation the Exchange Act and the rules and regulations promulgated thereunder
and will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained therein not misleading;
provided, however, that the representations and warranties in this subsection
- -------- -------
shall not apply to statements in or omissions from the Schedule 14D-9 made in
reliance upon and in conformity with information furnished to the Company in
writing by or on behalf of Parent or Purchaser. Parent and Purchaser and their
counsel shall be given an opportunity to review the Schedule 14D-9 before it is
filed with the SEC. The Company shall promptly provide to Parent and Purchaser
a copy of any written comments received by it from the SEC with respect to the
Schedule 14D-9. The Company, Parent and Purchaser shall promptly correct any
information provided by it for use in the Schedule 14D-9 that shall have become
false or misleading in any material respect, and the Company further agrees to
take all steps necessary to cause the Schedule 14D-9, as so corrected, to be
filed with the SEC and disseminated to holders of Shares, in each case as and to
the extent required by applicable federal securities laws.
(c) In connection with the Offer, the Company shall promptly furnish
Purchaser with mailing labels, security position listings, any non-objecting
beneficial owner lists and any available listings or computer files containing
the names and addresses of the record holders of Shares, each as of a recent
date, and shall promptly furnish Purchaser with such additional information
(including but not limited to updated lists of stockholders, mailing labels,
security position listings and non-objecting beneficial owner lists) and such
other customary assistance as Parent, Purchaser or their agents may reasonably
require in communicating the Offer to the record and beneficial holders of
Shares. Subject to the requirements of law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Offer and the Merger, Purchaser, Parent and each of their
affiliates, agents and associates shall hold in confidence the information
contained in any of such lists, labels or additional information subject to the
terms and conditions of the Confidentiality Agreement (as defined below).
ARTICLE II
THE MERGER
SECTION 2.1: THE MERGER. Upon the terms and subject to the conditions
------------------------
of this Agreement and in accordance with the DGCL and the VSCA, at the Effective
Time (as defined in Section 2.2), Purchaser shall be merged with and into the
Company. As a result of the Merger,
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the separate corporate existence of Purchaser shall cease and the Company shall
continue as the surviving corporation of the Merger (the "Surviving
Corporation").
SECTION 2.2: CLOSING; EFFECTIVE TIME. Subject to the provisions of
-------------------------------------
Article VII, the closing of the Merger (the "Closing") shall take place in
Roanoke, Virginia at the offices of Woods, Rogers & Hazlegrove, P.L.C., First
Union Tower, Suite 1400, 10 South Jefferson Street, Roanoke, Virginia, as soon
as practicable but in no event later than the fifth business day after the
satisfaction or waiver of the conditions set forth in Article VII, or at such
other place or at such other date as Parent and the Company may mutually agree.
The date on which the Closing actually occurs is hereinafter referred to as the
"Closing Date". At the Closing, the parties hereto shall cause the Merger to be
consummated by the filing of (a) articles of merger and (b) a certificate of
merger or a certificate of ownership and merger (the Articles of Merger and such
appropriate certificate to be referred to herein collectively as the
"Certificate of Merger"), respectively, with the Virginia State Corporation
Commission and the Secretary of State of the State of Delaware, in such form as
required by and executed in accordance with the relevant provisions of the DGCL
and the VSCA (the later of (x) the date and time of the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
(y) the date and time of the filing of the Articles of Merger with the Virginia
State Corporation Commission being the "Effective Time").
SECTION 2.3: EFFECTS OF THE MERGER. The Merger shall have the effects
-----------------------------------
set forth in the applicable provisions of the DGCL and the VSCA. Without
limiting the generality of the foregoing and subject thereto, at the Effective
Time all the property, rights, privileges, immunities, powers and franchises of
the Company and Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Purchaser shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION 2.4: CERTIFICATE OF INCORPORATION; BY-LAWS.
---------------------------------------------------
(a) At the Effective Time and without any further action on the part
of the Company and Purchaser, the Certificate of Incorporation of the Company,
as in effect immediately prior to the Effective Time, shall be the certificate
of incorporation of the Surviving Corporation until thereafter amended as
provided therein and under the DGCL.
(b) At the Effective Time and without any further action on the part
of the Company and Purchaser, the By-Laws of the Company, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation and thereafter may be amended or repealed in accordance with their
terms or the Certificate of Incorporation of the Company and as provided by law.
SECTION 2.5: DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
-----------------------------------------------------------------
directors of Purchaser immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and By-Laws of the Surviving
Corporation (directors and officers of the Company shall tender their
resignations effective upon the Effective Time), and the officers of the
Surviving Corporation shall be Timothy R. Duke, President, Mark Meikle, Vice
President and Treasurer, Bruce Groff,
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Vice President of Human Resources and Secretary and Donald G. Smith, Chairman of
the Board, in each case to hold office until their respective successors are
duly elected or appointed (as the case may be) and qualified.
SECTION 2.6: CONVERSION OF SECURITIES. At the Effective Time, by virtue
--------------------------------------
of the Merger and without any action on the part of Purchaser, the Company,
holders of any Shares, holders of common stock of Purchaser or the holders of
any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be canceled pursuant to Section 2.6(b),
and any Dissenting Shares (as defined in Section 2.8(a)) by virtue of the Merger
and without any action on the part of the holder thereof, shall be canceled,
extinguished and converted into the right to receive $10.75 in cash or such
greater amount that may be paid pursuant to the Offer (the "Merger
Consideration"), payable to the holder thereof, without interest, less any
required withholding taxes. Each holder of a certificate representing any such
Shares shall thereafter cease to have any rights with respect to such Shares,
except the right to receive the Merger Consideration for such Shares upon the
surrender of such certificate in accordance with Section 2.9 below.
(b) Each share of Company common stock, par value $0.01 per share (the
"Company Common Stock") held in the treasury of the Company together with the
associated Rights (all references herein to Company Common Stock in the context
of the transactions contemplated by this Agreement shall be deemed to include
such Rights), and each Share owned by the Company, Parent, Purchaser or any
other direct or indirect subsidiary of such persons, in each case immediately
prior to the Effective Time, by virtue of the Merger and without any action on
the part of the holder thereof, shall be canceled and retired without any
conversion thereof and no payment or distribution shall be made with respect
thereto.
(c) Each share of common stock of Purchaser issued and outstanding
immediately prior to the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, shall be converted into and become one
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
SECTION 2.7: TREATMENT OF OPTIONS. Immediately after the payment for
----------------------------------
Shares in the Offer, the Company shall cause each of the 153,500 outstanding
options, which the Company represents and warrants are the only outstanding
options to purchase Company Common Stock (including, without limitation, under
the Company's 1995 Employee Stock Option Plan and the Company's 1995 Non-
Employee Directors' Stock Option Plan), as set forth in Schedule 2.7 to the
Company Disclosure Letter (the "Options"), whether or not then exercisable or
vested, to be canceled, and the holder thereof to be entitled to receive
thereafter in consideration for such cancellation, an amount in cash equal to
the product of (a) the number of Shares subject to such Option immediately
before the cancellation of same and (b) the excess, if any, of the Merger
Consideration over the exercise price per Share of the Option immediately before
the cancellation of same (such payment to be net of applicable withholding
taxes).
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SECTION 2.8: DISSENTING SHARES AND SECTION 262 SHARES.
------------------------------------------------------
(a) Notwithstanding anything in this Agreement to the contrary, Shares
that are issued and outstanding immediately prior to the Effective Time and
which are held by stockholders who have not voted in favor of or consented to
the Merger and who shall have delivered a written demand for appraisal of such
Shares in the time and manner provided in Section 262 of the DGCL and who shall
not have failed to perfect or shall not have effectively withdrawn or lost their
rights to appraisal and payment under the DGCL (the "Dissenting Shares") shall
not be converted into the right to receive the Merger Consideration, but shall
be entitled to receive the consideration as shall be determined pursuant to
Section 262 of the DGCL; provided, however, that if such holder shall have
failed to perfect or shall have effectively withdrawn or lost his, her or its
right to appraisal and payment under the DGCL, such holder's Shares shall
thereupon be deemed to have been converted, at the Effective Time, into the
right to receive the Merger Consideration set forth in Section 2.6(a) of this
Agreement, without any interest thereon.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal pursuant to Section 262 received by the Company, withdrawals of such
demands, and any other instruments served pursuant to the DGCL and received by
the Company and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under the DGCL. The Company shall not,
except with the prior written consent of Parent or as otherwise required by
applicable law, make any payment with respect to any such demands for appraisal
or offer to settle or settle any such demands.
SECTION 2.9: SURRENDER OF SHARES; STOCK TRANSFER BOOKS.
-------------------------------------------------------
(a) Prior to the Effective Time, Purchaser shall designate First Union
National Bank, NationsBank, N.A., or such other bank or trust company reasonably
acceptable to the Company, to act as agent for the holders of Shares in
connection with the Merger (the "Paying Agent") to receive and disburse the cash
to which holders of Shares shall become entitled pursuant to Section 2.6(a). At
the Effective Time, Parent or Purchaser will make available to the Paying Agent
sufficient funds to make all payments pursuant to Section 2.6(a). Such funds
shall be invested by the Paying Agent as directed by Purchaser or, after the
Effective Time, the Surviving Corporation, provided that such investments shall
be in obligations of or guaranteed by the United States of America, in
commercial paper obligations rated A-1 or P-1 or better by Moody's Investors
Service, Inc. or Standard & Poor's Corporation, respectively, or in certificates
of deposit, bank repurchase agreements or banker's acceptances of commercial
banks with capital exceeding $500 million. Any net profit resulting from, or
interest or income produced by, such investments will be payable to the
Surviving Corporation or Parent, as Parent directs.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause to be mailed to each record holder, as of the Effective Time, of an
outstanding certificate, certificates or lost certificate affidavits which
immediately prior to the Effective Time represented Shares (the "Certificates"),
a form of letter of transmittal mutually agreeable to the Company and Parent
(which shall specify that delivery shall be effected, and risk of loss and title
7
<PAGE>
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Paying Agent) and instructions for use in effecting the surrender of the
Certificates for payment of the Merger Consideration therefor. Upon surrender to
the Paying Agent of a Certificate, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
and such other documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor the
Merger Consideration for each Share formerly represented by such Certificate,
and such Certificate shall then be canceled. Upon surrender to the Paying Agent
of such certificates, together with such letter of transmittal, duly executed
and completed in accordance with the instructions thereto, the Surviving
Corporation promptly, but in no event later than three business days after
receipt of such documents by the Paying Agent, shall cause to be paid to the
persons entitled thereto, a check in the amount to which such persons are
entitled. No interest shall be paid or accrued for the benefit of holders of the
Certificates on the Merger Consideration payable upon the surrender of the
Certificates. If payment of the Merger Consideration is to be made to a person
other than the person in whose name the surrendered Certificate is registered,
it shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or shall be otherwise in proper form for transfer and that the
person requesting such payment shall have paid any transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such tax
either has been paid or is not applicable. The Surviving Corporation shall pay
all charges and expenses, including those of the Paying Agent, in connection
with the exchange of Merger Consideration for Shares. In the event any
certificate representing Shares shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such certificate
to be lost, stolen or destroyed, the Paying Agent will issue in exchange for
such affidavit, as well as an unsecured indemnity in favor of the Surviving
Corporation for any claim that may be made against the Surviving Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed,
the Merger Consideration deliverable in respect thereof.
(c) At any time following the first anniversary of the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds (including any interest received with respect thereto)
which had been made available to the Paying Agent and which have not been
disbursed to holders of Certificates, and thereafter such holders shall be
entitled to look to the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as general creditors thereof with respect to
the Merger Consideration payable upon due surrender of their Certificates.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Certificate for Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(d) At the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers of Shares on the records of the Company. From and after the Effective
Time, the holders of Certificates evidencing ownership of Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares except as otherwise provided for herein or by applicable
law.
8
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Purchaser that,
except as set forth in the letter (the "Company Disclosure Letter") delivered by
the Company to Purchaser prior to the date of execution of this Agreement:
SECTION 3.1: ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Except as
----------------------------------------------------------
set forth on Schedule 3.1 to the Company Disclosure Letter, the Company and each
of its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the requisite corporate power and authority and has all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power, authority and governmental
approvals will not, individually or in the aggregate, have a Material Adverse
Effect (as defined below) or prevent or materially delay the consummation of the
Offer or the Merger. Each of the Company and each of its subsidiaries is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing as are not likely, to have a Material
Adverse Effect. When used in connection with the Company or any of its
subsidiaries, the term "Material Adverse Effect" means any change or effect that
would be materially adverse to the results of operations, financial condition or
business of the Company and its subsidiaries taken as a whole.
SECTION 3.2: CERTIFICATE OF INCORPORATION AND BY-LAWS. Except as set
------------------------------------------------------
forth on Schedule 3.2 to the Company Disclosure Letter, the Company has
heretofore furnished to Parent a complete and correct copy of the Certificate of
Incorporation and the By-Laws of the Company as currently in effect. Such
Certificate of Incorporation and By-Laws are in full force and effect and no
other organizational documents are applicable to or binding upon the Company.
The Company is not in violation of any of the provisions of its Certificate of
Incorporation or By-Laws.
SECTION 3.3: CAPITALIZATION. The authorized capital stock of the
----------------------------
Company consists of 17,000,000 shares of Company Common Stock. As of November
10, 1998, (a) 6,010,795 shares of Company Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable and
were issued free of preemptive (or similar) rights and (b) 1,105,300 shares of
Company Common Stock were held in the treasury of the Company. Except for
options issued pursuant to the Stock Option Agreement, no Options have been
granted and no Shares have been issued and the total number of Options
outstanding as of the date of this Agreement is 153,500. Except (i) as set
forth above and (ii) as a result of the exercise of Options, there are
outstanding (A) no shares of capital stock or other voting or non-voting
securities of the Company, (B) no securities of the Company convertible into or
exchangeable for shares of capital stock or voting or non-voting securities of
the Company, (C) no options, warrants or other rights to acquire from the
Company, and no obligation of the Company to issue, any capital
9
<PAGE>
stock, non-voting securities, voting securities or securities convertible into
or exchangeable for capital stock or voting securities of the Company and (D) no
equity equivalents, interests in the ownership or earnings of the Company or
other similar rights (collectively, "Company Securities"). Except as set forth
above, there are no outstanding obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any Company Securities.
There are no other options, calls, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or any of its subsidiaries to which the Company or
any of its subsidiaries is a party. All shares of Company Common Stock subject
to issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable and free of preemptive (or similar)
rights. Except as disclosed in Schedule 3.3 to the Company Disclosure Letter,
there are no outstanding contractual obligations of the Company or any of its
subsidiaries to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any such subsidiary or any other entity.
Each of the outstanding shares of capital stock of each of the Company's
subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and all such shares are owned by the Company or another wholly owned subsidiary
of the Company as set forth in Schedule 3.3 to the Company Disclosure Letter and
are owned free and clear of all security interests, liens, claims, pledges,
agreements, limitations in voting rights, charges or other encumbrances of any
nature whatsoever, except where the failure to own such shares free and clear is
not, individually or in the aggregate, likely to have a Material Adverse Effect.
Disclosed in Schedule 3.3 to the Company Disclosure Letter is a list of the
subsidiaries and affiliates of the Company which evidences, among other things,
the percentage of capital stock or other equity interests owned by the Company,
directly or indirectly, in such subsidiaries or associated entities.
SECTION 3.4: AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
--------------------------------------------------
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby (other than, with respect to the Merger, the adoption of
this Agreement by the holders of a majority of the Shares if and to the extent
required by applicable law, and the filing of appropriate merger documents as
required by the DGCL and the VSCA). The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than, with respect to the Merger, the
adoption of this Agreement by the holders of a majority of the Shares if and to
the extent required by applicable law, and the filing of appropriate merger
documents as required by the DGCL and the VSCA). This Agreement has been duly
and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by Parent and Purchaser,
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. The Board of Directors of the
Company has approved this Agreement and the transactions contemplated hereby
(including but not limited to the Offer and the Merger and the Stock Option
Agreement, and the transactions contemplated by each such agreement) so as to
render inapplicable hereto and thereto the limitation on business combinations
contained in Section 203 of the DGCL (or any similar provision). As a result of
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the foregoing actions subject to the applicability of Section 253 of the DGCL,
the only vote required to authorize the Merger is the affirmative vote of a
majority of the outstanding Shares.
SECTION 3.5: NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
--------------------------------------------------------
(a) Except as disclosed in Schedule 3.5 to the Company Disclosure
Letter, the execution and delivery of this Agreement by the Company do not and
the performance of this Agreement by the Company will not: (i) conflict with or
violate the Certificate of Incorporation or By-Laws of the Company or the
equivalent organizational documents of any of its subsidiaries; (ii) assuming
that all consents, approvals and authorizations contemplated by clauses (i),
(ii) and (iii) of subsection (b) below have been obtained and all filings
described in such clauses have been made, conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties are bound
or affected; or (iii) result in any breach or violation of or constitute a
default (or an event which with notice or lapse of time or both could become a
default) or result in the loss of a material benefit under, or give rise to any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or assets of the
Company or any of its subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective properties are bound or affected, except, in the case of clauses (ii)
and (iii), for any such conflicts, violations, breaches, defaults or other
occurrences which are not, individually or in the aggregate, likely to have a
Material Adverse Effect.
(b) The execution, delivery and performance of this Agreement by the
Company and the consummation of the Merger by the Company do not and will not
require any consent, approval, authorization or permit of, action by, filing
with or notification to, any governmental or regulatory authority, except for
(i) applicable requirements, if any, of the Exchange Act and the rules and
regulations promulgated thereunder, the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), state securities, takeover and "blue
sky" laws, (ii) the filing and recordation of appropriate merger or other
documents as required by the DGCL and the VSCA and (iii) such consents,
approvals, authorizations, permits, actions, filings or notifications the
failure of which to make or obtain are not, individually or in the aggregate,
likely to (x) prevent or materially delay the Company from performing its
obligations under this Agreement or (y) have a Material Adverse Effect.
(c) Concurrently with the execution of this Agreement, the Company
has, by all proper and required actions, consents and approvals of the Board of
Directors of the Company, amended the Rights Agreement (the "Rights Amendment")
to provide that (i) Parent and Purchaser each will be deemed to be an Exempt
Person (as defined in the Rights Agreement) so long as Parent or Purchaser only
acquires beneficial ownership of Shares pursuant to the transactions
contemplated by this Agreement (including, without limitation, the Offer and the
Merger) or acquires shares of Company Common Stock pursuant to the Stock Option
Agreement and (ii) the Rights shall expire upon the consummation of the Offer.
So long as Parent and Purchaser are each an Exempt Person, (1) neither shall
become an Acquiring Person (as defined
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in the Rights Agreement) and (2) no Distribution Date, Triggering Event or
Exchange (as such terms are defined in the Rights Agreement) or any adjustment
to the Purchase Price (as defined in the Rights Agreement) shall occur solely by
reason of the execution of this Agreement, the execution of the Stock Option
Agreement, the Offer, the Merger or any of the transactions contemplated by this
Agreement or the Stock Option Agreement.
SECTION 3.6: COMPLIANCE. Except as disclosed in Schedule 3.6 to the
------------------------
Company Disclosure Letter, neither the Company nor any of its subsidiaries is in
conflict with, or in default or violation of, (i) any law, rule, regulation,
order, judgment or decree applicable to the Company or any of its subsidiaries
or by which its or any of their respective properties are bound or affected, or
(ii) any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or its or any of their respective properties are bound or affected,
except for any such conflicts, defaults or violations which are not,
individually or in the aggregate, likely to have a Material Adverse Effect. All
licenses, permits and approvals required under such laws, rules and regulations
are in full force and effect, except where the failure to have such licenses,
permits and approvals would not have a Material Adverse Effect on the Company or
its subsidiaries.
SECTION 3.7: SEC FILINGS; FINANCIAL STATEMENTS.
-----------------------------------------------
(a) The Company and, to the extent applicable, each of its then or
current subsidiaries, has filed all forms, reports, statements and documents
required to be filed with the SEC for periods beginning January 1, 1995
(collectively, the "SEC Reports"). Each of the SEC Reports (exclusive of
financial statements and any selected or other financial data for periods prior
to January 1, 1995, and any Management's Discussion and Analysis of Financial
Conditions and Results of Operations applicable to such financial information),
at the time of its filing, complied in all material respects with the applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the rules and regulations promulgated thereunder, or the Exchange Act, and
the rules and regulations promulgated thereunder, each as in effect on the date
so filed. Except as disclosed in Schedule 3.7(a) to the Company Disclosure
Letter, none of the SEC Reports (including, but not limited to, any financial
statements or schedules included or incorporated by reference therein but
excluding any financial statements and any selected or other financial data for
periods prior to January 1, 1995, and any Management's Discussion and Analysis
of Financial Conditions and Results of Operations applicable to such financial
information) contained when filed, or (except to the extent revised or
superseded by a subsequent filing with the SEC) contains, any untrue statement
of a material fact or omitted or omits to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of the Company's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the audited consolidated balance sheets of the Company for
periods beginning January 1, 1995, and the related statements of consolidated
income and retained earnings, and statements of consolidated cash flows for each
of the financial statements of the Company included in the SEC Reports for
fiscal years beginning January 1, 1995, in each
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case, including any related notes thereto, as filed with the SEC (collectively,
the "Company Financial Statements"), and each of the unaudited interim financial
statements for the three- and six-month periods ending March 31, 1998, June 30,
1998, and September 30, 1998, respectively, has been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto) and fairly presents in all material respects the consolidated financial
position of the Company and its subsidiaries at the respective date thereof and
the consolidated results of its operations and changes in cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which will not
materially alter the financial position of the Company and its subsidiaries, as
reflected on such interim financial statements.
(c) Except as disclosed in Schedule 3.7(c) to the Company Disclosure
Letter, there are no liabilities of the Company or any of its subsidiaries of
any kind whatsoever, whether or not accrued and whether or not contingent or
absolute, which individually or in the aggregate is likely to have a Materially
Adverse Effect, other than (i) liabilities disclosed or provided for in the
consolidated balance sheet of the Company and its subsidiaries at December 31,
1997, including the notes thereto, (ii) the SEC Reports, (iii) liabilities
incurred on behalf of the Company in connection with this Agreement and the
contemplated Merger, and (iv) liabilities incurred in the ordinary course of
business consistent with past practice since December 31, 1997, none of which
are, individually or in the aggregate, likely to have a Material Adverse Effect.
(d) The Company has heretofore furnished or made available to Parent a
complete and correct copy of any amendments or modifications which have not yet
been filed with the SEC to agreements, documents or other instruments which
previously had been filed by the Company with the SEC pursuant to the Securities
Act and the rules and regulations promulgated thereunder or the Exchange Act and
the rules and regulations promulgated thereunder.
SECTION 3.8: ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
--------------------------------------------------
1997, except as contemplated by this Agreement or as disclosed in Schedule 3.8
to the Company Disclosure Letter, the Company and its subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been: (i) any
changes in the assets, liabilities, results of operation, financial condition or
business of the Company or any of its subsidiaries having or likely to have a
Material Adverse Effect; (ii) any condition, event or occurrence which,
individually or in the aggregate, is likely to have a Material Adverse Effect;
(iii) any damage, destruction or loss (whether or not covered by insurance) with
respect to any assets of the Company or any of its subsidiaries which is likely,
individually or in the aggregate, to have a Material Adverse Effect; (iv) any
change by the Company in its accounting methods, principles or practices; (v)
any revaluation by the Company of any of its material assets, including but not
limited to writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; (vi) any entry by the
Company or any of its subsidiaries into any commitment or transactions material
to the Company and its subsidiaries taken as a whole (other than commitments or
transactions entered into in the ordinary course of business); (vii) any
declaration, setting aside or payment of
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any dividends or distributions in respect of the Shares; (viii) any increase in
or establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including without limitation
the granting of stock options, stock appreciation rights, performance awards, or
restricted stock awards), stock purchase or other employee benefit plan or
agreement or arrangement, or any other increase in the compensation payable or
to become payable to any present or former directors, officers or key employees
of the Company or any of its subsidiaries, except for increases in base
compensation in the ordinary course of business consistent with past practice,
or any employment, consulting or severance agreement or arrangement entered into
with any such present or former directors, officers or key employees; or (ix)
any other action which, if it had been taken after the date hereof, would have
required the consent of Parent under Section 5.1.
SECTION 3.9: ABSENCE OF LITIGATION. Except as disclosed in Schedule
-----------------------------------
3.9 of the Company Disclosure Letter, there are no suits, claims, actions,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries, or any properties or
rights of the Company or any of its subsidiaries, before any court, arbitrator
or administrative, governmental or regulatory authority or body, that,
individually or in the aggregate, is likely to have a Material Adverse Effect.
As of the date hereof, neither the Company nor any of its subsidiaries nor any
of their respective properties is or are subject to any order, writ, judgment,
injunction, decree, determination or award having, or which, insofar as can be
reasonably foreseen, is likely to have a Material Adverse Effect or prevent or
materially delay consummation of the transactions contemplated hereby.
SECTION 3.1: EMPLOYEE BENEFIT PLANS.
------------------------------------
(a) Schedule 3.10(a) to the Company Disclosure Letter contains a true
and complete list of each "employee benefit plan" (within the meaning of section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including, without limitation, multiemployer plans within the meaning
of ERISA section 3(37)), stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, collective bargaining, bonus, incentive,
deferred compensation and all other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not subject to ERISA,
whether formal or informal, oral or written, legally binding or not, under which
any employee or former employee of the Company or any of its subsidiaries, has
any present or future right to benefits or under which the Company or any of its
subsidiaries has any present or future liability. All such plans, agreements,
programs, policies and arrangements shall be collectively referred to as
"Company Plans."
(b) With respect to each Company Plan, the Company has delivered or
made available to Parent a current, accurate and complete copy (or, to the
extent no such copy exists, an accurate description) thereof and, to the extent
applicable: (i) any related trust agreement or other funding instrument; (ii)
the most recent determination letter, if applicable; (iii) any summary plan
description and other written communications by the Company or any of its
subsidiaries to their employees concerning the extent of the benefits provided
under a Company Plan; and (iv) for the three most recent years (A) the Form 5500
and attached schedules, (B) audited financial statements and (C) actuarial
valuation reports.
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(c) Except as disclosed in Schedule 3.10(c) to the Company Disclosure
Letter, (i) Each Company Plan has been established and administered in material
compliance with its terms, and in material compliance with the applicable
provisions of ERISA, the Internal Revenue Code of 1986, as amended (the "Code"),
and other applicable laws, rules and regulations; (ii) each Company Plan which
is intended to be qualified within the meaning of Code section 401(a) is so
qualified and has received a favorable determination letter as to its
qualification, and nothing has occurred, whether by action or failure to act,
that would cause the loss of such qualification; (iii) no event has occurred and
no condition exists that would subject the Company or any of its subsidiaries,
either directly or by reason of their affiliation with any member of their
"Controlled Group" (defined as any organization which is a member of a
controlled group of organizations within the meaning of Code sections 414(b),
(c), (m) or (o)), to any tax, fine, lien or penalty imposed by ERISA, the Code
or other applicable laws, rules and regulations; (iv) for each Company Plan with
respect to which a Form 5500 has been filed, no material change has occurred
with respect to the matters covered by the most recent Form since the date
thereof; and (v) no "reportable event" (as such term is defined in ERISA section
4043), "prohibited transaction" (as such term is defined in ERISA section 406
and Code section 4975) or "accumulated funding deficiency" (as such term is
defined in ERISA section 302 and Code section 412 (whether or not waived)) has
occurred with respect to any Company Plan.
(d) With respect to each of the Company Plans that is subject to Title
IV of ERISA, as of the Effective Time, the assets of each such Company Plan are
at least equal in value to the present value of the accrued benefits (vested and
unvested) of the participants in such Company Plan on a termination basis, based
on the actuarial methods and assumptions indicated in the most recent actuarial
valuation reports.
(e) With respect to any Company Plan, (i) no actions, suits or claims
(other than routine claims for benefits in the ordinary course) are pending or,
to the knowledge of the Company, threatened, and (ii) no facts or circumstances
exist, to the knowledge of the Company, that could give rise to any such
actions, suits or claims.
(f) Except as disclosed in Schedule 3.10(f) to the Company Disclosure
Letter, no Company Plan exists that could result in the payment to any present
or former employee of the Company or any of its subsidiaries of any money or
other property or accelerate or provide any other rights or benefits to any
present or former employee of the Company or any of its subsidiaries as a result
of the transaction contemplated by this Agreement, whether or not such payment
would constitute a parachute payment within the meaning of Code section 280G.
SECTION 3.11: TAX MATTERS.
--------------------------
(a) The Company and each of its subsidiaries, and any consolidated,
combined, unitary or aggregate group for tax purposes of which the Company or
any of its subsidiaries is or has been a member has timely filed all Tax Returns
(as defined below) required to be filed by it in the manner provided by law, has
paid all Taxes (as defined below) (including interest and penalties) shown
thereon to be due and has provided adequate reserves in its financial statements
according to generally accepted accounting principles for any Taxes that
15
<PAGE>
have not been paid, whether or not shown as being due on any Tax Returns. All
such Tax Returns were true, correct and complete in all material respects.
(b) Except as has been disclosed in Schedule 3.11(b) to the Company
Disclosure Letter: (i) no material claim for unpaid Taxes has become a lien or
encumbrance of any kind against the property of the Company or any of its
subsidiaries or is being asserted against the Company or any of its
subsidiaries; (ii) as of the date hereof no audit of any Tax Return of the
Company or any of its subsidiaries is being conducted by a Tax authority; and
(iii) no extension of the statute of limitations on the assessment of any Taxes
has been granted by the Company or any of its subsidiaries and is currently in
effect.
(c) Except as disclosed in Schedule 3.11(c) of the Company Disclosure
Letter, during their most recent five taxable years respectively, neither the
Company nor any of its subsidiaries has made a change in accounting methods (nor
has any taxing authority proposed in writing any such adjustment or change of
accounting method), received a ruling from any taxing authority or signed an
agreement with any taxing authority which could have a Material Adverse Effect
on the Company or any of its subsidiaries, or has entered into any closing or
similar agreement with any taxing authority.
(d) Except as disclosed in Schedule 3.11(d) of the Company Disclosure
Letter, neither the Company nor any of its subsidiaries is a party to, is bound
by or has any obligation under any Tax sharing agreement, Tax indemnification
agreement or similar contract or arrangement.
(e) Except as disclosed in Schedule 3.11(e) of the Company Disclosure
Letter, no power of attorney with respect to any matter relating to Taxes or Tax
Returns has been granted by or with respect to the Company or any of its
subsidiaries.
(f) Neither the Company nor any of its subsidiaries has filed a
consent pursuant to Section 341(f) of the Code (or any predecessor provision)
concerning collapsible corporations, or agreed to have Section 341(f)(2) of the
code apply to any disposition of a "subsection (f) asset" (as such term is
defined in Section 341(f)(4) of the Code) owned by the Company or any of its
subsidiaries.
(g) None of the subsidiaries of the Company is a controlled foreign
corporation within the meaning of Section 957 of the Code or a passive foreign
investment company within the meaning of Section 1296 of the Code.
(h) Except as disclosed in Schedule 3.11(h) of the Company Disclosure
Letter, the Company has delivered to Parent complete and accurate copies of each
of: (A) all audit, examination and similar reports and all letter rulings and
technical advice memoranda relating to United States federal, state, local and
foreign Taxes due from or with respect to the Company and its subsidiaries; (B)
all United States federal, state and local, and foreign Tax Returns, Tax
examination reports and similar documents filed by the Company and its
subsidiaries; and (C) all closing agreements entered into by the Company and its
subsidiaries with any taxing authority and all statements of Tax deficiencies
assessed against or agreed to by the Company and its
16
<PAGE>
subsidiaries. The Company will deliver to Purchaser all materials with respect
to the foregoing for all matters arising after the date hereof.
(i) As used in this Agreement, the following terms shall have
the following meanings: "Taxes" shall mean any taxes of any kind, including but
not limited to those on or measured by or referred to as income, gross receipts,
capital, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, value added,
property or windfall profits taxes, customs, duties or similar fees, assessments
or charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental authority;
"Tax Return" shall mean any return, report or statement required to be filed
with any governmental authority with respect to Taxes.
SECTION 3.12: OFFER DOCUMENTS; PROXY STATEMENT. Neither the Schedule 14D-
-----------------------------------------------
9, nor any of the information supplied by the Company for inclusion in the Offer
Documents, shall, at the respective times such Schedule 14D-9, the Offer
Documents or any amendments or supplements thereto are filed with the SEC or are
first published, sent or given to stockholders, as the case may be, 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
the light of the circumstances under which they were made, not misleading.
Neither the proxy statement to be sent to the stockholders of the Company in
connection with the Stockholders Meeting (as defined in Section 6.1) or the
information statement to be sent to such stockholders, as appropriate (such
proxy statement or information statement, as amended or supplemented, is herein
referred to as the "Proxy Statement"), shall, at the date the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to stockholders
and at the time of the Stockholders Meeting, if any, and at the Effective Time,
contain any untrue or misleading 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 made therein, in the light of the circumstances under which they
are made, not misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Stockholders
Meeting which has become false or misleading. Notwithstanding the foregoing,
the Company makes no representation or warranty with respect to any information
supplied by Parent or Purchaser or any of their respective representatives which
is contained in the Schedule 14D-9 or the Proxy Statement. The Schedule 14D-9
and the Proxy Statement will comply in all material respects as to form with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder.
SECTION 3.13: ENVIRONMENTAL MATTERS.
-----------------------------------
(a) Except as disclosed in Schedule 3.13(a) of the Company Disclosure
Letter and to the extent that the inaccuracy of any of the following (or the
circumstances giving rise to such inaccuracy), individually or in the aggregate,
is not likely to have a Material Adverse Effect:
(i) the Company and its subsidiaries are, and within the
period of all applicable statutes of limitation have been,
in compliance with all applicable Environmental Laws;
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(ii) the Company and its subsidiaries hold all Environmental
Permits (each of which is in full force and effect)
required for any of their current operations and for any
property owned, leased, or otherwise operated by any of
them, and are, and within the period of all applicable
statutes of limitation have been, in compliance with all
such Environmental Permits;
(iii) no review by, or approval of, any Governmental Authority
or other person is required under any Environmental Law in
connection with the execution or delivery of this
Agreement or the consummation of the transactions
contemplated hereby;
(iv) neither the Company nor any of its subsidiaries has
received any Environmental Claim (as hereinafter defined)
against any of them, and the Company has no knowledge of
any such Environmental Claim being threatened;
(v) to the knowledge of the Company, Hazardous Materials are
not present on any property owned, leased, or operated by
the Company or any of its subsidiaries, that is likely to
form the basis of any Environmental Claim against any of
them; and the Company has no reason to believe that
Hazardous Materials are present on any other property that
is likely to form the basis of any Environmental Claim
against any of them;
(vi) the Company has no knowledge of any material Environment
Claim pending or threatened, or of the presence or
suspected presence of any Hazardous Materials that is
likely to form the basis of any Environmental Claim, in
any case against any person or entity whose liability the
Company or any of its subsidiaries has or may have
retained or assumed either contractually or by operation
of law. or against any real property which the Company or
any of its subsidiaries formerly owned, leased, or
operated, in whole or in part; and
(vii) to the knowledge of the Company, the Company has informed
Parent and Purchaser of: all material facts which the
Company reasonably believes could form the basis of a
material Environmental Claim against the Company or any of
its subsidiaries arising out of the non-compliance or
alleged non-compliance with any Environmental Law, or the
presence or suspected presence of Hazardous Materials at
any location.
(b) For purposes of this Agreement, the terms below shall have the
following meanings:
18
<PAGE>
"Environmental Claim" means any claim, demand, action, suit,
complaint, proceeding, directive, investigation, lien, demand letter,
or notice (written or oral) of noncompliance, violation, or liability,
by any person or entity asserting liability or potential liability
(including without limitation liability or potential liability for
enforcement, investigatory costs, cleanup costs, governmental response
costs, natural resource damages, property damage, personal injury,
fines or penalties) arising out of, based on or resulting from (i) the
presence, discharge, emission, release or threatened release of any
Hazardous Materials at any location, (ii) circumstances forming the
basis of any violation or alleged violation of any Environmental Laws
or Environmental Permits, or (iii) otherwise relating to obligations
or liabilities under any Environmental Law.
"Environmental Laws" means any and all laws, rules, orders,
regulations, statutes, ordinances, guidelines, codes, decrees, or
other legally enforceable requirement (including, without limitation,
common law) of any foreign government, the United States, or any
state, local, municipal or other governmental authority, regulating,
relating to or imposing liability or standards of conduct concerning
protection of human health as affected by the environment or Hazardous
Materials (including without limitation employee health and safety) or
the environment (including without limitation indoor air, ambient air,
surface water, groundwater, land surface, subsurface strata, or plant
or animal species).
"Environmental Permits" means all permits, licenses, registrations,
approvals, exemptions and other filings with or authorizations by any
Governmental Authority under any Environmental Law.
"Governmental Authority" means any government, any state or other
political subdivision thereof and any entity (including, without
limitation, a court) exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Hazardous Materials" means all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction
thereof), petroleum products, asbestos, asbestos-containing materials,
pollutants, contaminants, radioactivity, electromagnetic fields and
all other materials, whether or not defined as such, that are
regulated pursuant to any Environmental Laws or that could result in
liability under any applicable Environmental Laws.
SECTION 3.14: TITLE AND CONDITION OF PROPERTIES.
------------------------------------------------
(a) Except as disclosed in Schedule 3.14(a) of the Company Disclosure
Letter, neither the Company nor any of its subsidiaries own any real property.
(b) Except as disclosed in Schedule 3.14(b) of the Company Disclosure
Letter, the Company or its subsidiaries, as the case may be, has good, valid,
and, in the case of Owned Properties (as defined below), marketable fee simple
title to: (i) all of the material real property
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<PAGE>
and interests in real property owned by the Company or its subsidiaries, except
for properties sold or otherwise disposed of in the ordinary course of business
(the "Owned Properties"), and (ii) all of the material leasehold estates in all
real properties leased by the Company or its subsidiaries, except leasehold
interests terminated in the ordinary course of business (the "Leased
Properties"; the Owned Properties and Leased Properties being sometimes referred
to herein as the "Real Properties"), in each case except as disclosed in
Schedule 3.14 of the Company Disclosure Letter, free and clear of all mortgages,
liens, security interests, easements, covenants, rights-of-way, subleases and
other similar restrictions and encumbrances ("Encumbrances"), except for
Encumbrances for current Taxes not yet due and payable.
(c) Except to the extent that the inaccuracy of any of the following
(or the circumstances giving rise to such inaccuracy), individually or in the
aggregate, are not likely to have a Material Adverse Effect or as disclosed in
Schedule 3.14(c) of the Company Disclosure Letter: (i) each of the agreements
by which the Company has obtained a leasehold interest in each Leased Property
(individually, a "Lease" and collectively, the "Leases") is in full force and
effect in accordance with its respective terms and the Company or its subsidiary
is the holder of the lessee's or tenant's interest thereunder; to the knowledge
of the Company, there exists no default under any Lease and no circumstance
exists which, with the giving of notice, the passage of time or both, is likely
to result in such a default; the Company and its subsidiaries have complied with
and timely performed all conditions, covenants, undertakings and obligations on
their parts to be complied with or performed under each of the Leases; the
Company and its subsidiaries have paid all rents and other charges to the extent
due and payable under the Leases; (ii) there are no leases, subleases, licenses,
concessions or any other contracts or agreements granting to any person or
entity other than the Company or any of its subsidiaries any right to the
possession, use, occupancy or enjoyment of any Real Property or any portion
thereof; (iii) the current operation and use of the Real Properties does not
violate any statute, law, regulation, rule, ordinance, permit, requirement,
order or decree now in effect; the use being made of each Real Property at
present materially conforms with the certificate of occupancy issued for such
Real Property; (iv) there are no existing, or to the knowledge of the Company,
threatened, condemnation or eminent domain proceedings (or proceedings in lieu
thereof) affecting the Real Properties or any portion thereof; (v) no default or
breach exists under any of the covenants, conditions, restrictions, rights-of-
way, or easements, if any, affecting all or any portion of a Real Property,
which are to be performed or complied with by the Company or any of its
subsidiaries; and (vi) all the buildings, structures, equipment and other
tangible assets of the Company (whether owned or leased) are in normal operating
condition (normal wear and tear excepted).
(d) Neither the Company nor any of its subsidiaries is obligated under
or bound by any option, right of first refusal, purchase contract, or other
contractual right to sell or dispose of any Owned Property or any portions
thereof or interests therein which property, portions and interests,
individually or in the aggregate, are material to the Company and its
subsidiaries.
(e) Except as disclosed in Schedule 3.14(e) of the Company Disclosure
Letter, the Company and its subsidiaries own good and marketable title, free and
clear of all Encumbrances, to all of the personal property and assets shown on
the Company Financial Statements or acquired after December 31, 1997, except for
(A) assets which have been disposed
20
<PAGE>
of to nonaffiliated third parties since December 31, 1997, in the ordinary
course of business, (B) Encumbrances reflected in the Company Financial
Statements, (C) liens for fees, taxes, levies, imposts, duties or governmental
charges of any kind which are not yet delinquent, (D) liens for mechanics or
materialmen arising by operation of law for sums which are not yet delinquent,
(E) easements and similar encumbrances ordinarily created for fuller utilization
and enjoyment of property, (F) a security interest in favor of C.I.T., (G)
Encumbrances or imperfections of title which will not, individually or in the
aggregate, have a Material Adverse Effect.
(f) All of the material equipment (including computer hardware) and
other tangible personal property and assets owned or used by the Company and its
subsidiaries are in operating condition and repair, except for ordinary wear and
tear not caused by neglect, and are useable in the ordinary course of business.
The personal property and assets reflected on the Financial Statements or
acquired after December 31, 1997, the rights under Company agreements and the
Intellectual Property (as defined in Section 3.16) owned or used by the Company
under valid license, collectively include all assets necessary to provide,
produce, franchise, sell and license the services and products currently
provided, produced, franchised, sold and licensed by the Company and its
subsidiaries and to conduct the business of the Company and its subsidiaries as
presently conducted or as currently contemplated to be conducted.
SECTION 3.15: BROKERS. No broker, finder or investment banker (other
----------------------
than the Financial Adviser) is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of the Company. The Company has
heretofore furnished to Parent information concerning the fee which will be
payable to the Financial Advisor in connection with the transactions
contemplated hereby.
SECTION 3.16: INTELLECTUAL PROPERTY.
-------------------------------------
(a) As used in this Agreement, "Intellectual Property" means all of
the following, in which the Company holds or owns any rights which are necessary
to conduct the business of the Company and its subsidiaries as presently
conducted or as currently proposed to be conducted: (i) trademarks, trade
dress, service marks, logos, trade names, corporate names and all registrations
and applications to register the same; (ii) patents and pending patent
applications, and any and all divisions, continuations, continuations-in-part,
reissues, reexaminations, and extensions thereof; (iii) copyrights, rights of
publicity, rights in any semi-conductor chip product works or "mask works" and
all registrations and applications to register the same; (iv) all computer
software programs, including without limitation, all source code and object
code; databases and compilations, including all data and compilations of data;
all descriptions, flow-charts and other work product used to design, plan,
organize and develop any of the foregoing; and all documentation, including user
manuals and training materials relating to the foregoing (collectively,
"Computer Software"); (v) all technology, know-how, trade secrets and
proprietary processes and formulae; and (vi) all licenses and agreements to
which the Company or any of the subsidiaries is a party which relate to any of
the foregoing, including but not limited to Computer Software licenses other
than shrink-wrap licenses for off-the-shelf applications ("Licenses").
21
<PAGE>
(b) Except as disclosed in Schedule 3.16(b) of the Company Disclosure
Letter, the Company or its subsidiaries owns or has the right to use, sell or
license all Intellectual Property, free and clear of all Encumbrances. Section
3.16(b) of the Company Disclosure Letter contains a true and complete list of
all the following Intellectual Property: (i) copyright registrations and
applications and material unregistered copyrights; (ii) trademarks and service
mark registrations and applications and material applications; (iii) Computer
Software; and (iv) material Licenses.
(c) Except as disclosed in Section 3.16(c) of the Company Disclosure
Letter, all Computer Software (i) was developed (x) by employees of the Company
or its subsidiaries within the scope of their employment or (y) as "works-made-
for-hire" as that term is defined under Section 101 of the United States
copyright laws, pursuant to a written agreement; (ii) was assigned to the
Company or its subsidiaries pursuant to a written agreement; (iii) is used in
written License; or (iv) is in the public domain. Except as set forth in
Section 3.16(c) of the Company Disclosure Letter, no former or present
employees, officers or directors of the Company hold any right, title or
interest directly or indirectly, in whole or in part, in or to any Computer
Software or any other Intellectual Property.
(d) No breach or default (or event which with notice or lapse of time
or both would result in an event of default) by the Company or any of its
subsidiaries exists under any of the Licenses, and the consummation of the
transactions contemplated by this Agreement will not violate or conflict with or
constitute such a default, result in a forfeiture under, or constitute a basis
for termination of any such License.
(e) Except as disclosed in Schedule 3.16(e) of the Company Disclosure
Letter, to the Company's knowledge the conduct of the Company's and its
subsidiaries' business and the use of the Intellectual Property do not infringe,
violate or misuse any intellectual property rights or any other proprietary
right of any person or give rise to any obligations to any person as a result of
co-authorship, or co-inventorship. Neither the Company nor any of the
subsidiaries have received any notice of any claims or threats that the
Company's and its subsidiaries' use of any of the Intellectual Property
infringes, violates or misuses, or is otherwise in conflict with any
Intellectual Property or proprietary rights of any third party or that any of
the Intellectual Property is invalid or unenforceable, nor to the Company's
knowledge, is there a basis for such a claim. Except as disclosed in Schedule
3.16(e) of the Company Disclosure Letter, neither the Company nor any of its
subsidiaries has sent to any other person any notice or claim of any present or
threatened infringement, violation or misuse by any other person of any of the
Intellectual Property and, to the Company's knowledge, there are no such
infringements, violations or misuses.
(f) The Company and its subsidiaries have used reasonable efforts to
maintain the confidentiality of its trade secrets and other confidential
Intellectual Property.
SECTION 3.17: CONTRACTS.
------------------------
(a) Each material Company agreement is disclosed in Schedule 3.17(a)
of the Company Disclosure Schedule and is legally valid and binding and in full
force and effect. The
22
<PAGE>
Company has previously made available for inspection by Parent or Purchaser or
their representatives all such material Company agreements.
(b) Each contract, agreement or arrangement between the Company and
any bank or financial institution with respect to borrowing funds or financing
arrangements (the "Bank Product Agreements") is disclosed in Schedule 3.17(b) of
the Company Disclosure Letter and is legally valid and binding and in full force
and effect. The Company is not in default, nor to the Company's knowledge is
any third party in default, under any Bank Product Agreement. The Company has
previously made available for inspection by Parent or Purchaser or their
representatives complete and accurate copies of all Bank Product Agreements.
SECTION 3.18: POTENTIAL CONFLICTS OF INTEREST. Except as disclosed in
----------------------------------------------
Schedule 3.18 of the Company Disclosure Letter, no officer or director of the
Company or any of its subsidiaries owns, directly or indirectly, any interest in
(excepting not more than 1% stock holdings for investment purposes in securities
of publicly held and traded companies) or is an officer, director, employee or
consultant of any person which is a competitor, lessor, lessee, franchisee,
customer or supplier of the Company or any of its subsidiaries; and no officer
or director of the Company or any of its subsidiaries (i) owns, directly or
indirectly, in whole or in part, any Intellectual Property which the Company or
any of its subsidiaries is using or the use of which is necessary for the
business of the Company or any of its subsidiaries; (ii) has any claim, charge,
action or cause of action against the Company or any of its subsidiaries, except
for claims for accrued vacation pay, accrued benefits under the Benefits Plans
and similar matters and agreements existing on the date hereof which have been
disclosed in Schedule 3.18 of the Company Disclosure Letter; (iii) has made, on
behalf of the Company or any of its subsidiaries, any payment or commitment to
pay any commission, fee or other amount to, or to purchase or obtain or
otherwise contract to purchase or obtain any goods or services from, any other
person of which any officer or director of the Company, or, to the Company's
knowledge, a relative of any of the foregoing, is a partner or stockholder
(except stock holdings solely for investment purposes in securities of publicly
held and traded companies); (iv) owes any money to the Company or any of its
subsidiaries; (v) is owed any money by the Company or any of its subsidiaries;
except for claims for accrued vacation pay, accrued benefits under the Benefits
Plans and similar matters and agreements existing on the date hereof which have
been disclosed in Schedule 3.18 of the Company Disclosure Letter; or (vi) is a
party to any transaction, agreement, arrangement or understanding with the
Company or any of its subsidiaries other than items arising out of the ordinary
course of employment with the Company.
SECTION 3.19: YEAR 2000 COMPLIANCE. The reports set forth on Schedule
----------------------------------
3.19 of the Company Disclosure Letter regarding Year 2000 compliance are, to the
Company's knowledge, true and correct in all material respects.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent and warrant
to the Company that:
SECTION 4.1: CORPORATE ORGANIZATION. Each of Parent and Purchaser is a
------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation and has the requisite corporate
power and authority and any necessary governmental authority to own, operate or
lease its properties and to carry on its business as it is now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority and governmental approvals is not, individually or in
the aggregate, likely to prevent the consummation of the Offer or the Merger.
Each of Parent and Purchaser is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, leased or operated by it or the nature of
its activities makes such licensing necessary, except for such failures to be so
qualified or licensed and in good standing as are not likely to have a Material
Adverse Effect.
SECTION 4.2: AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
--------------------------------------------------
Purchaser has all necessary corporate power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by each of Parent and Purchaser and the consummation by each of
Parent and Purchaser of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Purchaser
other than filing and recordation of appropriate merger documents as required by
the DGCL and the VSCA. This Agreement has been duly executed and delivered by
Parent and Purchaser and, assuming due authorization, execution and delivery by
the Company, constitutes a legal, valid and binding obligation of each such
corporation enforceable against such corporation in accordance with its terms.
SECTION 4.3: NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
--------------------------------------------------------
(a) The executions and delivery of this Agreement by Parent and
Purchaser do not and the performance of this Agreement by Parent and Purchaser
will not: (i) conflict with or violate the respective articles of incorporation
or by-laws of Parent or Purchaser; (ii) assuming that all consents, approvals
and authorizations contemplated by clauses (i), (ii) and (iii) of subsection (b)
below have been obtained and all filings described in such clauses have been
made, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Parent or Purchaser or by which either of them or their
respective properties are bound or affected; or (iii) result in any breach or
violation of or constitute a default (or an event which with notice or lapse of
time or both could become a default) or result in the loss of a material benefit
under, or give rise to any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the property or assets of Parent or Purchaser pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Parent or Purchaser is a party or by
24
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which Parent or Purchaser or any of their respective properties are bound or
affected, except, in the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which are not, individually
or in the aggregate, likely to prevent or materially delay the consummation of
the Offer or the Merger.
(b) The execution, delivery and performance of this Agreement by
Parent and Purchaser do not and will not require any consent, approval,
authorization or permit of, action by, filing with or notification to, any
governmental or regulatory authority, except (i) for applicable requirements, if
any, of the Exchange Act and the rules and regulations promulgated thereunder,
the HSR Act, state securities, takeover and "blue sky" laws, (ii) the filing and
recordation of appropriate merger or other documents as required by the DGCL,
and (iii) such consents, approvals, authorizations, permits, actions, filings or
notifications the failure of which to make or obtain are not, individually or in
the aggregate, likely to prevent the consummation of the Offer or the Merger.
SECTION 4.4: OFFER DOCUMENTS; PROXY STATEMENT. The Offer Documents, as
----------------------------------------------
filed pursuant to Section 1.1, will not, at the time such Offer Documents are
filed with the SEC or are first published, sent or given to stockholders, as the
case may be, contain any untrue statement of a material fact or omit to state
any material fact required to be stated or incorporated by reference therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The information supplied by Parent
and Purchaser for inclusion in the Proxy Statement shall not, on the date the
Proxy Statement is first mailed to stockholders, at the time of the Stockholders
Meeting (as defined in Section 6.1), if any, or at the Effective Time, contain
any statement which, at such time and in light of the circumstances under which
it shall be made, is false or misleading with respect to any material fact, or
shall omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not false or misleading or necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Stockholders Meeting which has become false or
misleading. Notwithstanding the foregoing, Parent and Purchaser make no
representation or warranty with respect to any information supplied by the
Company or any of its representatives which is contained in or incorporated by
reference in any of the foregoing documents or the Offer Documents. The Offer
Documents, as amended and supplemented, will comply in all material respects as
to form with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder.
SECTION 4.5: BROKERS. No broker, finder or investment banker (other
---------------------
than Ewing Monroe Bemiss & Co.) is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by and on behalf of Parent or Purchaser.
SECTION 4.6: FUNDS. Parent or Purchaser has, and at the Expiration Date
-------------------
and at the Effective Time, will have the funds necessary to consummate the Offer
and the Merger, respectively. The Company has been provided with a true and
accurate copy of commitment letters duly executed by all parties thereto
evidencing the availability of such funds, which Parent currently anticipates
will be used to consummate the Offer and the Merger.
25
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SECTION 4.7: NO PRIOR ACTIVITIES. Except for obligations or liabilities
---------------------------------
incurred in connection with its incorporation or organization or the negotiation
and consummation of this Agreement and the transactions contemplated hereby
(including any financing), Purchaser has not incurred any obligations or
liabilities, and has not engaged in any business or activities of any type or
kind whatsoever or entered into any agreements or arrangements with any person
or entity.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1: CONDUCT OF BUSINESS OF THE COMPANY PENDING THE MERGER. The
-------------------------------------------------------------------
Company covenants and agrees that, during the period from the date hereof to the
Effective Time, unless Parent shall otherwise agree in writing, the businesses
of the Company and its subsidiaries shall be conducted only in, and the Company
and its subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice; and the Company and its
subsidiaries shall each use its reasonable best efforts to preserve
substantially intact the business organization of the Company and its
subsidiaries, to keep available the services of the present officers, employees
and consultants of the Company and its subsidiaries and to preserve the present
relationships of the Company and its subsidiaries with customers, suppliers and
other persons with which the Company or any of its subsidiaries has significant
business relations to the end that the Company's and its subsidiaries' goodwill
and ongoing business shall be unimpaired at the Effective Time. By way of
amplification and not limitation, neither the Company nor any of its
subsidiaries shall, between the date of this Agreement and the Effective Time,
directly or indirectly do, or commit to do, any of the following without the
prior written consent of Parent:
(a) Amend or otherwise change its certificate of incorporation or by-
laws or equivalent organizational documents;
(b) Except as disclosed in Schedule 5.1(b) of the Company Disclosure
Letter, issue, deliver, sell, pledge, dispose of or encumber, or authorize or
commit to the issuance, sale, pledge, disposition or encumbrance of, (i) any
shares of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital stock,
or any other ownership interest (including but not limited to stock appreciation
rights or phantom stock), of the Company or any of its subsidiaries or (ii) any
material assets of the Company or any of its subsidiaries, except for sales of
inventory in the ordinary course of business and in a manner consistent with
past practice;
(c) Declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock except as disclosed in Schedule 5.1(c) of the Company
Disclosure Letter;
(d) Reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
26
<PAGE>
(e) (i) Acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof; (ii) incur any indebtedness for borrowed money (except for drawdowns on
the Company's existing credit facility in the ordinary course of business
consistent with past practice) or issue any debt securities or assume, guarantee
or endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, or make any loans, advances or capital contributions
to, or investments in, any other person; (iii) enter into any contract or
agreement other than in the ordinary course of business consistent with past
practice; (iv) authorize any single capital expenditure except (A) as set forth
in Schedule 5.1(e)(iv) of the Company Disclosure Letter, which letter includes
the Company's capital expenditure budget, (B) with the prior approval of
Purchaser or Parent, such approval not to be unreasonably withheld, or (C) in an
amount not exceeding $100,000 for the emergency repair or replacement of the
plant facility necessary to continue operation of the plant in the normal course
of business; or (v) authorize several capital expenditures pursuant to clause
(iv)(C) immediately above in an aggregate amount exceeding $300,000.
(f) Except to the extent required under existing Company plans and
employee and director agreements as in effect on the date of this Agreement and
disclosed in the Company Disclosure Letter, increase the compensation or fringe
benefits of any of its directors, officers or employees, except for increases in
salary or wages of employees of the Company or its subsidiaries who are not
officers of the Company in the ordinary course of business in accordance with
past practice, or grant any severance or termination pay not currently required
to be paid under existing severance plans to or enter into any employment,
consulting or severance agreement or arrangement with any present or former
director, officer or other employee of the Company or any of its subsidiaries,
or establish, adopt, enter into or amend or terminate any collective bargaining
agreement or Company Plan, including, but not limited to, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any directors,
officers or employees;
(g) Change any of the accounting practices or principles used by it;
(h) Make any material Tax election, change any material method of Tax
accounting or settle or compromise any material federal, state, local or foreign
Tax liability;
(i) Settle or compromise any pending or threatened suit, action or
claim which is material or which relates to the transactions contemplated
hereby;
(j) Adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its subsidiaries not constituting an inactive
subsidiary (other than the Merger);
(k) Pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction (i) in the ordinary course of business
and consistent with past practice of liabilities reflected or reserved against
in the Company Financial Statements or incurred in the ordinary
27
<PAGE>
course of business and consistent with past practice and (ii) of liabilities
required to be paid, discharged or satisfied pursuant to the terms of any
contract in existence on the date hereof (including, without limitation, benefit
plans relating to directors); or
(l) Take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 5.1(a) through 5.1(k) or any
action which would make any of the representations or warranties of the Company
contained in this Agreement untrue and incorrect as of the date when made if
such action had then been taken, or would result in any of the conditions set
forth in Annex A not being satisfied.
SECTION 5.2: NO AMENDMENT OF THE RIGHTS AGREEMENT. Subsequent to the
-------------------------------------------------
Rights Amendment, the Company shall not amend or modify the Rights Agreement to
change the status of Parent or Purchaser as an Exempt Person or the meaning and
effect of such status.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1: STOCKHOLDERS MEETING.
----------------------------------
(a) If Shares are purchased in the Offer and adoption of this
Agreement by the Company's stockholders is required, by applicable law, the
Company's Certificate of Incorporation or Bylaws, to occur at a duly convened
meeting of the Corporation's stockholders, the Company, acting through its Board
of Directors, shall in accordance with and subject to applicable law and the
Company's Certificate of Incorporation and By-Laws, (i) duly call, give notice
of, convene and hold a meeting of its stockholders as soon as practicable
following consummation of the Offer for the purpose of adopting this Agreement
(the "Stockholders Meeting"), (ii) include in the Proxy Statement the unanimous
recommendation of the Board of Directors that the stockholders of the Company
vote in favor of the adoption of this Agreement and the written opinion of the
Financial Adviser that the consideration to paid to the stockholders of the
Company pursuant to the Offer and the Merger is fair to such stockholders from a
financial point of view and (iii) use its reasonable best efforts to obtain the
necessary adoption of this Agreement.
(b) If Shares are purchased in the Offer and adoption of this
Agreement by the Company's stockholders may, by applicable law, the Company's
Certificate of Incorporation and By-Laws, occur by written consent of the
holders of a majority of the Shares entitled to vote on such adoption (the
"Written Consent"), then, subject to the Company's obligations with respect to
the preparation, filing, and dissemination of the Proxy Statement (which, in
such case, shall be an information statement prepared in accordance with the
Exchange Act and the rules and regulations thereunder) as set forth in Section
6.2 below, Purchaser shall execute the Written Consent and take all necessary
and appropriate action to cause the Merger to become effective as soon as
reasonably practicable after such purchase of Shares in the Offer.
28
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(c) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90% of the outstanding Shares, the Company agrees, at the
request of Purchaser, subject to Article VII, to take all necessary and
appropriate action to cause the Merger to become effective as soon as reasonably
practicable after such acquisition, without a meeting of the Company's
stockholders, in accordance with Section 253 of the DGCL.
SECTION 6.2: PROXY STATEMENT. If required by applicable law, as soon as
-----------------------------
practicable following Parent's request, the Company shall file with the SEC
under the Exchange Act and the rules and regulations promulgated thereunder, and
shall use its reasonable best efforts to have cleared by the SEC, the Proxy
Statement with respect to the Stockholders Meeting. Parent, Purchaser and the
Company will cooperate with each other in the preparation of the Proxy
Statement; without limiting the generality of the foregoing, each of Parent and
Purchaser will furnish to the Company the information relating to it required by
the Exchange Act and the rules and regulations promulgated thereunder to be set
forth in the Proxy Statement. The Company agrees to use its reasonable best
efforts, after consultation with the other parties hereto, to respond promptly
to any comments made by the SEC with respect to the Proxy Statement and any
preliminary version thereof filed by it and cause such Proxy Statement to be
mailed to the Company's stockholders at the earliest practicable time.
SECTION 6.3: COMPANY BOARD REPRESENTATION; SECTION 14(F).
---------------------------------------------------------
(a) Promptly upon the purchase by Purchaser of Shares pursuant to the
Offer, and from time to time thereafter, Purchaser shall be entitled to
designate up to such number of directors, rounded up to the next whole number,
on the Board of Directors of the Company as shall give Purchaser representation
on the Board of Directors equal to the product of the total number of directors
on such Board (giving effect to the directors elected pursuant to this sentence
and including any vacancies or unfilled newly-created directorships) multiplied
by the percentage that the aggregate number of Shares beneficially owned by
Purchaser or any affiliate of Purchaser bears to the total number of Shares then
outstanding, and the Company shall amend, or cause to be amended its by-laws to
provide for each of the matters set forth in this Section 6.3 and shall, at such
time, promptly take all action necessary to cause Purchaser's designees to be so
elected, including either increasing the size of the Board of Directors or
securing the resignations of incumbent directors or both. At such times, the
Company will use its reasonable best efforts to cause persons designated by
Purchaser to constitute the same percentage as is on the board of (i) each
committee of the Board of Directors, (ii) each board of directors of each
subsidiary of the Company and (iii) each committee of each such board, in each
case only to the extent permitted by law. Until Purchaser acquires a majority
of the outstanding Shares on a fully diluted basis, the Company shall use its
reasonable best efforts to ensure that all the members of the Board of Directors
and such boards and committees as of the date hereof who are not employees of
the Company shall remain members of the Board of Directors and such boards and
committees.
(b) The Company's obligations to appoint Purchaser's designees to its
Board of Directors (or to any committee of its Board of Directors or to the
board of directors or any committee thereof of any subsidiary of the Company)
pursuant to subsection (a) shall be subject to Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder. The Company shall promptly take all
actions required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill
29
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its obligations under this Section 6.3 and shall include in the Schedule 14D-9
or a separate Rule 14f-1 information statement provided to stockholders such
information with respect to the Company and its officers and directors as is
required under Section 14(f) and Rule 14f-1 to fulfill its obligations under
this Section 6.3. Parent or Purchaser will supply to the Company and be solely
responsible for the accuracy and completeness of any information with respect to
either of them and their nominees, officers, directors and affiliates required
by Section 14(f) and Rule 14f-1.
(c) In addition to any vote of the Board of Directors required by law,
the Certificate of Incorporation or the By-laws of the Company, or by this
Agreement, following the election or appointment of Purchaser's designees
pursuant to this Section 6.3 and prior to the Effective Time, the concurrence of
a majority of the directors of the Company then in office who are neither
designated by Purchaser nor are employees of the Company (the "Disinterested
Directors") will be required to authorize any amendment, or waiver of any term
or condition, of this Agreement or the Certificate of Incorporation or By-Laws
of the Company, any termination of this Agreement by the Company, and any
extension by the Company of the time for the performance of any of the
obligations or other acts of Purchaser or waiver or assertion of any of the
Company's rights hereunder. Notwithstanding Section 6.3(a) hereof, the number
of Disinterested Directors shall be not less than two; provided, however, that,
-------- -------
in such event, if the number of Disinterested Directors is reduced below two for
any reason, the remaining Disinterested Director(s) shall be entitled to
designate persons to fill such vacancies who shall be deemed to be Disinterested
Directors for purposes of this Agreement, or if no Disinterested Directors then
remain, the other directors who were directors prior to the date hereof shall
designate two persons to fill such vacancies who cannot be officers or
affiliates of the Company, Parent or Purchaser, and such persons shall be deemed
to be Disinterested Directors for purposes of this Agreement.
SECTION 6.4: ACCESS TO INFORMATION; CONFIDENTIALITY.
----------------------------------------------------
(a) From the date hereof to the Effective Time, upon reasonable prior
notice, the Company shall, and shall cause its subsidiaries, officers,
directors, employees, and shall use its reasonable best efforts to cause its
auditors and other agents to, afford the officers, employees, auditors and other
agents of Parent, and financing sources who shall agree to be bound by the
provisions of this Section 6.4 as though a party hereto, complete access,
consistent with applicable law, at all reasonable times to its officers,
employees, agents, properties, offices, plants and other facilities and to all
books and records, and shall furnish Parent and such financing sources with all
financial, operating and other data and information as Parent, through its
officers, employees or agents, or such financing sources may from time to time
reasonably request. Notwithstanding the foregoing, any such investigation or
consultation shall be conducted, where possible, during normal business hours
and, in each case, in such a manner as not to interfere unreasonably with the
business or operations of the Company or its subsidiaries.
(b) As soon as practicable after the date of this Agreement, Company
and Parent shall cooperate in good faith to develop a plan (the "Plan") with
respect to the communications with their respective employees and the employees
of their respective subsidiaries regarding the transactions contemplated by this
Agreement. Prior to consummation
30
<PAGE>
of the Offer, Parent shall coordinate any communications to the Company's
employees (including employees of the Company's subsidiaries) through the
officers of the Company and in a manner that will not disrupt the operations of
the Company.
(c) All information obtained by Parent and Purchaser pursuant to this
Section 6.4 shall be kept confidential in accordance with that certain letter
agreement, dated July 20, 1998 (the "Parent Confidentiality Agreement"), between
Parent and the Financial Advisor as agent for the Company.
SECTION 6.5: NO SOLICITATION OF TRANSACTIONS. The Company, its affiliates
---------------------------------------------
and their respective officers, directors, employees, representatives and agents
shall immediately cease any existing discussions or negotiations, if any, with
any parties conducted heretofore with respect to any acquisition or exchange of
all or any material portion of the assets of, or any equity interest in, the
Company or any of its subsidiaries or any business combination with or involving
the Company or any of its subsidiaries. At any time prior to consummation of the
Offer, the Company may, directly or indirectly, furnish information and access,
in each case only in response to a request for such information or access to any
person made after the date hereof that was not solicited, initiated or knowingly
encouraged by the Company or any of its affiliates or any of its or their
respective officers, directors, employees, representatives or agents after the
date hereof, pursuant to appropriate confidentiality agreements containing terms
and conditions (including standstill provisions) that are no less favorable than
the terms and conditions contained in the Parent Confidentiality Agreement.
Additionally, the Company, its affiliates, officers, directors employees or
representatives, may participate in discussions and negotiate with such person
concerning any merger, sale of assets, sale of shares of capital stock or
similar transaction (including an exchange of stock or assets) involving the
Company or any subsidiary or division of the Company, only if such person has
submitted a proposal to the Board of Directors of the Company relating to any
such transaction and the Board by a majority vote determines in good faith,
based upon the advice of outside counsel to the Company, that failing to take
such action is reasonably likely to constitute a breach of the Board of
Director's fiduciary duty under applicable law. The Board of Directors shall
provide a copy of any such written proposal to Parent immediately after receipt
thereof (except such written proposal shall be provided to Parent by 10:30 a.m.
on the next business day in cases where such written proposal is not received
during normal business hours) and shall notify Parent immediately if any
proposal (oral or written) is made (except Parent shall be notified by 10:30
a.m. on the next business day in cases where such proposal is not received
during normal business hours) and shall in such notice, indicate in reasonable
detail the identity of the offeror and the terms and conditions of any proposal
and shall keep Parent promptly advised of all developments which could
reasonably be expected to culminate in the Board of Directors withdrawing,
modifying or amending its recommendation of the Offer, the Merger and the other
transactions contemplated by this Agreement. Except as set forth in this Section
6.5, neither the Company or any of its affiliates, nor any of its or their
respective officers, directors, employees, representatives or agents, shall,
directly or indirectly, solicit, initiate or knowingly encourage discussions or
negotiations with, any corporation, partnership, person or other entity or group
(other than Parent and Purchaser, any affiliate or associate of Parent and
Purchaser or any designees of Parent or Purchaser) concerning any merger, sale
of any material portion or assets, sale of any shares of capital stock or
similar transactions (including an exchange of stock or assets) involving the
Company or any
31
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subsidiary or division of the Company. Nothing in this Section 6.5 shall prevent
the Board of Directors from taking, and disclosing to the Company's
stockholders, a position contemplated by Rules 14d-9 and 14e-2 promulgated under
the Exchange Act with regard to any tender offer; provided, further, that the
Board of Directors shall not recommend that the stockholders of the Company
tender their Shares in connection with any such tender offer unless the Board by
majority vote shall have determined in good faith, based upon the advice of
outside counsel to the Company, that failing to take such action is reasonably
likely to constitute a breach of the Board of Director's fiduciary duty under
applicable law. The Company agrees not to release any third party from, or waive
any provisions of, any confidentiality or standstill agreement to which the
Company is a party, unless the Board of Directors determines, based upon the
advice of outside counsel, that the failure to make such release or waiver is
reasonably likely to constitute a breach of the Board of Director's fiduciary
duties under applicable law.
SECTION 6.6: EMPLOYEE MATTERS.
------------------------------
(a) On and after the Effective Time, Parent shall cause the Surviving
Corporation and its subsidiaries to promptly pay or provide when due all
compensation and benefits earned through or prior to the Effective Time as
provided pursuant to the terms of any compensation arrangements, employment
agreements and employee or director benefit plans, programs and policies in
existence as of the date hereof for all employees (and former employees) and
directors (and former directors) of the Company and its subsidiaries (including
all compensation and benefits earned through the Effective Time pursuant to the
Company Plans disclosed in the Company Disclosure Letter). Parent and the
Company agree that the Surviving Corporation and its subsidiaries shall pay
promptly or provide when due all compensation and benefits required to be paid
pursuant to the terms of any individual agreement with any employee, former
employee, director or former director in effect as of the date hereof and
disclosed in the Company Disclosure Letter.
(b) If employees of the Surviving Corporation and its subsidiaries
become eligible to participate in a medical, dental or health plan of Parent or
its subsidiaries, Parent shall cause such plan to (i) waive any preexisting
condition limitations for conditions covered under the applicable medical,
health or dental plans of the Company and its subsidiaries and (ii) honor any
deductible and out-of-pocket expenses incurred by the employees and their
beneficiaries under such plans during the portion of the calendar year prior to
such participation.
(c) The Surviving Corporation shall perform all of Company's
obligations under and pursuant to the Union Contract.
(d) Nothing in this Section 6.6 shall require the continued
employment of any person or, with respect to clause (c) hereof, prevent the
Company and/or the Surviving Corporation and their subsidiaries from taking any
action or refraining from taking any action that the Company and its
subsidiaries prior to the Effective Time, could have taken or refrained from
taking.
(e) The Surviving Corporation shall pay management bonuses of up to
an aggregate of $600,000 for the fiscal year 1998, in accordance with past
practices and pursuant to
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the direction and discretion of Timothy R. Duke, to the extent that such bonuses
have been accrued on the Company's unaudited interim financial statements for
the nine-month period ended September 30, 1998.
SECTION 6.7: DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
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(a) The Articles of Incorporation and By-Laws of the Surviving
Corporation shall contain provisions no less favorable with respect to
indemnification than are set forth in the Certificate of Incorporation and By-
laws of the Company, which provisions shall not be amended, repealed or
otherwise modified for a period of 6 years from the Effective Time in any manner
that would adversely affect the rights thereunder of individuals who at or prior
to the Effective Time were directors, officers or employees of the Company.
(b) For 6 years after the Effective Time, the Surviving Corporation
will indemnify and hold harmless each present and former director and officer of
the Company (the "Indemnified Parties"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") (but only to the extent such
Costs are not otherwise covered by insurance and paid) incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative (collectively, "Claims"), arising out
of or pertaining to matters existing or occurring at or prior to the Effective
Time, whether asserted or claimed prior to, at or after the Effective Time, to
the fullest extent permitted under applicable law (and the Surviving Corporation
will also advance expenses as incurred to the fullest extent permitted under
applicable law provided the person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
person is not entitled to indemnification).
(c) Any Indemnified Party wishing to claim indemnification under
Section 6.7(b), upon learning of any such Claim, shall promptly notify Parent
thereof.
(d) Parent shall, or shall cause, the Surviving Corporation to
maintain the Company's existing officers' and directors' liability insurance
("D&O Insurance") for a period of 6 years after the Effective Time so long as
the annual premium therefor is not in excess of twice the current premium (the
"Maximum Premium"); provided, however, if the existing D&O Insurance expires, or
-------- -------
is terminated or canceled by the insurance carrier during such period, the
Surviving Corporation will use its reasonable best efforts to obtain as much D&O
Insurance and, to the extent possible, covering substantially the same matters
that were covered under the D&O Insurance as in effect on the date hereof, as
can be obtained for the remainder of such period for a premium not in excess (on
an annualized basis) of the Maximum Premium.
(e) If the Surviving Corporation or Parent or any of their respective
successors or assigns, (i) reorganizes or consolidates with or merges into any
other person and is not the resulting, continuing or surviving corporation or
entity of such consolidation or merger or (ii) liquidates, dissolves or
transfers all or substantially all of its properties and assets to any person,
then, and in each such case, prior to such action, proper provision will be made
so that the successors and assigns of such party assume the obligations of
Surviving Corporation or Parent hereunder, as applicable.
33
<PAGE>
SECTION 6.8: NOMINATION OF TIMOTHY R. DUKE. Upon acceptance and payment
-------------------------------------------
for the Shares in the Offer, Parent, acting through its Board of Directors,
shall cause its Board of Directors to be expanded and shall appoint Timothy R.
Duke to fill the vacancy created by such expansion. Thereafter, Parent shall
cause Timothy R. Duke to be nominated as a director nominee for consideration by
Parent's stockholders at the next regularly scheduled annual meeting of Parent's
stockholders.
SECTION 6.9: NOTIFICATION OF CERTAIN MATTERS. The Company shall give
---------------------------------------------
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
the occurrence or non-occurrence of (i) any event the occurrence or non-
occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
and (ii) any failure of the Company, Parent or Purchaser, as the case may be, to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 6.9 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION 6.10: FURTHER ACTION; REASONABLE BEST EFFORTS.
-----------------------------------------------------
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement as
soon as practicable, including but not limited to (i) cooperation in the
preparation and filing of the Offer Documents, the Schedule 14D-9, the Proxy
Statement, any required filings under the HSR Act and any amendments to any
thereof, (ii) cooperation with respect to consummating the financing for the
Offer and the Merger and (iii) using its reasonable best efforts to promptly
make all required regulatory filings and applications including, without
limitation, responding promptly to requests for further information and to
obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
with the Company and its subsidiaries and Parent and its subsidiaries as are
necessary for the consummation of the transactions contemplated by this
Agreement and to fulfill the conditions to the Offer and the Merger. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and directors
of each party to this Agreement shall use their reasonable best efforts to take
all such necessary action.
(b) The Company and Parent each shall keep the other reasonably
apprised of the status of matters relating to completion of the transactions
contemplated hereby, including promptly furnishing the other with copies of
notices or other communications received by Parent or the Company, as the case
may be, or any of their subsidiaries, from any governmental authority with
respect to the Offer or the Merger or any of the other transactions contemplated
by this Agreement. The parties hereto will consult and cooperate with one
another, and consider in good faith the views of one another in connection with
any analyses, appearances, presentations,
34
<PAGE>
memoranda, briefs, arguments, opinions and proposals made or submitted by or on
behalf of any party hereto in connection with proceedings under or relating to
the HSR Act or any other antitrust law.
(c) Each party shall timely and promptly make all filings which are
required under the HSR Act and Parent shall pay the filing fee. Each party will
furnish to the other such necessary information and reasonable assistance as it
may request in connection with its preparation of such filings. Each party will
supply the other with copies of all correspondence, filings or communications
between such party or its representatives and the Federal Trade Commission, the
Antitrust Division of the United States Department of Justice or any other
governmental agency or authority or members of their respective staffs with
respect to this Agreement or the transactions contemplated hereby.
SECTION 6.11: PUBLIC ANNOUNCEMENTS. The parties agree that the initial
-----------------------------------
press release announcing the execution of this Agreement shall be a joint
release approved by all parties. Parent and the Company shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to the Offer or the Merger and shall not issue any such press
release or make any such public statement prior to such consultation and prior
to approval by Parent, except as may be required by law or any listing agreement
with its securities exchange.
SECTION 6.12: DISPOSITION OF LITIGATION.
----------------------------------------
(a) The Company shall not settle any litigation currently pending, or
commenced after the date hereof, against the Company or any of its directors by
any stockholder of the Company relating to the Offer or this Agreement, without
the prior written consent of Parent (which shall not be unreasonably withheld).
(b) The Company shall not voluntarily cooperate with any third party
that has sought or may hereafter seek to restrain or prohibit or otherwise
oppose the Offer or the Merger and shall cooperate with Parent and Purchaser to
resist any such effort to restrain or prohibit or otherwise oppose the Offer or
the Merger, unless the Board of Company, based upon the advice of outside legal
counsel, determines that such cooperation is mandatory in order to comply with
its fiduciary duties.
SECTION 6.13: COMMITMENT LETTER. Parent covenants and agrees that, during
--------------------------------
the period from the date hereof to the Effective Time, unless the Company shall
otherwise agree in writing, it shall operate its business, and cause each of its
subsidiaries and affiliates, including Purchaser, to operate their respective
businesses, in a manner so as not to materially impact its ability to borrow the
monies contemplated to be loaned to it or them as set forth in the Commitment
Letter. By way of example, and not of limitation, Parent agrees that neither it,
nor any of its subsidiaries or affiliates (including Purchaser) will (i) enter
into any financing transaction (other than the sale of common equity for cash
consideration resulting in gross proceeds per share equal to the fair market
value of such common equity) or any merger, consolidation, or purchase or sale
of a substantial portion of the equity or assets, with or of any other person or
entity, or (ii) enter into any recapitalization, reorganization, liquidation or
dissolution, to the extent that any such action
35
<PAGE>
under clauses (i) or (ii) hereof would materially and adversely impact Parent's
ability to borrow funds pursuant to the Commitment Letter. From and after the
date hereof and continuing until completion of the Merger, or the earlier
termination of this Agreement in accordance with its terms, Parent and Purchaser
agree to use the funds currently available under Parent's existing revolving
credit facility with First Union National Bank, as Agent, and Wachovia Bank of
North Carolina, N.A., as co-Agent (the "Revolving Credit Facility"), solely to
fund the purchase of Shares pursuant to the Offer and the payment of the Merger
Consideration. Parent and Purchaser jointly and severally represent and warrant
to the Company that, on the date hereof, there is at least $30,000,000 of
availability under the Revolving Credit Facility. Additionally, Parent and
Purchaser jointly and severally represent and warrant to the Company that, on
the date hereof, Parent has unrestricted cash on its balance sheet of at least
$20,000,000 (the "Minimum Cash Balance"), and covenants and agrees that the
Minimum Cash Balance shall be used by Parent and Purchaser solely to fund the
purchase of Shares pursuant to the Offer and the payment of the Merger
Consideration.
ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.1: CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER.
-------------------------------------------------------------------------
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) If required by the DGCL, this Agreement shall have been adopted
by the affirmative vote of the stockholders of the Company by the requisite vote
in accordance with the Company's Certificate of Incorporation and the DGCL.
(b) No statute, rule, regulation, executive order, decree, ruling,
injunction or other order (whether temporary, preliminary or permanent) shall
have been enacted, entered, promulgated or enforced by any United States,
foreign, federal or state court or governmental authority that prohibits,
restrains, enjoins or restricts the consummation of the Merger; provided,
--------
however, that prior to invoking this condition each party agrees to comply with
- -------
Section 6.10.
(c) Purchaser shall have purchased all Shares validly tendered
pursuant to the Offer (except that payment for all validly tendered Shares is
not a condition to Parent's or Purchaser's obligation if Purchaser fails to
accept for payment and pay for any Shares in violation of the terms of the Offer
or this Agreement).
(d) Any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired.
36
<PAGE>
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1: TERMINATION. This Agreement may be terminated and the
-------------------------
transactions contemplated herein may be terminated and abandoned at any time
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company:
(a) By mutual written consent of Parent, Purchaser and the Company;
(b) By either of Purchaser or Parent or of the Company if, by the
Outside Date, any of the Offer Conditions (as defined in Annex A) has not been
satisfied or (except with respect to the Minimum Condition) has not been waived
by Purchaser;
(c) By the Company prior to the purchase of Shares pursuant to the
Offer, if (i) there has been a material breach of any representation, warranty,
covenant or agreement on the part of Parent or Purchaser contained in this
Agreement that materially adversely affects Parent's or Purchaser's ability to
consummate (or materially delays commencement or consummation of) the Offer and
that has not been cured prior to the earlier of (A) 10 business days following
notice of such breach by the Company to Parent and Purchaser and (B) two
business days prior to the Expiration Date or (ii) Purchaser has (x) terminated
the Offer or (y) failed to pay for Shares pursuant to the Offer;
(d) By the Company if, prior to the purchase of Shares pursuant to
the Offer, any person has made a bona fide offer to acquire the Company (i) that
the Board of Directors of the Company determines in its good faith judgment is
more favorable to the Company's stockholders than the Offer and the Merger and
(ii) as a result of which the Board of Directors determines in good faith, based
upon the advice of outside counsel, that the failure to terminate this Agreement
is reasonably likely to constitute a breach of the Board's fiduciary obligations
under applicable law, provided that such termination under this paragraph shall
--------
not be effective until the Company has made payment of the full fee and expense
reimbursement required by Section 8.3;
(e) By Parent prior to the purchase of Shares pursuant to the Offer,
if (1) there has been a breach of any representation, warranty, covenant or
agreement on the part of the Company contained in this Agreement that is likely
to have a Material Adverse Effect and that has not been cured prior to the
earlier of (A) 10 business days following notice of such breach and (B) two
business days prior to the date on which the Offer expires; (2) the Board of
Directors of the Company has (x) modified (including by amendment of the
Schedule 14D-9) in a manner adverse to Purchaser or withdrawn its approval or
recommendation of the Offer, this Agreement or the Merger, (y) approved or
recommended another offer or transaction pursuant to, or otherwise knowingly and
intentionally breached in a material manner the provisions of, Section 6.5, or
(z) amended the Rights Agreement to facilitate an offer by any other person to
acquire the Company, or has resolved to effect any of the foregoing; (3) there
has been, solely as a result of the operation of the Rights Agreement, a
material breach of any representation, warranty, covenant or agreement contained
in Section 3.3 or Section 3.4, which material breach
37
<PAGE>
has not been cured by the earlier of (X) the Outside Date or (Y) 20 days after
receipt by the Company of notice of such breach from Parent or Purchaser; or (4)
there has been a material breach of any representation, warranty, covenant or
agreement contained in Section 3.5(c) or Section 5.2; or
(f) By Parent or the Company, upon the entry or issuance of any
order, preliminary or permanent injunction, decree, judgment or ruling in any
action or proceeding before any court or governmental, administrative or
regulatory authority or agency, or any statute, rule or regulation enacted,
entered, enforced, promulgated, amended or issued that is applicable to Parent,
Purchaser, the Company or any subsidiary or affiliate of Purchaser or the
Company or the Offer or the Merger, by any legislative body, court, government
or governmental, administrative or regulatory authority or agency that is likely
to have the effect of: (i) making illegal or otherwise directly or indirectly
restraining or prohibiting the making of the Offer in accordance with the terms
of this Agreement, the acceptance for payment of, or payment for, some of or all
the Shares by Purchaser or any of its affiliates or the consummation of the
Merger; (ii) prohibiting the ownership or operation of the Company and its
subsidiaries by Parent or any of Parent's subsidiaries, (iii) imposing material
limitations on the ability of Parent, Purchaser or any of Parent's affiliates
effectively to acquire or hold or to exercise in all material respects full
rights of ownership of the Shares, including without limitation the right to
vote any Shares acquired or owned by Parent or Purchaser or any of its
affiliates on all matters properly presented to the stockholders of the Company,
including, without limitation, the adoption of this Agreement or the right to
vote any shares of capital stock of any subsidiary directly or indirectly owned
by the Company; or (iv) requiring divestiture by Parent or Purchaser or any of
their affiliates of any Shares.
SECTION 8.2: EFFECT OF TERMINATION. In the event of the termination of
-----------------------------------
this Agreement pursuant to Section 8.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto except as
set forth in Section 8.3 and Section 9.1; provided, however, that the payment of
-------- -------
the Termination Fee (as defined in Section 8.3(a) below) pursuant to Section
8.3(a)(i) shall be considered with respect to the calculation of any damages
resulting from any such willful breach by the Company. Notwithstanding anything
herein to the contrary, nothing in this Section 8.2 shall relieve any party from
liability for fraud or breach of any covenant, agreement or any other term in
this Agreement. If this Agreement is terminated by the Company and a
Termination Fee is paid pursuant to Section 8.3(a)(i)(B) or Section 8.3(a)(ii),
the Termination Fee shall be deemed to be liquidated damages rather than a
penalty, and shall constitute the total damages and sole remedy of Parent and
Purchaser upon any such termination.
SECTION 8.3: FEES AND EXPENSES.
-------------------------------
(a) If (i) the Company terminates this Agreement (A) pursuant to
Section 8.1(d) or (B) in a manner or for a reason not expressly permitted by
Section 8.1 or (ii) Parent terminates this Agreement pursuant to Section
8.1(e)(2), Section 8.1(e)(3) or Section 8.1(e)(4), then the Company shall pay to
Parent, within three business days following termination of this Agreement a
fee, in cash, of $5,000,000 (the "Termination Fee"). If, from and after July
20, 1998, and prior to the purchase of Shares pursuant to the Offer, (1) any
other person has made a bona-fide offer to acquire at least 50% of the Shares or
substantially all of the assets of the
38
<PAGE>
Company, or otherwise to acquire the Company (the "Third-Party Offer"), at a
price per Share (or the equivalent price per Share, in the case of an asset
purchase) (x) that is higher on its face than the price per Share to be paid in
the Offer or (y) that the Company determines, based upon the advice of its
Financial Advisor, is higher than the price per Share to be paid in the Offer,
(2) the Offer remains outstanding until the Outside Date but is not consummated
solely as a result of the failure of the Minimum Condition and (3) the Third-
Party Offer is consummated within 180 days of the termination of this Agreement,
then the Company shall pay to Parent, within three business days following the
consummation of the Third Party Offer, the Termination Fee. The Company in no
event shall be obligated to pay more than one such fee with respect to all such
agreements and occurrences.
(b) Each party shall bear its own expenses in connection with this
Agreement and the transactions contemplated hereby.
SECTION 8.4: AMENDMENT. Subject to Section 6.3, this Agreement may be
-----------------------
amended by the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective Time;
provided, however, that, after adoption of the Agreement by the stockholders of
the Company, no amendment may be made which would reduce the amount or change
the type of consideration into which each Share shall be converted upon
consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 8.5: WAIVER. Subject to Section 6.3, at any time prior to the
--------------------
Effective Time, any party hereto may (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall
be valid only if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1: NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
------------------------------------------------------------------------
The representations, warranties and agreements in this Agreement shall terminate
at the Effective Time or upon the termination of this Agreement pursuant to
Section 8.1, as the case may be, except that the agreements set forth in Article
II, Section 6.6, Section 6.7, and Section 6.8 and Article IX shall survive the
Effective Time and those set forth in Section 5.2, Section 6.4, Section 8.3 and
Article IX, as well as the Parent Confidentiality Agreement, shall also survive
termination of this Agreement.
SECTION 9.2: NOTICES. All notices, requests, claims, demands and other
---------------------
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or United States express mail (postage prepaid,
39
<PAGE>
return receipt requested) or by overnight courier service guaranteeing next
business day delivery (charges prepaid) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
if to Parent or Purchaser:
Roanoke Electric Steel Corporation
102 Westside Blvd., N.W.
P.O. Box 13948
Roanoke, Virginia 24038-3948
Attention: Donald G. Smith
Telecopy: (540) 342-9437
with additional copies to:
Woods, Rogers & Hazlegrove, P.L.C.
First Union Tower, Suite 1400
10 South Jefferson Street
P.O. Box 14125
Roanoke, Virginia 24038-4125
Attention: Heman A. Marshall, III, Esq.
Telecopy: (540) 983-7711
if to the Company:
Steel of West Virginia, Inc.
P.O. Box 2547
Huntington, West Virginia 25726
Attention: Timothy R. Duke
Telecopy: (304) 529-1479
with a copy to:
Sierchio & Albert, P.C.
41 East 57th Street
Floor 39 - At Madison Avenue, Penthouse A
New York, New York 10022
Attention: Stephen A. Albert, Esq.
Telecopy: (212) 446-9504
with a further copy to:
Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, Pennsylvania 19103
40
<PAGE>
Attention: James D. Epstein, Esq.
Telecopy: (215) 981-4750
SECTION 9.3: CERTAIN DEFINITIONS. For purposes of this Agreement, the
---------------------------------
term:
"affiliate" of a person means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is
under common control with, the first mentioned person;
"beneficial owner" with respect to any Shares means a person who shall
be deemed to be the beneficial owner of such Shares (i) which such
person or any of its affiliates or associates beneficially owns,
directly or indirectly, (ii) which such person or any of its
affiliates or associates (as such term is defined in Rule 12b-2 of the
Exchange Act) has, directly or indirectly, (A) the right to acquire
(whether such right is exercisable immediately or subject only to the
passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of consideration rights, exchange
rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding or (iii) which
are beneficially owned, directly or indirectly, by any other persons
with whom such person or any of its affiliates or person with whom
such person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any shares; provided, however, that no person
nor any affiliate or associate of such person shall be deemed to be
the beneficial owner of any securities by reason of a revocable proxy
granted for a particular meeting of stockholders, pursuant to a public
solicitation of proxies for such meeting, and with respect to which
shares neither such person nor any such affiliate or associate is
otherwise deemed the beneficial owner.
"control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of
the management policies of a person, whether through the ownership of
stock, as trustee or executor, by contract or credit arrangement or
otherwise;
"generally accepted accounting principles" shall mean the generally
accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a
significant segment of the accounting profession in the United States,
in each case applied on a basis consistent with the manner in which
the audited financial statements for the fiscal year of the Company
ended December 31, 1997 were prepared;
41
<PAGE>
"person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined
in Section 13(d)(3) of the Exchange Act); and
"subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means any corporation,
partnership, joint venture or other legal entity of which the Company,
the Surviving Corporation, Parent or such other person, as the case
may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, 50% or more of the stock or
other equity interests the holder of which is generally entitled to
vote for the election of the board of directors or other governing
body of such corporation or other legal entity.
SECTION 9.4: SEVERABILITY. If any term or other provision of this
--------------------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
SECTION 9.5: ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, together with
------------------------------------------
the other agreements referenced herein (including the Parent Confidentiality
Agreement), constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof. This Agreement shall not be assigned by operation of law
or otherwise, except that Parent and Purchaser may assign all or any of their
respective rights and obligations hereunder to any direct or indirect wholly
owned subsidiary or subsidiaries of Parent, provided that no such assignment
shall relieve the assigning party of its obligations.
SECTION 9.6: PARTIES IN INTEREST. This Agreement shall be binding upon
---------------------------------
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, except for the provisions of Sections 6.6(c) and
6.7, is intended to or shall confer upon any other person any rights, benefits
or remedies of any nature whatsoever under or by reason of this Agreement.
SECTION 9.7: GOVERNING LAW. This Agreement shall be governed by, and
---------------------------
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.8: HEADINGS. The descriptive headings contained in this
----------------------
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
42
<PAGE>
SECTION 9.9: COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be
------------------------------------------------
executed in one or more counterparts (including facsimile signatures), and by
the different parties hereto in separate counterparts (including facsimile
signatures), each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 9.10: SPECIFIC PERFORMANCE. The parties agree that irreparable
----------------------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in the U.S. District
Court for the Western District of Virginia, Roanoke Division or the Circuit
Court for the City of Roanoke, Virginia, this being in addition to any other
remedy to which such party is entitled at law or in equity. In addition, each of
the parties hereto (i) consents to submit itself to the personal jurisdiction of
such courts in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (ii) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, (iii) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a Federal or state court sitting in City of
Roanoke, and (iv) consents to service being made through the notice procedures
set forth in Section 9.2.
[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
43
<PAGE>
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
ROANOKE ELECTRIC STEEL CORPORATION
By: /s/ Donald G. Smith
-------------------------------
Name: Donald G. Smith
Title: President
SWVA ACQUISITION, INC.
By: /s/ Donald G. Smith
--------------------------------
Name:
Title:
STEEL OF WEST VIRGINIA, INC.
By: /s/ Timothy R. Duke
--------------------------------
Name: Timothy R. Duke
Title: President
44
<PAGE>
ANNEX A
OFFER CONDITIONS
The capitalized terms used in this Annex A have the meanings set forth in
the attached Merger Agreement.
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for any Shares tendered pursuant to
the Offer, and Purchaser may postpone the acceptance for payment or payment for
any Shares tendered pursuant to the Offer, and Purchaser may terminate the Offer
(whether or not Purchaser has purchased or paid for any Shares) to the extent
permitted by the Merger Agreement unless the following conditions (the "Offer
Conditions") have been satisfied:
(1) at the expiration of the Offer, a number of Shares that
constitutes more than 50% of the voting power (determined on a fully-
diluted basis) on the date of purchase of all the securities of the Company
entitled to vote generally in the election of directors or in a merger has
been validly tendered in the Offer and not properly withdrawn prior to the
expiration of the Offer (the "Minimum Condition");
(2) all of the representations and warranties of the Company set
forth in the Merger Agreement that are qualified by reference to a Material
Adverse Effect are true and correct, and any such representations and
warranties that are not so qualified are true and correct in all respects
except in any respect that is not likely to have a Material Adverse Effect,
in each case as if such representations and warranties were made at the
time of such determination; or
(3) At any time on or after the date of the Merger Agreement, none of
the following events has occurred:
(a) the entry or issuance of any order, preliminary or permanent
injunction, decree, judgment or ruling in any action or
proceeding before any court or governmental, administrative or
regulatory authority or agency, or any statute, rule or
regulation enacted, entered, enforced, promulgated, amended or
issued that is applicable to Parent, Purchaser, the Company or
any subsidiary or affiliate of Purchaser or the Company or the
Offer or the Merger, by any legislative body, court, government
or governmental, administrative or regulatory authority or agency
that is likely to have the effect of: (i) making illegal or
otherwise directly or indirectly restraining or prohibiting the
making of the Offer in accordance with the terms of the Merger
Agreement, the acceptance for payment of, or payment for, some of
or all the Shares by Purchaser or any of its affiliates or the
consummation of the Merger; (ii) prohibiting the ownership or
operation of the Company and its subsidiaries by Parent or any of
Parent's
45
<PAGE>
subsidiaries, (iii) imposing material limitations on the ability
of Parent, Purchaser or any of Parent's affiliates effectively to
acquire or hold or to exercise in all material respects full
rights of ownership of the Shares, including without limitation
the right to vote any Shares acquired or owned by Parent or
Purchaser or any of its affiliates on all matters properly
presented to the stockholders of the Company, including, without
limitation, the adoption of the Merger Agreement or the right to
vote any shares of capital stock of any subsidiary directly or
indirectly owned by the Company; or (iv) requiring divestiture by
Parent or Purchaser or any of their affiliates of any Shares;
(b) (i) any general suspension of trading in, or limitation on prices
(other than suspensions or limitations triggered on NASDAQ by
price fluctuations on a trading day) for, securities on any
national securities exchange, (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in
the United States, (iii) a commencement of a war or material
armed hostilities or other material national calamity directly
involving the entire United States or materially adversely
affecting the consummation of the Offer or (v) in the case of any
of the foregoing existing at the time of commencement of the
Offer, a material acceleration or worsening thereof;
(c) (i) the Board of Directors of the Company or any committee
thereof has withdrawn or modified in a manner adverse to Parent
or Purchaser the approval or recommendation of the Offer, the
Merger or the Merger Agreement, or approved or recommended any
takeover proposal or any other acquisition of Shares other than
the Offer, (ii) any such person or group has entered into a
definitive agreement or an agreement in principle with the
Company with respect to a tender offer or exchange offer for any
Shares or a merger, consolidation or other business combination
with or involving the Company or any of its subsidiaries, or
(iii) the Board of Directors of the Company or any committee
thereof has resolved to do any of the foregoing;
(d) the Company fails to perform in any material respect any material
obligation or to comply in any material respect with any material
agreement or material covenant of the Company to be performed or
complied with by it under the Merger Agreement;
(e) the Merger Agreement has been terminated in accordance with its
terms or the Offer has been terminated with the consent of the
Company; or
(f) any waiting periods under the HSR Act applicable to the purchase
of Shares pursuant to the Offer or the Merger have not expired or
been terminated;
46
<PAGE>
and, upon the failure of any of the conditions set forth in Sections 2 or 3 of
this Annex A, Purchaser determines, in its reasonable judgment, that it is
inadvisable for Purchaser to proceed with the Offer or with the acceptance for
payment of or payment for Shares.
The Offer Conditions (other than the Minimum Condition) are for the sole
benefit of Purchaser and may be waived by Purchaser in writing in whole or in
part at any time and from time to time in its sole discretion.
47
<PAGE>
Exhibit (c)(2)
Stock Option Agreement, dated as of November 10, 1998, between
Steel of West Virginia, Inc., and SWVA Acquisition, Inc.
<PAGE>
STOCK OPTION AGREEMENT
----------------------
STOCK OPTION AGREEMENT, dated as of November 10, 1998, between Steel of
West Virginia, Inc., a Delaware corporation ("Company"), and SWVA Acquisition,
-------
Inc., a Virginia corporation ("Purchaser").
---------
WITNESSETH:
-----------
WHEREAS, Purchaser, Roanoke Electric Steel Corporation, a Virginia
corporation of which Purchaser is a wholly owned subsidiary ("Parent"), and
------
Company, propose to enter into an Agreement and Plan of Merger (the "Merger
------
Agreement"), which would provide, among other things, that Purchaser, upon the
- ---------
terms and subject to the conditions thereof, would make a cash tender offer (the
"Offer") for all outstanding shares of common stock, par value $0.01 per share,
of Company (the "Shares") and thereafter Purchaser would merge with Company (the
------
"Merger"); and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Parent and Purchaser have requested that Company agree, and Company
has agreed, as set forth herein, to grant to Purchaser an option to purchase
authorized but unissued Shares.
NOW, THEREFORE, to induce Parent and Purchaser to enter into the Merger
Agreement and in consideration of the mutual covenants and agreements set forth
herein and therein, the parties agree as follows:
1. Grant of Option. Company hereby grants to Purchaser an irrevocable
---------------
option, exercisable as provided herein (the "Option"), to purchase up to an
------
aggregate of 1,196,148 authorized but unissued Shares (the "Option Shares") for
-------------
an exercise price (the "Exercise Price") equal to the closing bid price per
--------------
Share, as reported by The Nasdaq Stock Market, on the date following the date of
the first joint public announcement of the Merger by Company and Parent;
provided, however, that the number of Option Shares shall not exceed 19.9% of
issued and outstanding Shares (not counting the Option Shares) and shall be
subject to adjustments as set forth in Section 7 below. In the event that after
the date hereof any additional Shares (other than the Option Shares) are either
(i) issued or become outstanding, or (ii) redeemed, repurchased, retired or
otherwise cease to be outstanding, the number of Option Shares shall be
increased or decreased, as appropriate, so that, after such issuance, such
number equals 19.9% of the number of Shares then issued and outstanding (not
counting the Option Shares).
2. Exercise of Option. The Option may be exercised by Purchaser at any
------------------
time or from time to time following the occurrence of a Triggering Event (as
hereinafter defined), in whole or in part, until the 180th day following the
termination of the Merger Agreement. If Purchaser wishes to exercise the Option,
Purchaser shall give written notice to Company of its intention to exercise the
Option, specifying the number of Option Shares it will purchase and a place,
time and date not earlier than one day and not later than 20 days from the date
such notice is given for the closing of such purchase (the "Closing"). Each
-------
Closing shall be held on the date
<PAGE>
specified in such notice unless, on such date, there shall be any preliminary or
permanent injunction or other order by any court of competent jurisdiction or
any other legal restraint or prohibition preventing the consummation of such
purchase, in which event such Closing shall be held as soon as practicable
following the lifting, termination or suspension of such injunction, order,
restraint or prohibition (each party agreeing to use its commercially reasonable
efforts to have such injunction, order, restraint or prohibition lifted,
terminated or suspended). Company's obligation to issue Option Shares upon
exercise of the Option is subject to the conditions that (i) any waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), applicable to the purchase of the Option Shares shall have expired
-------
or been terminated and (ii) there shall be no preliminary or permanent
injunction or other order preventing or restricting the issuance of the Option
Shares. Purchaser and Company shall each promptly make such filings and provide
such information as may be required under the HSR Act with respect to the
purchase of the Option Shares. Notwithstanding the termination of the Option,
purchaser will be entitled to exercise its rights under this Section 2 if it has
exercised such rights in accordance with the terms hereof prior to the
termination of the Option. The term "Triggering Event" shall mean the occurrence
of (a) the termination of the Merger Agreement under circumstances that caused a
Termination Fee (as defined in the Merger Agreement) to become payable by
Company to Parent, (b) the occurrence of all of the events set forth in clauses
(1), (2) and (3) of the second sentence of Section 8.3(a) of the Merger
Agreement or (c) the purchase by Purchaser of Shares pursuant to the Offer
following satisfaction of the Minimum Condition (as defined in Annex A to the
Merger Agreement). Company shall promptly notify Purchaser and Parent in writing
of the occurrence of any Triggering Event (which notice is not a condition to
the exercise of the Option).
3. Payment and Delivery of Certificates. At any Closing hereunder (a)
------------------------------------
Purchaser shall make payment to Company of the aggregate purchase price for the
Option Shares so purchased in immediately available funds by certified or
official bank check or by wire transfer to a bank account designated by Company
to Purchaser prior to such Closing and (b) Company shall deliver or cause to be
delivered to Purchaser a certificate or certificates, duly executed by Company
and registered in the name of Purchaser, representing the number of Option
Shares so purchased.
4. Payment in Lieu of Exercise. If, after the occurrence of a Triggering
---------------------------
Event but prior to the expiration of the Option, any Third Party (a) acquires
beneficial ownership of more than 50 percent of the then outstanding Shares or
(b) enters into an agreement with Company to acquire Company, by merger,
consolidation or purchase of all or substantially all of its assets or other
similar business combination, reorganization or recapitalization, then Purchaser
may, in lieu of exercising the Option, surrender the Option to Company and
Company shall pay to Purchaser upon Purchaser's written demand, an amount in
cash for each of the Option Shares equal to the excess of (a) the highest price
per Share paid or to be paid by such Third Party pursuant to such transaction
(or such consideration paid to Company, in the case of an asset acquisition or
similar transaction, divided by the number of Shares outstanding on a
fully-diluted basis (after taking into consideration the exercise of all
outstanding options, warrants, rights
-2-
<PAGE>
(other than rights issued pursuant to that certain Rights Agreement between
Company and Continental Stock Transfer & Trust Company, as Rights Agent, dated
March 19, 1997, as amended to date), convertible securities or exchangeable
securities issued by Company), excluding Shares issuable pursuant to this
Agreement) over (b) the Exercise Price. In the event the price per Share paid or
to be paid by such Third Party pursuant to such transaction includes both cash
and non-cash consideration, the value of such non-cash consideration shall be
determined by an investment banking firm acceptable to Company and Purchaser (it
being understood that the firm retained by Company to render financial advisory
services in connection with the Offer and Merger is acceptable to Company and
Purchaser for such purpose). Upon but not until (i) the surrender by Purchaser
of the Option and its demand for cash pursuant to this Section 4 and (ii)
Purchaser's receipt of the full amount of such cash, any and all obligations of
Purchaser to make payment and the obligations of Company to deliver certificates
for Option Shares pursuant to Section 3 hereof shall terminate.
5. Representations and Warranties of Company. Company hereby represents
-----------------------------------------
and warrants to Purchaser as follows:
a. Due Authorization, Etc. This Agreement has been duly authorized by
-----------------------
all necessary corporate action on the part of Company and has been duly executed
and delivered by a duly authorized officer of Company. Prior to the execution
and delivery of this Agreement and the issuance of the Option, the Board of
Directors of Company (at a meeting duly called and held) has duly and validly
approved this Agreement and the transactions contemplated hereby and by the
Merger Agreement, including the Offer and the Merger and the acquisitions of
Shares contemplated hereby and thereby, and for purposes of (S)203 of the
Delaware General Corporation Law, such approval occurring prior to the time
Purchaser became an "interested stockholder", as that term is defined in
(S).203.
b. Option Shares. Company has taken all necessary corporate action to
--------------
authorize and reserve for issuance, upon exercises of the Option, the number of
Option Shares and will take all necessary corporate action to authorize and
reserve for issuance all additional Shares or other securities that may be
issued as a result of Section 7 hereof upon exercise of the Option. The Shares
(or such other securities) to be issued upon due exercise, in whole or in part,
of the Option, when paid for as provided herein, will be duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights,
without liability attaching to the ownership thereof, and will be delivered free
add clear of all claims, liens, encumbrances and security interests of any kind
whatsoever.
c. Conflicting Instruments. Neither the execution and delivery of this
------------------------
Agreement by Company nor the consummation by Company of the transactions
contemplated hereby will violate or result in any violation of, or be in
conflict with or constitute a default under, or require the consent of any
person under, (i) the Certificate of Incorporation or By-Laws of Company or (ii)
any agreement, instrument, indenture, judgment, decree, order, statute, rule or
governmental regulation applicable to or binding upon Company except, in the
case of clause (ii),
-3-
<PAGE>
for violations, breaches or defaults which (x) are not in the aggregate material
to the business, results of operations or financial condition of Company and its
subsidiaries taken as a whole, (y) will not prevent or delay the consummation of
the transactions contemplated hereby and (z) would not prevent or restrict
Purchaser from exercising full rights of ownership over the Option Shares.
Except for any filing that may be required under the HSR Act, the Exchange Act
or the Securities Act of 1933 (the "Securities Act"), no consent, approval,
--------------
order or authorization of, or registration, declaration or filing with, any
government authority is required in connection with the execution and delivery
of this Agreement by Company or the performance by Company of its obligations
hereunder.
6. Representations and Warranties of Purchaser. Purchaser hereby
-------------------------------------------
represents and warrants to Company as follows:
a. Due Authorization, Etc. This Agreement has been duly authorized by
----------------------
all necessary corporate action on the part of Purchaser and has been duly
executed and delivered by a duly authorized officer of Purchaser.
b. No Distribution. Purchaser is acquiring the Option, and will
---------------
acquire the Option Shares issuable upon exercise of the Option, for its own
account and not with a view to or for sale in connection with any distribution
thereof, and Purchaser will not sell or otherwise dispose of the Option, or any
Option Shares, except in each case in compliance with the Securities Act and the
rules and regulations thereunder.
7. Adjustment Upon Changes in Capitalization. In the event of any change
-----------------------------------------
in the Shares by reason of any stock dividend, extraordinary dividend or
distribution, split-up, recapitalization, combination, exchange of shares or the
like, the number of Option Shares subject to the Option, the Exercise Price and
the price per Option Share to be paid by Company upon surrender of the Option
pursuant to Section 4 hereof shall be appropriately adjusted.
8. Registration Under the Securities Act. If the Option is exercised and
-------------------------------------
Purchaser so requests, Company shall file and use its commercially reasonable
efforts to register the Option Shares for sale as promptly as practicable after
receiving such request, but only after the termination of the Merger Agreement
in accordance with its terms, under the Securities Act and any applicable state
securities law. Purchaser shall pay all fees and expenses in connection with
such registration, including the reasonable fees and expenses of counsel and
accountants of Parent, Purchaser and Company, including underwriting discounts
and commissions to brokers or dealers.
9. Listing. If the Shares or any other securities to be acquired upon
-------
exercise of the Option are then listed on the National Association of Securities
Dealers Automated Quotation System (the "NASDAQ") (or any other national
securities quotation system or national securities exchange), the Company, upon
the request of the Purchaser, will promptly file an application to list the
Shares or other securities to be acquired upon exercise of the Option on the
-4-
<PAGE>
NASDAQ (and any other national securities quotation system or national
securities exchange) and will use commercially reasonable efforts to obtain
approval of such listing as promptly as practicable. The Purchaser shall pay all
fees and expenses in connection with such listing.
10. Further Assurances. From time to time, at the other party's
------------------
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective the transactions
contemplated by this Agreement in accordance with the terms and conditions
hereof.
11. Specific Performance. The parties hereto acknowledge and agree
--------------------
that if any of the provisions of this Agreement were not performed by Company in
accordance with their specific terms or were otherwise breached, Purchaser would
not have an adequate remedy at law and would be harmed irreparably and that the
damages therefor would be difficult to determine. Accordingly, it is agreed that
Purchaser shall be entitled to injunctive relief to prevent breaches of this
Agreement by Company and specifically to enforce the terms and provisions
hereof, in addition to any other remedy to which it may be entitled, at law or
in equity.
12. Miscellaneous.
-------------
a. Assignment. This Agreement shall not be assigned, by operation
----------
of law or otherwise, except that Purchaser may assign its rights and
obligations, in whole or in part, to Parent or to another wholly owned
subsidiary of Parent, but no such assignment shall relieve Purchaser of its
obligations hereunder if such assignee does not perform such obligations.
b. Amendments. This Agreement may not be modified, amended,
----------
altered or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
c. Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received upon receipt) in accordance with the terms of
the Merger Agreement.
d. Governing Law. This Agreement shall be governed by and
-------------
construed and enforced in accordance with the laws of the State of Delaware,
without regard to its conflicts of law rules.
e. Counterparts; Facsimile Signatures. This Agreement may be
----------------------------------
executed in several counterparts (including by facsimile signature), each of
which shall be deemed an original, but all of which together shall constitute
one and the same agreement.
f. Effect of Headings. The headings herein are for reference
------------------
purposes only and shall not in any way affect the meaning or interpretation
hereof.
-5-
<PAGE>
g. Entire Agreement. This Agreement and the Merger Agreement
----------------
contain the entire understanding of the parties with respect to their subject
matter and supersede all prior agreements or understandings among the parties
with respect to such subject matter. Company will not revoke the approvals
contemplated by Section 5(a) hereof.
h. Governing Law; Jurisdiction; and Consent to Service. Except as
---------------------------------------------------
expressly set forth below, this Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
In addition, each of Purchaser and Company hereby agree that any dispute arising
out of this Agreement, the Offer or the Merger shall be heard in the Court of
Chancery of the State of Delaware or in the United States District Court for the
District of Delaware and, in connection therewith, each party to this Agreement
hereby consents to the jurisdiction of such courts and agrees that any service
of process in connection with any dispute arising out of this Agreement, the
Offer or the Merger may be given to any other party hereto in accordance with
subsection (c) above.
i. Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
j. Third Party Beneficiaries. Nothing in this Agreement, expressed
-------------------------
or implied, shall be construed to give any person other than the parties hereto
any legal or equitable right, remedy or claim under or by reason of this
Agreement or any provision contained herein.
k. Expenses. Each party shall pay its own costs and expenses
--------
incurred in connection with the negotiation, execution, delivery, interpretation
and enforcement of this Agreement (including the fees and disbursements of its
accountants and advisors), except that in the event any legal proceeding is
commenced by any party to this Agreement to enforce or recover damages for any
breach of the provisions hereof, the prevailing party in such legal proceeding
shall be entitled to recover in such legal proceeding from the losing party such
prevailing party's costs and expenses incurred in connection with such legal
proceedings, including reasonable attorneys fees.
l. No Waiver. The failure of any party hereto to exercise any
---------
right, power or remedy provided under this Agreement or otherwise or to insist
upon compliance by any other party hereto with its obligations hereunder, and
any custom or practice of the parties at variance with the terms hereof, shall
not constitute a waiver by such party of its right to exercise
-6-
<PAGE>
any such or other right, power or remedy or to demand such compliance, either
with respect to the particular instance or future instances.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by Company and Purchaser on the date first above written.
STEEL OF WEST VIRGINIA, INC.
By: /s/ Timothy R. Duke
------------------------------
SWVA ACQUISITION, INC.
By: /s/ Donald G. Smith
------------------------------
-7-
<PAGE>
Exhibit (c)(3)
Form of Stock Tender and Voting Agreement, dated as of November 10,
1998, by and among Roanoke Electric Steel Corporation, SWVA
Acquisition, Inc., and certain stockholders of the Company.
<PAGE>
FORM OF
STOCK TENDER AND VOTING AGREEMENT
---------------------------------
STOCK TENDER AND VOTING AGREEMENT (this "Agreement"), dated as of
November 10, 1998 by and among _____________ ("Shareholder"), Roanoke Electric
Steel Corporation, a Virginia corporation ("Parent"), and SWVA Acquisition,
------
Inc., a Virginia corporation and a wholly-owned subsidiary of Parent
("Purchaser").
---------
W I T N E S S E T H:
-------------------
WHEREAS, concurrently herewith, Parent, Purchaser and Steel of West
Virginia, Inc., a Delaware corporation ("Company"), are entering into an
-------
Agreement and Plan of Merger of even date herewith (the "Merger Agreement"),
----------------
pursuant to which Purchaser agrees to make a tender offer (the "Offer") for all
-----
outstanding shares of common stock, $.01 par value per share (the "Common
------
Stock"), of the Company, at $10.75 in cash, to be followed by a merger (the
- -----
"Merger") of Purchaser with the Company;
------
WHEREAS, Shareholder beneficially owns (as defined in Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
--------
Act")), as of the date hereof, ______ shares of Common Stock (the "Existing
- --- --------
Shares", together with any shares of Common Stock beneficial ownership of which
- ------
is acquired by Shareholder after the date hereof and prior to the termination
hereof, hereinafter collectively referred to as the "Shares");
------
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Parent and Purchaser have requested that Shareholder agree, and
Shareholder has agreed, to enter into this Agreement; and
WHEREAS, Parent and Purchaser have entered into the Merger Agreement in
reliance on Shareholder's representations, warranties, covenants and agreements
hereunder;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other, good and valuable consideration, and intending to be
legally bound hereby, it is agreed as follows:
1. Agreement to Tender and Vote.
----------------------------
1.1. Tender. Shareholder agrees to validly tender all Shares
------
beneficially owned by it (which, for purposes of this Section 1.1 shall be
determined with reference to Rule 13d-3(a)(2) promulgated under the Exchange Act
pursuant to the Offer within ten business days of commencement of the Offer and
not withdraw any such Shares, except to the extent that the tender of shares
(excluding Shares acquired after the date hereof) pursuant to the Offer could
subject Shareholder to liability under Section 16(b) of the Exchange Act.
1.2. Voting. Shareholder hereby agrees that, during the time this
------
Agreement is in effect, at any meeting of the shareholders of Company, however
called, and in
<PAGE>
any action by consent of the stockholders of Company, Shareholder shall vote all
Shares beneficially owned by it (which, for purposes of this Section 1.2 shall
be determined with reference to Rule 13d-3(a)(1) promulgated under the Exchange
Act) (a) in favor of the Merger and (b) against any action or agreement that
would impede, interfere with, delay, postpone or attempt to discourage the
Merger or the Offer including, but not limited to, (i) any extraordinary
corporate transaction (other than the Merger), such as a merger, other business
combination, reorganization, consolidation, recapitalization, dissolution or
liquidation (each, an "Extraordinary Transaction") involving Company, (ii) a
-------------------------
sale or transfer of a material amount of assets of Company or any of its
subsidiaries, (iii) any change in the board of directors of Company or (iv) any
material change in the capitalization of the Company. Shareholder acknowledges
receipt and review of a copy of the Merger Agreement.
2. Representations and Warranties of Shareholder. Shareholder represents
---------------------------------------------
and warrants to Parent and purchaser as follows:
2.1. Ownership of Shares. On the date hereof the Existing Shares are
-------------------
all of the Shares currently beneficially owned by Shareholder. On the Closing
Date, the Shares will constitute all of the shares of Common Stock owned
beneficially by Shareholder. Shareholder does not have any rights to acquire any
additional shares of Common Stock other than pursuant to Options (as defined in
the Merger Agreement). Shareholder currently has with respect to the Existing
Shares, and at Closing will have with respect to the Shares, good, valid and
marketable title, free and clear of all liens, encumbrances, restrictions,
options, warrants, rights to purchase, voting agreements or voting trusts, and
claims of every kind (other than the encumbrances created by this Agreement and
other than restrictions on transfer under applicable Federal and State
securities laws).
2.2. Power; Binding Agreement. Shareholder has the full legal
------------------------
capacity, right, power and authority to enter into and perform all of
Shareholder's obligations under this Agreement. The execution and delivery of
this Agreement by Shareholder will not violate any other agreement to which
Shareholder is a party including, without limitation, any voting agreement,
shareholders agreement or voting trust. This Agreement has been duly executed
and delivered by Shareholder and constitutes a legal, valid and binding
agreement of Shareholder, enforceable in accordance with its terms. Neither the
execution or delivery of this Agreement nor the consummation by Shareholder of
the transactions contemplated hereby will (a) other than filings required under
the federal or state securities laws, require any consent or approval of or
filing with any governmental or other regulatory body, or (b) constitute a
violation of, conflict with or constitute a default under, any contract,
commitment, agreement, understanding, arrangement or other restriction of any
kind to which Shareholder is a party or by which Shareholder is bound.
2.3. Finder's Fees. No person is, or will be, entitled to any
-------------
commission or finder's fees from Shareholder in connection with this Agreement
or the transactions
-2-
<PAGE>
contemplated hereby exclusive of any commission or finder's fees referred to in
the Merger Agreement.
3. Representations and Warranties of Parent and Purchaser. Parent and
------------------------------------------------------
Purchaser, jointly and severally, represent and warrant to Shareholder as
follows:
3.1. Authority. Each of Parent and Purchaser has full legal right,
---------
power and authority to enter into and perform all of its obligations under this
Agreement. The execution and delivery of this Agreement by Parent and Purchaser
will not violate any other agreement to which Parent or Purchaser is a party.
This Agreement has been duly executed and delivered by each of Parent and
Purchaser and constitutes a legal, valid and binding agreement of Parent and
Purchaser, enforceable in accordance with its terms. Neither the execution of
this Agreement nor the consummation by Parent or Purchaser of the transactions
contemplated hereby will (a) require any consent or approval of or filing with
any governmental or other regulatory body, or (b) constitute a violation of,
conflict with or constitute a default under, any contract, commitment,
agreement, understanding, arrangement or other restriction of any kind to which
Parent or Purchaser is a party or by which it is bound.
3.2. Finder's Fees. No person is, or will be, entitled to any
-------------
commission or finder's fee from Parent or Purchaser in connection with this
Agreement or the transactions contemplated hereby exclusive of any commission or
finder's fees referred to in the Merger Agreement.
4. Termination. This Agreement (other than the provisions of Sections 5, 6
-----------
and 7), shall terminate on the earliest to occur of (a) the date on which
Purchaser accepts for payment the Shares tendered in the Offer, so long as the
Shares are so tendered and not withdrawn, (b) the Effective Time (as defined in
the Merger Agreement), and (c) the date immediately following the date on which
the Merger Agreement is terminated.
5. Expenses. Except as provided in Section 19, each party hereto will pay
--------
all of its expenses in connection with the transactions contemplated by this
Agreement, including, without limitation, the fees and expenses of its counsel
and other advisers.
6. Confidentiality. Shareholder recognizes that successful consummation of
---------------
the transactions contemplated by this Agreement may be dependent upon
confidentiality with respect to these matters. In this connection, pending
public disclosure, Shareholder agrees that he will not disclose or discuss these
matters with anyone (other than officers, directors, legal counsel and advisors
of Shareholder or the Company, if any) not a party to this Agreement, without
prior written consent of Parent, except for filings required pursuant to the
Exchange Act, and the rules and regulations thereunder or disclosures
Shareholder's legal counsel advises in writing are necessary in order to fulfill
Shareholder's obligations imposed by law, in which event Shareholder shall give
prompt prior notice of such disclosure to Parent.
-3-
<PAGE>
7. Indemnification. In the event Shareholder is sued for a breach of his
---------------
fiduciary duty as an officer or director of the Company by reason of
Shareholder's execution, delivery or performance of this Agreement, Shareholder
shall be entitled to indemnification and advancement of expenses in respect of
such claim to the same extent as an Indemnified Party (as defined in the Merger
Agreement) is entitled to the indemnification and advancement of expenses set
forth in Section 6.7 of the Merger Agreement as fully as if such Shareholder had
been named therein.
8. Certain Covenants of Shareholder.
--------------------------------
8.1. Except in accordance with the provisions of this Agreement,
Shareholder agrees, while this Agreement is in effect, not to, directly or
indirectly:
(a) sell, transfer, pledge, encumber, assign or otherwise dispose
of, or enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer, pledge, encumbrance, assignment or other
disposition of, any of the Shares;
(b) grant any proxies, deposit any Shares into a voting trust or
enter into a voting agreement with respect to any Shares; or
(c) (i) take any action to encourage, initiate or solicit any
inquiries or the making of any proposal with respect to (A) any Extraordinary
Transaction involving, or (B) any purchase of all or any significant portion of
the assets of, or any significant equity interest in, the Company or any of its
subsidiaries (either of clauses (A) and (B) being an "Acquisition Proposal") or,
(ii) except to the extent required for Shareholder, in his capacity as an
officer or director of Company, to discharge its fiduciary duties as advised by
counsel, (A) engage in any negotiations concerning, provide any confidential
information or data to, or have any discussions with, any person relating to an
Acquisition Proposal or (B) otherwise assist or facilitate any effort or attempt
by any person or entity (other than Parent and Purchaser, or their officers,
directors, representatives, agents, affiliates or associates) to make or
implement an Acquisition Proposal; Shareholder will immediately cease and cause
to be terminated any existing activities, discussions or negotiations on his
part with any parties conducted heretofore with respect to any of the foregoing,
and, except to the extent required for Shareholder, in his capacity as an
officer or director of the Company, to discharge his fiduciary duties as advised
by counsel, will notify Purchaser and Parent promptly if he becomes aware of any
such inquiries or that any proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
instituted or continued with, the Company (or its officers, directors,
representatives, agents, affiliates or associates), such notice to include the
material terms communicated.
8.2. Shareholder agrees, while this Agreement is in effect, to notify
Parent promptly of the number of any shares of Common Stock beneficial ownership
of which is acquired by Shareholder after the date hereof.
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<PAGE>
9. Survival of Representations and Warranties. None of the representations,
------------------------------------------
warranties, covenants and agreements made by Shareholder, Parent or Purchaser in
this Agreement shall survive the Closing hereunder.
10. Notices. All notices or other communications required or permitted
-------
hereunder shall be in writing (except as otherwise provided herein) and shall be
deemed duly given when received, addressed as follows:
If to Parent or Purchaser:
Roanoke Electric Steel Corporation
102 Westside Boulevard, N.W.
P.O. Box 13948
Roanoke, VA 24038-3948
Attention: Donald G. Smith
Telephone: (540) 342-1831
Facsimile: (540) 342-9437
With copies to:
Heaman A. Marshall, Esq.
Woods, Rogers & Hazlegrove, P.L.C.
First Union Tower, Suite 1400
10 South Jefferson Street
Roanoke, VA 24011
Telephone: (540) 983-7654
Facsimile: (540) 983-7711
If to Shareholder:
----------------
----------------
----------------
Telephone:
---------------
Facsimile:
---------------
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<PAGE>
With copies to:
James D. Epstein, Esq.
Pepper Hamilton LLP
3000 Two Logan Square
18th and Arch Streets
Philadelphia, PA 19103-2799
Telephone: (215) 981-4368
Facsimile: (215) 981-4750
and
Stephen A. Albert
Sierchio & Albert, P.C.
41 E. 57th Street, 39th Floor
New York, NY 10022
Telephone: (212) 446-9500
Facsimile: (212) 446-9504
11. Entire Agreement; Amendment. This Agreement, together with the
---------------------------
documents expressly referred to herein, constitute the entire agreement among
the parties hereto with respect to the subject matter contained herein and
supersede all prior agreements and understandings among the parties with respect
to such subject matter. This Agreement may not be modified, amended, altered or
supplemented except by an agreement in writing executed by the party against
whom such modification, amendment, alteration or supplement is sought to be
enforced.
12. Assigns. This Agreement shall be binding upon and inure to the benefit
-------
of the parties hereto and their respective successors, assigns and personal
representatives, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto without the
prior written consent of the other parties, except that Purchaser may assign,
any or all of its rights and obligations hereunder to Parent or any direct or
indirect wholly-owned subsidiary of Parent without the consent of Shareholder or
Company, but no such transfer shall relieve Purchaser of its obligations under
this Agreement if such subsidiary does not perform the obligations of Purchaser
hereunder.
13. Governing Law; Jurisdiction; and Consent to Service. Except as
---------------------------------------------------
expressly set forth below, this Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
In addition, each of the Company, Purchaser and Parent hereby agree that any
dispute arising out of this Agreement, the Offer or the Merger shall be heard in
the Court of Chancery of the State of Delaware or in the United States District
Court for the District of Delaware and, in connection therewith, each party to
this Agreement hereby
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<PAGE>
consents to the jurisdiction of such courts and agrees that any service of
process in connection with any dispute arising out of this Agreement, the Offer
or the Merger may be given to any other party hereto by certified mail, return
receipt requested, at the respective addresses set forth in Section 12 above.
14. Injunctive Relief. The parties agree that in the event of a breach of
-----------------
any provision of this Agreement, the aggrieved party may be without an adequate
remedy at law. The parties therefore agree that in the event of a breach of any
provision of this Agreement, the aggrieved party shall be entitled to obtain in
any court of competent jurisdiction a decree of specific performance or to
enjoin the continuing breach of such provision, in each case without the
requirement that a bond be posted, as well as to obtain damages for breach of
this Agreement. By seeking or obtaining such relief, the aggrieved party will
not be precluded from seeking or obtaining any other relief to which it may be
entitled.
15. Counterparts; Facsimile Signatures. This Agreement may be executed in
----------------------------------
any number of counterparts (including by facsimile signature), each of which
shall be deemed to be an original and all of which together shall constitute one
and the same documents.
16. Severability. Any term or provision of this Agreement which is invalid
------------
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
17. Further Assurances. Each party hereto shall execute and deliver such
------------------
additional documents as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
18. Third Party Beneficiaries. Nothing in this Agreement, expressed or
-------------------------
implied, shall be construed to give any person other than the parties hereto any
legal or equitable right, remedy or claim under or by reason of this Agreement
or any provision contained herein.
19. Legal Expenses. In the event any legal proceeding is commenced by any
--------------
party to this Agreement to enforce or recover damages for any breach of the
provisions hereof, the prevailing party in such legal proceeding shall be
entitled to recover in such legal proceeding from the losing party such
prevailing party's costs and expenses incurred in connection with such legal
proceedings, including reasonable attorneys fees.
20. Amendment and Modification. This Agreement may be amended, modified and
--------------------------
supplemented by a written document executed by Parent, Purchaser and
Shareholder.
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<PAGE>
21. Parent Guarantee. Parent hereby guarantees Purchaser's performance of
----------------
its obligations to Shareholder under and pursuant to this Agreement.
IN WITNESS WHEREOF, Parent and Purchaser have caused this Agreement to be
executed by their duly authorized officers, and Shareholder has duly executed
this Agreement, as of the date and year first above written.
SHAREHOLDER:
---------------------------------
Name:
ROANOKE ELECTRIC STEEL
CORPORATION
By:
-----------------------------
SWVA ACQUISITION, INC.
By:
------------------------------
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<PAGE>
Exhibit (c)(4)
Employment Agreement, dated November 10, 1998, by and between Steel
of West Virginia, Inc., and Timothy R. Duke.
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT, dated this 10th day of November, 1998, by and between Steel of
West Virginia, Inc. (the "Company") and Timothy R. Duke ("Executive").
WITNESSETH:
WHEREAS, the Company is engaged in the business of manufacturing steel and
steel products, fabricating steel components, truck trailers, off-highway
construction equipment, industrial lift trucks, accessories for the mining
industry and related services (the "Business");
WHEREAS, Executive is and has been employed by the Company in the
capacities of President and Chief Executive Officer;
WHEREAS, the Company is entering into an Agreement and Plan of Merger dated
November 10, 1998 by and among Roanoke Electric Steel Corporation ("Parent"),
SWVA Acquisition, Inc. ("Acquisition") and the Company (the "Merger Agreement")
pursuant to which, among other things, Acquisition will make a tender offer for
the shares of Company (the "Offer"), and Acquisition will be merged into the
Company (the "Merger"); and
WHEREAS, pursuant to and simultaneous with the acceptance and payment
for the Shares in the Offer, the Company wishes to retain the services of
Executive as the President and CEO of the Company; and Executive wishes to
assume the position of President and CEO of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the Company and Executive agree as follows:
1. Employment and Other Positions:
(a) The Company hereby agrees to employ Executive, and Executive
hereby agrees to serve, subject to the provisions of this Agreement, as an
employee of Company in accordance with the terms of this Agreement. Executive
agrees to devote all of his business time, attention and energies to the
performance of the duties assigned to him hereunder, and to perform such duties
faithfully, diligently and to the best of his abilities and subject to such
laws, rules, regulations and policies from time to time applicable to the
Company's employees. Except as otherwise provided herein, Executive is
permitted to pursue outside interests, including, but not limited to charitable
work, membership in trade associations, industry boards, and on the boards of
directors of other companies, provided that such outside interests do not
interfere with the performance of his duties and obligations hereunder, and
further provided that Executive receives the prior consent of the Board of
Directors of the Company which consent will not be
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<PAGE>
unreasonably withheld. Executive agrees to refrain from engaging in any activity
that does, will or could reasonably be deemed to conflict with the best
interests of the Company. Without limiting the generality of the foregoing,
Executive shall perform the duties associated with the positions of President
and CEO, and such other duties and responsibilities as are from time to time
assigned to Executive by the Board of Directors of the Company consistent with
such positions, at his current office location, or in such other capacity or at
such other locations as may be mutually agreed by Company and Executive.
(b) In addition to the employment specified above, in accordance with
Section 6.8 of the Merger Agreement, Executive shall be appointed to the Board
of Parent and thereafter nominated for such position at the next annual meeting
of stockholders of Parent, and Parent will appoint Executive as a director of
the Company for such terms as he shall serve as a director of Parent during the
term of this Agreement.
2. Term: This Agreement shall commence upon acceptance and payment for
the Shares in the Offer , as set forth in the Merger Agreement, and shall
expire on the third (3rd) anniversary thereof (the "Term"), unless sooner
terminated in accordance with Section 7 hereof; except that, if the Effective
Time of the Merger shall not occur within one hundred and twenty (120) days of
the Outside Date for the Offer, all as defined in the Merger Agreement, Company
or Parent may declare the Agreement null and void, and other than for any
amounts payable by reason of Section 8(b) hereof, and, notwithstanding anything
herein otherwise to the contrary, neither Company nor Parent shall have any
further responsibility for any payments of any amounts or for the provision of
any benefits to Executive under this Agreement.
3. Compensation:
(a) Base Salary: Executive's base salary shall be at the annual
rate of Two Hundred and Twenty-Five Thousand Dollars ($225,000) (the "Annual
Base Salary") during the Term, payable in accordance with the Company's regular
payroll practices. All applicable withholding taxes shall be deducted from such
payments. Annual Base Salary may be increased (but not decreased), from time to
time during the Term, in the exercise of the good faith discretion of the
Company's Board of Directors.
(b) Incentive Plan: Executive shall receive additional compensation,
if and as provided in any incentive compensation plan applicable to Executive,
adopted, in the sole discretion of the Board of Directors of the Company, from
time to time (herein referred to as the "Incentive Amount"). The current
Incentive Plan applicable to Executive is described in Schedule 1 attached
hereto and incorporated herein by reference.
4. Benefits: Executive shall be eligible to participate in such benefit
plans, including but not limited to stock option and similar plans and officers'
and directors' liability insurance, as are, or from time-to-time hereafter may
be, provided by the Company or Parent for executive employees and/or directors
(except salary Incentive Plans or similar incentive
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<PAGE>
compensation plans, other than stock option plans of Parent or any other
subsidiary of Parent, except as described in Section 3(b) above and as set forth
in the Merger Agreement), and as permitted by the terms of such plans Where
different plans covering substantially similar benefits are provided by each of
the Company and Parent, Executive shall participate, if permitted by the terms
of the plan, in the plan that provides the higher level of benefits (except that
Executive shall not be entitled to simultaneously participate in plans of both
of the Company and Parent covering the same or substantially similar benefits).
All benefits shall be provided to Executive in accordance with the terms and
conditions of such benefit plans and programs as are maintained by the Company
or Parent, as such plans are amended from time to time.
5. Reimbursement of Expenses: The Company shall reimburse Executive for
reasonable and necessary business expenses of Executive for travel, meals and
similar items incurred in connection with the performance of Executive's duties,
and which are consistent with such guidelines as the Board of Directors of the
Company may from time to time establish. All payments for reimbursement of such
expenses shall be made to the Executive only upon the presentation to the
Company of appropriate vouchers or receipts, if, and in such form as may be,
required by such guidelines, from time to time.
6. Confidentiality, Non-Competition, Etc.:
(a) Executive acknowledges that: (i) the Business is highly
competitive and that Executive's employment by the Company will require that
Executive have access to and knowledge of confidential information of the
Company which may include, but shall not be limited to, the identity of the
Company's customers, the identity of the representatives of customers with whom
the Company has dealt, the kinds of products and services provided by the
Company to customers and offered to potential customers, the manner in which
such products are manufactured and such services are performed or offered to be
manufactured or performed, the needs of actual or prospective customers, pricing
information, information concerning the creation, acquisition or disposition of
products and services, computer software applications and other programs,
personnel information and other trade secrets not generally known to the public
(the "Confidential Information"); (ii) the direct and indirect disclosure of any
such Confidential Information to existing or potential competitors of the
Company would place the Company at a competitive disadvantage and would do
damage, monetary or otherwise, to the Company's business; and (iii) the engaging
by Executive in any of the activities prohibited by this Section 8 would
constitute improper appropriation and/or use of such Confidential Information.
Executive expressly acknowledges the trade secret status of the Confidential
Information and that the Confidential Information constitutes a protectible
business interest of the Company.
(b) For purposes of this Section 6, the "Company" shall be construed
to include the Company and its parents, subsidiaries and affiliated companies of
each engaged in the Business, including any divisions or subsidiaries managed by
Executive.
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<PAGE>
(c) During Executive's Term of employment, and at all times after the
termination of Executive's employment, by expiration of the Term or otherwise,
Executive shall not, directly or indirectly, whether individually, as a
director, stockholder, owner, partner, employee, principal or agent of any
business, or in any other capacity, make known, disclose, furnish, make
available or utilize any of the Confidential Information, other than in the
proper performance of the duties contemplated herein, or as expressly permitted
herein, or as required by a court of competent jurisdiction or other
administrative or legislative body; provided that, prior to disclosing any of
the Confidential Information as required by a court or other administrative or
legislative body, Executive shall promptly notify the Company so that the
Company may seek a protective order or other appropriate remedy. Executive
agrees to return all Confidential Information, including all photocopies,
extracts and summaries thereof, and any such information stored electronically
on tapes, computer disks or in any other manner to the Company at any time upon
request by the Company and upon the termination of his employment for any
reason.
(d) During Executive's employment hereunder, Executive shall not
engage in "Competition" with the Company. For purposes of this Agreement,
"Competition" by Executive shall mean Executive's engaging in, or otherwise
directly or indirectly being employed by or acting as a consultant or lender to,
or being a director, officer, employee, principal, agent, stockholder, member,
owner or partner of, or permitting his name to be used in connection with the
activities of any other business or organization anywhere in the United States
which competes, directly or indirectly, with the Business of the Company. This
provision shall not, however, prevent Executive from owning 19.9% or less of any
publicly traded company which may compete with the Company, provided Executive
has no active participation with such company, including but not limited to
serving on such company's board of directors.
(e) Executive acknowledges that the services to be rendered by him to
the Company are of a special and unique character, which gives this Agreement a
peculiar value to the Company, the loss of which may not be reasonably or
adequately compensated for by damages in an action at law; and that a material
breach or threatened breach by him of any of the provisions contained in this
Section 6 will cause the Company irreparable injury. Executive therefore
agrees that the Company shall be entitled, in addition to any other right or
remedy, to a temporary, preliminary and permanent injunction, without the
necessity of proving the inadequacy of monetary damages or the posting of any
bond or security, enjoining or restraining Executive from any such violation or
threatened violations.
(f) Executive further acknowledges and agrees that, due to the
uniqueness of his services and confidential nature of the information he will
possess, the covenants set forth herein are reasonable and necessary for the
protection of the Business and goodwill of the Company.
(g) Should a court of competent jurisdiction determine that any of the
restrictions set forth in this Section 6, including those as regards the scope
of Executive's
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<PAGE>
activities restricted, the duration of the restriction or the geographic scope
of the restriction, is overly broad or unenforceable as written, the parties
agree that this Agreement shall be deemed amended to reduce any or all of such
restrictions to those deemed appropriate and enforceable by such court.
7. Termination:
(a) The employment of Executive hereunder shall terminate on the first
to occur of the following:
(i) the date of Executive's death, adjudicated incompetency or
adjudicated bankruptcy;
(ii) the date on which Executive shall have experienced a
Disability (as defined below), and the Board of Directors of the Company
gives Executive notice of termination on account of Disability;
(iii) the date on which Executive shall have engaged in conduct
which constitutes Cause (as defined below), and the Board of Directors of
the Company gives Executive notice of termination for Cause;
(iv) the date on which Executive gives the Company notice of
termination for Good Reason (as defined below); or,
(v) expiration of the Term.
(b) For purposes of this Agreement, "Disability" shall mean an
illness, injury or other incapacitating condition as a result of which Executive
is unable to perform the services required to be performed under this Agreement
for a period of one hundred eighty (180) consecutive days during the Term;
provided, however, that if long term disability insurance benefits payable to
Executive pursuant to any policy of disability insurance then maintained by the
Company or Parent for the benefit of employees commences during such 180-day
period, the amount payable to Executive for such benefits shall be deducted from
the Annual Base Salary payable to Executive for as long as such benefits are
payable. Executive agrees to submit to such medical examinations as may be
necessary to determine whether a Disability exists, pursuant to such reasonable
requests made by the Board of Directors of the Company, from time to time.
(c) For purposes of this Agreement, "Cause" shall mean the occurrence
of any of the following:
(i) Executive's willful and continued failure to substantially
perform his duties with the Company, other than by reason of physical or
mental illness;
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<PAGE>
(ii) Executive's conviction of, guilty plea, to plea of nolo
contendere or confession to, a felony or misdemeanor involving fraud, theft
or other Class 1 or Class 2 misdemeanor;
(iii) Executive willfully or negligently engaging in conduct
which is demonstrably and materially injurious to the Company, monetarily
or otherwise;
(iv) Any attempt of Executive to obtain any personal profit from
any transactions in which the Executive has an interest which is adverse to
the Company unless Executive shall first obtain the consent of the
Company's Board of Directors; or,
(v) Executive's breach of any material term of this Agreement.
Notwithstanding the foregoing, Cause shall not be deemed to have occurred
in the case of Section 7(c)(i), (iii), (iv) or (v) until Company shall have
given Executive notice of the facts that constitute Cause and Executive shall
have failed to cure such Cause within ten (10) business days.
(d) For purposes of this Agreement, "Good Reason" shall mean the
occurrence of any of the following:
(i) Company's failure to maintain Executive's job privileges
and responsibilities in a manner generally consistent with and reasonable
for the position of President and CEO of the Company;
(ii) Company's breach of any of the material terms of this
Agreement;
(iii) Relocation of Executive's principal office outside of the
Huntington, West Virginia area, without Executive's prior consent; or
(iv) The occurrence of a Change in Control, meaning: a change
in control of Parent of a nature that would be required to be reported
(assuming such event has not been "previously reported") in response to
Item 1(a) of the Current Report on Form 8-K, as in effect on the date
hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended ("Exchange Act"); provided that, without limitation, such
a Change in Control shall be deemed to have occurred at such time as (i)
any Person is or becomes the "beneficial owner" (as defined in Rule 13d-3
or Rule 13d-5 under the Exchange Act as in effect on January 1, 1996),
directly or indirectly, of 20% or more of the combined voting power of
Parent's voting securities; (ii) the Incumbent Board of Parent ceases for
any reason to constitute at least the majority of the Board; provided,
however, that any person becoming a director subsequent to the date hereof
whose election, or nomination for election by Parent's shareholders was
approved by a vote of at least 75% of the directors comprising the
Incumbent Board (either by a specific vote or by
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<PAGE>
approval of the proxy statement of Parent in which such person is named as
a nominee for director, without objection to such nomination) shall be, for
purposes of this clause (ii), considered as though such person were a
member of the Incumbent Board; (iii) all or substantially all of the assets
of Parent are sold, transferred or conveyed if the transferee is not
controlled by Parent (control meaning the ownership of more than 50% of the
combined voting power of such entity's voting securities); or (iv) Parent
is merged or consolidated with another corporation or entity and, as a
result of such merger or consolidation, less than 75% of the outstanding
voting securities of the surviving or resulting corporation or entity shall
be owned in the aggregate by the former shareholders of Parent.
Notwithstanding anything in the foregoing to the contrary, no Change in
Control shall be deemed to have occurred for purposes of this Agreement by
virtue of any transaction (i) which results in the Executive or a group of
Persons which includes the Executive, acquiring, directly or indirectly,
20% or more of the combined voting power of Parent's voting securities; or
(ii) which results in Parent, any subsidiary of Parent or any profit-
sharing plan, employee stock ownership plan or employee benefit plan of the
Company or Parent or any of Parent's subsidiaries (or any trustee of or
fiduciary with respect to any such plan acting in such capacity) acquiring,
directly or indirectly, 20% or more of the combined voting power of
Parent's voting securities.
Notwithstanding the foregoing, Good Reason shall not be deemed to have
occurred in the case of Section 7(d)(i) or (ii) until Executive shall have
given Company notice of the facts that constitute Good Reason and Company
shall have failed to cure such Good Reason within ten (10) business days.
8. Compensation in Event of Termination; Survival:
(a) Upon termination of Executive's employment for any reason, this
Agreement shall terminate and the Company shall have no further obligation to
Executive except as set forth in this Section 8; provided that, the provisions
set forth in Sections 6 (with the exception of Section 6(d)), 11 and 12 hereof
shall remain in full force and effect after the termination of Executive's
employment.
(b) In the event Executive's employment is terminated pursuant to
Sections 7(a)(i) through (iii) or (v) prior to the expiration of the Term,
Executive or his estate, conservator or designated beneficiary, as the case may
be, shall be entitled to payment of any accrued but unpaid Annual Base Salary,
accrued but unpaid Incentive Amount, and reimbursement of incurred business
expenses (upon the conditions set forth in Section 5 hereof), all through the
date of termination, subject, however, to the Company's right to pursue any
claims for any damages which it may incur by reason of termination in accordance
with Section 7(a)(iii). Following any such termination, neither Executive nor
his estate, conservator or designated beneficiary shall be entitled to receive
any other salary or other payment provided for hereunder
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<PAGE>
with respect to any period after such termination, except as Executive may
otherwise be entitled pursuant to any employee benefit plan.
(c) In the event Executive's employment is terminated pursuant to
Section 7(a)(iv) , in addition to the payment of amounts payable under Section
8(b) above, Executive shall be entitled to receive, as his sole and exclusive
remedy, the Annual Base Salary, payable for the remainder of the Term, payable
in installments in accordance with the Company's regular payroll practices,
after deduction of all applicable withholding taxes and similar payments, which
sum shall not be offset by any amounts otherwise earned by Executive during such
period, and Executive shall have no duty to seek other employment during such
period.
9. Assignment: The duties assumed hereunder by Executive shall not be
assignable by Executive. It is further agreed that neither Executive or any
beneficiary of any amount hereunder shall have any right to commute, sell,
assign, transfer or otherwise convey the right to receive any payment hereunder,
except as expressly provided herein or in the applicable plan, etc., which
payments and the right thereto are expressly declared to be non-assignable and
non-transferable, and in the event of any attempted assignment or transfer,
Company shall have no further liability hereunder. Company may only assign this
Agreement as contemplated in Paragraph 10 hereof.
10. Successors and Assigns; Binding Agreement: This Agreement shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective heirs, administrators, executors, successors and assigns, and upon
any person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company's assets and Business.
11. Return of Company Property: Executive agrees that, promptly following
the termination of his employment for any reason, he shall return all property
of the Company, its subsidiaries, affiliates and any divisions thereof which is
then in or thereafter comes into his possession, including, but not limited to,
documents, contracts, agreements, plans, photographs, books, notes,
electronically stored data and all copies of the foregoing, as well as any
materials or equipment supplied by the Company to Executive.
12. Resignation as Director: Executive shall, promptly following the
termination of his employment for any reason, resign as a director of Parent and
as a director of Company, respectively, to the extent that he is serving in
either of those capacities at the time of termination.
13. Entire Agreement: This Agreement sets forth the entire agreement
between the parties with respect to its subject matter and merges and supersedes
all prior discussions, agreements and understandings of every kind and nature
between them, including any prior employment agreement, whether written or oral,
between the Company and Executive as of the effective date of the Term, and
neither party shall be bound by any term or condition with respect
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<PAGE>
to the subject matter of this Agreement other than as expressly set forth or
provided for herein. This Agreement may not be changed or modified except by an
agreement in writing, signed by the parties hereto.
14. Each Party the Drafter: This Agreement and the provisions contained
in it shall not be construed or interpreted for or against any party to this
Agreement because that party drafted or caused that party's legal representative
to draft any of its provisions.
15. Waiver: The failure of either party to this Agreement to enforce any
of its terms, provisions or covenants shall not be construed as a waiver of the
same or of the right of such party to enforce the same. Waiver by either party
hereto of any breach or default by the other party of any term or provision of
this Agreement shall not operate as a waiver of any other breach or default.
16. Severability: In the event that any one or more of the provisions of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remainder of the Agreement shall
not in any way be affected or impaired thereby. Moreover, if any one or more of
the provisions contained in this Agreement shall be held to be excessively broad
as to duration, activity or subject, such provisions shall be construed by
limiting and reducing them so as to be enforceable to the maximum extent allowed
by applicable law.
17. Arbitration: Any controversy or claim arising out of or related to
this Agreement or the breach thereof shall be settled by arbitration to be
conducted in Roanoke, Virginia, in accordance with the rules of American
Arbitration Association. The decision of the arbitrator shall be final and
binding and judgment upon the award rendered thereby may be entered in any court
having competent jurisdiction thereof. The expenses of the arbitration shall be
shared equally by the Company and Executive; except that each of the parties
hereto shall be individually responsible for any and all attorneys,
accountants, consultants or other expert witness fees and expenses incurred by
such party in relation to such arbitration.
18. Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia, without regard to its
conflict of law rules.
19. Descriptive Headings: The paragraph headings and recitals contained
herein are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
20. Counterparts: This Agreement may be executed in one or more
counterparts, which, together, shall constitute one and the same agreement.
-9-
<PAGE>
21. Guarantee: Parent hereby joins in this Agreement to guarantee the
performance of the covenants and agreements herein made by the Company.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
THE COMPANY EXECUTIVE
By: /s/ Mark G. Meikle /s/ Timothy R. Duke
---------------------------- ----------------------
Its: Vice President and
Chief Financial Officer
PARENT
By: /s/ Donald G. Smith
-----------------------------
Its: Chairman of the Board, President,
Treasurer and Chief Executive Officer
-11-
<PAGE>
SCHEDULE A
CURRENT INCENTIVE PLAN
From the Effective Date of the Employment Agreement and for fiscal year
1998-1999, the Incentive Compensation Plan applicable to the Agreement pursuant
to Section 3(b) shall be as follows:
Employee shall be paid, in addition to Annual Base Compensation, on a
monthly basis, an amount equal to two percent (2%) of the monthly gross
profits of the Company (exclusive of profits of Parent or subsidiaries of
Parent than SWVA, Inc., Marshall Steel, Inc., and Steel Ventures, Inc.), if
any, before profit sharing contributions and taxes, but after deduction of
only such interest expense as would have been attributable to the
financing in place for the Company immediately prior to acceptance and
payment for the Shares in the Offer, as set forth in the Merger Agreement,
all as determined by the Company's certified public accountants (the
"Incentive Amount").
Beginning in fiscal year 1999-2000, and thereafter, the Incentive Plan
applicable to the Agreement shall be such Incentive Plan as is, from time
to time, determined by the Board of the Company.
-12-
<PAGE>
Exhibit (c)(5)
Confidentiality Letter Agreement dated July 20, 1998, between Roanoke Electric
Steel Corporation and Janney Montgomery Scott, Inc.
<PAGE>
[LETTERHEAD OF JANNEY MONTGOMERY SCOTT APPEARS HERE]
July 20, 1998
PRIVATE AND CONFIDENTIAL
- ------------------------
Donald G. Smith
President & CEO
Roanoke Electric Steel Corporation
102 Westside Boulevard, N.W.
Roanoke, VA 24017
Dear Mr. Smith:
In order to allow Roanoke Electric Steel Corporation ("Roanoke") to evaluate a
possible transaction with Steel of West Virginia, Inc. (the "Company"), the
Company or its Representatives (as defined below) will deliver to Roanoke, upon
Roanoke's execution and delivery to us of this letter of agreement, certain
information (the "Confidential Information") about the properties and operations
of the Company that is either non-public, confidential or proprietary. Roanoke
agrees to treat as confidential and, except as required by applicable law, legal
process or stock exchange rule, to reveal to no one, except to its respective
directors, officers, employees, financing sources, agents or advisors (including
without limitation attorneys, accountants, consultants, brokers and financial
advisors) (collectively, "Representatives") to the extent permitted below, (i)
the fact that Roanoke is having discussions in this regard and (ii) any
Confidential Information that the Company or its Representatives may furnish
Roanoke about the Company.
The term "Confidential Information" means all the information about the Company,
whether written or oral, that is provided to Roanoke (including any information
provided before the execution of this agreement), and all reports, analyses,
compilations, data, studies, or other documents prepared by Roanoke or its
Representatives containing or based, in whole or in part, on any such furnished
information or, to the extent that it contains Confidential Information,
reflecting Roanoke's review of, or interest in, the Company. The term
"Confidential Information" does not include information which (i) is or becomes
general public knowledge other than as a result of a disclosure by Roanoke or
its Representatives in breach of this Agreement, (ii) was within Roanoke's
possession prior to its being furnished to Roanoke by the Company, provided that
the source of such information was not bound by an obligation of confidentiality
to the Company, or (iii) becomes available to Roanoke on a non-confidential
basis from a source other than the Company or any of its Representatives,
provided that, such other source is not bound by an obligation of
confidentiality to the Company.
<PAGE>
[LETTERHEAD OF JANNEY MONTGOMERY SCOTT APPEARS HERE]
Roanoke Electric Steel Company
July 20,1998
Page 2 of 4
Roanoke will hold the Confidential Information in confidence, will use the
Confidential Information only to assist Roanoke in its evaluation of an
investment in the Company or any proposed transaction with respect thereto,
shall not otherwise use the Confidential Information for its own or anyone
else's benefit, and will not disclose any of the Confidential Information except
(i) to Roanoke's directors, officers, employees and Representatives (including
outside attorneys, accountants and consultants) who need such information for
the purpose of such evaluation (and Roanoke shall inform such persons of the
confidential nature of the material, and shall take reasonable measures to
enforce confidentiality and prevent unauthorized use or disclosure of
Confidential Information), or (ii) as may be required by law, legal process or
stock exchange rule. If any person, listed in clause (i) discloses Confidential
Information in breach of this Agreement, Roanoke shall be strictly liable for
such disclosure (regardless of any measures taken by Roanoke to prevent
disclosure). In the event of proposed disclosure under clause (ii), Roanoke will
provide the Company with prior notice so that the Company may seek a protective
order or other appropriate remedy, and Roanoke will not oppose action by the
Company to obtain such order or remedy.
Upon termination of Roanoke's evaluation of the proposed investment, or at any
earlier time, Roanoke shall return to the Company all documents furnished to
Roanoke by or on behalf of the Company containing Confidential Information. Any
notes and other documents prepared by Roanoke containing or based upon
Confidential Information will be held subject to the terms of this agreement or
destroyed.
Roanoke understands that the Company will endeavor to include in the
Confidential Information materials that may be relevent to Roanoke's evaluation,
but Roanoke acknowledges that the Company and its Representatives make no
representation or warranty (express or implied) as to the accuracy or
completeness of the Confidential Information. Roanoke agrees that the Company
and its Representatives shall have no liability to Roanoke or to any of its
Representatives, it being understood that only those particular representations
and warranties that may be made in a definitive agreement, when, as and if it is
executed, and subject to such limitations and restrictions as may be specified
in such definitive agreement, including restrictions on survival, shall have any
legal effect.
<PAGE>
[LETTERHEAD JANNEY MONTGOMERY SCOTT APPEARS HERE]
Roanoke Electric Steel Company
July 20, 1998
Page 3 of 4
Roanoke further agrees that for a period of two years from the date hereof,
neither Roanoke nor any of its Representatives will knowingly solicit as
employees or consultants any of the current officers or employees of the
Company, without obtaining the prior written consent of the Company. The
foregoing, however, shall not prohibit general solicitations for employees
including through newspapers or similar advertisements or through search firms,
provided that such solicitations are not directed at the Company's employees.
Roanoke also agrees that neither Roanoke nor any of its Representatives will
contact any employees of the Company in connection with Roanoke's evaluation of
the Company without prior approval.
Roanoke agrees that the intention of the parties is to prevent absolutely the
disclosure or use by Roanoke or its Representatives (except for purposes of
evaluating a proposed investment in the Company) of any Confidential Information
obtained by Roanoke from the Company or its Representatives. The Company and
Roanoke agree that for all purposes this agreement will be construed to
accomplish that result.
This Confidentiality Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, their respective successors and assigns, and
shall be strictly adhered to by all of Roanoke's Representatives. By making any
Confidential Information available to any such person, Roanoke agrees that it
will be held strictly and fully responsible for any damages suffered by the
Company as a result of disclosure by such person, regardless of Roanoke's fault.
Roanoke agrees that disclosure of any Confidential Information could irreparably
injure the Company's business and its relationship with its employees, its
customers and others, and the Company shall be entitled to equitable relief in
the event of any breach or threatened breach of this agreement. Such remedies
shall not be exclusive. Any breach or threatened breach of this agreement by
Roanoke shall entitle the Company to apply to any court of competent
jurisdiction to enjoin the violation, threatened or actual, of this agreement,
without the necessity of posting surety or injunction bond and regardless of
the existence or absence of any legal remedies or the sufficiency thereof.
Roanoke, and its successors and assigns, hereby waive any right to assert any
contention that the remedy at law for any breach or threatened breach of this
agreement is sufficient and consent to non-exclusive personal jurisdiction and
venue in the state and federal courts with jurisdiction in West Virginia.
Roanoke shall indemnify and hold harmless the Company and its Representatives
from any and all claims, injuries, losses, damages or expenses (including
attorneys' fees and costs) arising out of a breach by Roanoke or its
Representatives of any provision of this agreement.
<PAGE>
JANNEY MONTGOMERY SCOTT
INVESTMENT BANKING
Established 1832
Roanoke Electric Steel Company
July 20, 1998
Page 4 of 4
This agreement sets forth the entire understanding and agreement of the parties
and related persons with regard to the subject matter hereof and supersedes all
prior and contemporancous agreements, arrangements and understandings related
thereto. In the event of any inconsistency between this agreement and any
statement contained in or transmitted with the Confidential Information this
agreement shall control. This agreement may be amended, superseded or canceled
only by a written instrument which specifically states that it amends,
supersedes or cancels this agreement, executed and delivered by an authorized
officer of each entity to be bound thereby.
Very truly yours,
Janney Montgomery Scott, Inc.
Authorized Agent of the Company, on behalf of the Company
By: /s/ Michael J. Mufson
---------------------------
Michael J. Mufson
Senior Vice President
Co-Director-Investment Banking
Accepted and Agreed as of the date first written above:
Roanoke Electric Steel Corporation
By: /s/ Donald G. Smith
---------------------------
Donald G. Smith
President and CEO
