<PAGE>
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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
------------------------
REPUBLIC ENGINEERED STEELS, INC.
(NAME OF SUBJECT COMPANY)
BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING FUND, L.P.*
BLACKSTONE OFFSHORE CAPITAL PARTNERS II, L.P.*
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP II, L.P.*
THE VERITAS CAPITAL FUND, L.P.*
RES HOLDING CORPORATION
AND
RES ACQUISITION CORPORATION
(BIDDERS)
COMMON STOCK, $.01 PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
760391102
(CUSIP NUMBER OF CLASS OF SECURITIES)
DAVID A. STOCKMAN
RES HOLDING CORPORATION
C/O THE BLACKSTONE GROUP
345 PARK AVENUE
NEW YORK, NY 10154
TELEPHONE: (212) 935-2626
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
Copies to:
<TABLE>
<S> <C>
ROBERT L. FRIEDMAN, ESQ. BENJAMIN M. POLK, ESQ.
SIMPSON THACHER & BARTLETT WHITMAN BREED ABBOTT & MORGAN LLP
425 LEXINGTON AVENUE 200 PARK AVENUE
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10166
TELEPHONE: (212) 455-2000 TELEPHONE: (212) 351-3000
</TABLE>
------------------------
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION** AMOUNT OF FILING FEE***
<S> <C>
$155,661,691 $31,133
</TABLE>
* None of Blackstone Capital Partners II Merchant Banking Fund, L.P.,
Blackstone Offshore Capital Partners II, L.P., Blackstone Family Investment
Partnership II, L.P. or The Veritas Capital Fund, L.P. admits that it is a
'bidder' for purposes of the Offer within the meaning of Rule 14d-1(e)(1).
** Based on the offer to purchase all of the outstanding shares of Common Stock
of the Subject Company at $7.25 cash per share, 19,706,578 shares
outstanding and 1,764,000 shares issuable upon the exercise of options
outstanding pursuant to the Subject Company's agreements and plans as of
July 23, 1998.
*** 1/50 of 1% of Transaction Valuation.
/ / CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY RULE 0-11(A)(2)
AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY PAID.
IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM
OR SCHEDULE AND THE DATE OF ITS FILING.
<TABLE>
<S> <C>
Amount Previously Paid:.......................................................... N/A
Form or Registration No.:........................................................ N/A
Filing Party:.................................................................... N/A
Date Filed:...................................................................... N/A
</TABLE>
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<PAGE>
This Tender Offer Statement on Schedule 14D-1 relates to the offer by RES
Acquisition Corporation, a Delaware corporation (the 'Purchaser'), to purchase
all of the outstanding shares of Common Stock, $0.01 par value per share (the
'Shares'), of Republic Engineered Steels, Inc., a Delaware corporation (the
'Company'), at a purchase price of $7.25 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 July 30, 1998 (the 'Offer to Purchase'), a copy
of which is attached hereto as Exhibit (a)(l), and in the related Letter of
Transmittal (which, together with the Offer to Purchase, as amended from time to
time, constitute the 'Offer'), a copy of which is attached hereto as Exhibit
(a)(2). The Purchaser is a wholly owned subsidiary of RES Holding Corporation, a
Delaware corporation (the 'Parent'). At the time of the Merger (as defined in
the Introduction to the Offer to Purchase), it is anticipated that approximately
73.33% of Parent common stock will be owned in the aggregate by Blackstone
Capital Partners II Merchant Banking Fund, L.P. ('BCP'), Blackstone Offshore
Capital Partners II, L.P. ('BOCP'), and Blackstone Family Investment Partnership
II, L.P. ('BFIP'), approximately 24.04% of Parent common stock will be owned by
The Veritas Capital Fund, L.P. ('Veritas Cap L.P.') and approximately 2.63% will
be owned by HVR Holdings, LLC (the 'Veritas Coinvestor'). BCP and BFIP are
Delaware limited partnerships and BOCP is a Cayman exempted limited partnership.
Veritas Cap L.P. is a Delaware limited partnership.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Republic Engineered Steels, 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, $.01 par value per share, of the Company. The information
set forth in the Introduction (the 'Introduction') of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in Section 6 ('Price Range of Shares; No Cash
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, the Parent, BCP,
BOCP, BFIP, and Veritas Cap L.P., (collectively, the 'Applicable Persons').
Although BCP, BOCP, BFIP and Veritas Cap L.P. are signatories to this Schedule
14D-1, none of BCP, BOCP, BFIP or Veritas Cap L.P. admits that it is a 'bidder'
for purposes of the Offer. The information set forth in Section 8 ('Certain
Information Concerning the Parent, the Purchaser, Blackstone, Veritas and the
Veritas Coinvestor') of the Offer to Purchase and in Schedule I thereto is
incorporated herein by reference.
(e) and (f) During the last five years, none of, nor, to the best knowledge
of the Applicable Persons, 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 Parent, the Purchaser, Blackstone, Veritas and the Veritas Coinvestor') and
Section 12 ('Purposes of the Offer; the Merger; Plans for the Company') of the
Offer to Purchase is incorporated herein by reference. Except as set forth in
Section 8 of the Offer to Purchase, since July 1, 1995, to the best knowledge of
the Applicable Persons, there have been no transactions which would be required
to be disclosed under this Item 3(a) between any of the Applicable Persons, or,
to the best knowledge of the Applicable Persons, any of the persons listed in
Schedule I to the Offer to Purchase and the Company or any of its executive
officers, directors or affiliates.
2
<PAGE>
(b) The information set forth in Section 8 ('Certain Information Concerning
the Parent, the Purchaser, Blackstone, Veritas and the Veritas Coinvestor'),
Section 10 ('Background of the Offer; Contacts with the Company') and Section 12
('Purpose of the Offer; the Merger; Plans for the Company') of the Offer to
Purchase is incorporated herein by reference. Except as set forth in Section 8,
Section 10 and Section 12 of the Offer to Purchase, since July 1, 1995, there
have been no contacts, negotiations or transactions which would be required to
be disclosed under Item 3(b) between any of the Applicable Persons or any of
their respective subsidiaries or, to the best knowledge of the Applicable
Persons, any of those persons listed in Schedule I to the Offer to Purchase and
the Company or its affiliates concerning a merger, consolidation or acquisition,
a tender offer or other acquisition of securities, an election of directors or a
sale or other transfer of a material amount of assets.
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') and Section 12 ('Purpose of the Offer; the Merger; Plans for the
Company') 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)-(g) The information set forth in the Introduction, Section 6 ('Price
Range of Shares; No Cash Dividends'), Section 10 ('Background of the Offer;
Contacts with the Company'), Section 11 ('The Merger Agreement'), Section 12
('Purpose of the Offer; the Merger; Plans for the Company') and Section 14
('Effect of the Offer on the Market for the Shares, NASDAQ Listing and Exchange
Act Registration') of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) The information set forth in the Introduction and Section 8 ('Certain
Information Concerning the Parent, the Purchaser, Blackstone, Veritas and the
Veritas Coinvestor') of the Offer to Purchase is incorporated herein by
reference. Except as set forth in the Introduction and Section 8 of the Offer to
Purchase, none of the Applicable Person nor, to the best knowledge of the
Applicable Persons, any of the persons listed in Schedule I to the Offer to
Purchase or any associate or majority-owned subsidiary of any of the Applicable
Persons or any of the persons so listed beneficially owns or has any right to
acquire, directly or indirectly, any Shares.
(b) The information set forth in the Introduction and Section 11 ('The
Merger Agreement') of the Offer to Purchase is incorporated herein by reference.
Except as set forth in the Introduction and Section 11 of the Offer to Purchase,
none of the Applicable Persons, nor, to the best knowledge of the Applicable
Persons, any of the persons or entities referred to above or any executive
officer, director or subsidiary of any of the foregoing has effected any
transactions in the Shares during the past sixty days.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in Section 10 ('Background of the Offer; Contacts
with the Company'), Section 11 ('The Merger Agreement'), and Section 17 ('Fees
and Expenses') of the Offer to Purchase is incorporated herein by reference.
Except as set forth in Sections 10 and 17 of the Offer to Purchase, none of the
Applicable Persons nor, to the best knowledge of the Applicable Persons, any of
the persons listed in Schedule I to the Offer to Purchase, has any contract,
arrangement, understanding or relationship with any other person with respect to
any securities of the Company (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loans or option arrangements, puts or
calls, guarantees of loans, guarantee agreements or any giving or withholding of
proxies).
3
<PAGE>
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction, Section 9 ('Source and
Amount of Funds'), Section 12 ('Purpose of the Offer; the Merger; Plans for the
Company') 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
Parent, the Purchaser, Blackstone, Veritas and the Veritas Coinvestor') of the
Offer to Purchase is incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 11 ('The Merger Agreement') and
Section 12 ('Purpose of the Offer; the Merger; Plans for the Company') 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 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 is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase dated July 30, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter from the Dealer Managers 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) Summary Advertisement published on July 30, 1998.
(a)(8) Press Release dated July 24, 1998.
(b) Commitment Letter dated July 23, 1998 to RES Holding Corporation from
The Chase Manhattan Bank, Chase Securities Inc., DLJ Capital Funding, Inc. and
DLJ Bridge Finance, Inc.
(c) Agreement and Plan of Merger, dated as of July 23, 1998, by and among
RES Holding Corporation, RES Acquisition Corporation and Republic Engineered
Steels, Inc.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
4
<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.
BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING FUND,
L.P.*
By: Blackstone Management Associates II L.L.C., its
general partner
By: /s/ DAVID STOCKMAN
---------------------------------
Name: David Stockman
Title: Member
BLACKSTONE OFFSHORE CAPITAL PARTNERS II, L.P.*
By: Blackstone Management Associates II L.L.C., its
investment general partner
By: /s/ DAVID STOCKMAN
---------------------------------
Name: David Stockman
Title: Member
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP II, L.P.*
By: Blackstone Management Associates II L.L.C., its
general partner
By: /s/ DAVID STOCKMAN
---------------------------------
Name: David Stockman
Title: Member
THE VERITAS CAPITAL FUND, L.P.*
By: Veritas Capital Management, L.L.C., its general
partner
By: /s/ ROBERT MCKEON
---------------------------------
Name: Robert McKeon
Title: Member
RES HOLDING CORPORATION
By: /s/ DAVID STOCKMAN
---------------------------------
Name: David Stockman
Title: President
RES ACQUISITION CORPORATION
By: /s/ DAVID STOCKMAN
---------------------------------
Name: David Stockman
Title: President
Date: July 30, 1998
- ------------------------
* None of Blackstone Capital Partners II Merchant Banking Fund, L.P., Blackstone
Offshore Capital Partners II, L.P., Blackstone Family Investment Partnership
II, L.P., or The Veritas Capital Fund, L.P. admits that it is a 'bidder' for
purposes of the Offer within the meaning of Rule 14d-1(e)(1).
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
- --------- ---------------------------------------------------------------------------------------------- -----
<S> <C> <C>
11(a)(1) -- Offer to Purchase dated July 30, 1998.........................................................
11(a)(2) -- Letter of Transmittal.........................................................................
11(a)(3) -- Notice of Guaranteed Delivery.................................................................
11(a)(4) -- Letter from the Dealer Managers to Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees......................................................................................
11(a)(5) -- Letter to clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees......................................................................................
11(a)(6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.........
11(a)(7) -- Summary Advertisement published on July 30, 1998..............................................
11(a)(8) -- Press Release dated July 24, 1998.............................................................
11(b) -- Commitment Letter dated July 23, 1998 to RES Holding Corporation from The Chase Manhattan
Bank, Chase Securities Inc., DLJ Capital Funding, Inc. and DLJ Bridge Finance, Inc. ..........
11(c) -- Agreement and Plan of Merger, dated as of July 23, 1998, by and among RES Holding Corporation,
RES Acquisition Corporation and Republic Engineered Steels, Inc. .............................
</TABLE>
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
REPUBLIC ENGINEERED STEELS, INC.
AT
$7.25 NET PER SHARE
BY
RES ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
RES HOLDING CORPORATION
THE OFFER (AS DEFINED HEREIN) AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, AUGUST 26, 1998 UNLESS THE OFFER IS
EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE TIME THE OFFER WOULD OTHERWISE
EXPIRE SUCH NUMBER OF SHARES OF COMMON STOCK (THE 'SHARES') OF REPUBLIC
ENGINEERED STEELS, INC. (THE 'COMPANY') WHICH CONSTITUTES A MAJORITY 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 (WITHOUT GIVING EFFECT TO ANY VOTING RIGHTS OF THE
SPECIAL PREFERRED STOCK OF THE COMPANY), (II) THERE BEING VALIDLY TENDERED AND
NOT PROPERLY WITHDRAWN BY THE EMPLOYEE COMMON STOCK OWNERSHIP PLAN OF THE
COMPANY (THE 'ESOP') PRIOR TO THE TIME THE OFFER WOULD OTHERWISE EXPIRE A NUMBER
OF SHARES SUCH THAT, IMMEDIATELY FOLLOWING THE PURCHASE OF SHARES PURSUANT TO
THE OFFER, THE ESOP WOULD HOLD LESS THAN 25% OF THE SHARES THEN OUTSTANDING (OR
SUCH FEWER NUMBER OF SHARES AS IS NECESSARY TO ELIMINATE THE VOTING RIGHTS OF
THE SPECIAL PREFERRED STOCK OF THE COMPANY AND CAUSE SUCH STOCK TO BE REDEEMABLE
AT THE OPTION OF THE COMPANY), (III) THE EXPIRATION OR THE TERMINATION OF ANY
APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT
OF 1976, AS AMENDED, APPLICABLE TO THE PURCHASE OF SHARES IN THE OFFER AND THE
MERGER (AS DEFINED HEREIN), PRIOR TO THE EXPIRATION OF THE OFFER, (IV) THE
RATIFICATION BY THE MEMBERS OF THE UNITED STEELWORKERS OF AMERICA (THE 'USWA')
OF THE SETTLEMENT AGREEMENT (INCLUDING THE NEW MASTER COLLECTIVE BARGAINING
AGREEMENT ATTACHED AS AN EXHIBIT THERETO) (EACH AS DEFINED HEREIN) SUBMITTED FOR
THEIR RATIFICATION BY THE USWA IN CONNECTION WITH THE OFFER AND (V) THE RECEIPT
BY RES HOLDING CORPORATION OF THE FUNDS PURSUANT TO THE FINANCING COMMITMENTS
ENTERED INTO IN CONNECTION WITH THE MERGER AGREEMENT (AS DEFINED HEREIN) IN
ORDER TO PURCHASE THE SHARES PURSUANT TO THE OFFER AND THE MERGER AND TO PAY
RELATED FEES AND EXPENSES. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND
CONDITIONS. SEE THE INTRODUCTION AND SECTIONS 1, 9 AND 15.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE HOLDERS OF SHARES AND RECOMMENDS THAT STOCKHOLDERS OF THE
COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES TO THE PURCHASER.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (1) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, mail or deliver the Letter of Transmittal (or such facsimile) and
any other required documents to the Depositary (as defined herein), and either
deliver the certificates representing the tendered Shares and any other required
documents to the Depositary or tender such Shares pursuant to the procedure for
book-entry transfer set forth in Section 3 or (2) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Stockholders having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, commercial bank, trust company or other nominee if
they desire to tender Shares so registered.
A stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply with
the procedure for book-entry transfer on a timely basis, may tender such Shares
by following the procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance may be directed to Donaldson, Lufkin &
Jenrette Securities Corporation and Chase Securities Inc. (each, a 'Dealer
Manager') or to Mackenzie Partners, Inc. (the 'Information Agent') at their
respective addresses and telephone numbers set forth on the back cover of this
Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may also be obtained from the
Information Agent or the Dealer Managers, or from brokers, dealers, commercial
banks or trust companies.
------------------------
THE DEALER MANAGERS FOR THE OFFER ARE:
DONALDSON, LUFKIN & JENRETTE CHASE SECURITIES INC.
JULY 30, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
----
<S> <C>
INTRODUCTION............................................................................................... 2
THE TENDER OFFER........................................................................................... 5
1. Term of the Offer; Expiration Date................................................................... 5
2. Acceptance for Payment and Payment for Shares........................................................ 6
3. Procedure for Tendering Shares....................................................................... 7
4. Withdrawal Rights.................................................................................... 10
5. Certain Federal Income Tax Consequences.............................................................. 10
6. Price Range of Shares; No Cash Dividends............................................................. 11
7. Certain Information Concerning the Company........................................................... 11
8. Certain Information Concerning the Parent, the Purchaser, Blackstone, Veritas and the Veritas
Coinvestor........................................................................................... 13
9. Source and Amount of Funds........................................................................... 14
10. Background of the Offer; Contacts with the Company................................................... 17
11. The Merger Agreement................................................................................. 19
12. Purpose of the Offer; the Merger; Plans for the Company.............................................. 30
13. Dividends and Distributions.......................................................................... 34
14. Effect of the Offer on the Market for the Shares, Nasdaq Stock Market Listing and Exchange Act
Registration......................................................................................... 35
15. Certain Conditions of the Offer...................................................................... 36
16. Certain Legal Matters and Regulatory Approvals....................................................... 37
17. Fees and Expenses.................................................................................... 39
18. Miscellaneous........................................................................................ 40
SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT, THE PURCHASER, BLACKSTONE CAYMAN AND THE VERITAS
COINVESTOR AND MEMBERS OF BMA AND VERITAS CAP L.L.C............................................. I-1
</TABLE>
i
<PAGE>
To: The Stockholders of
REPUBLIC ENGINEERED STEELS, INC.
INTRODUCTION
RES Acquisition Corporation, a Delaware corporation (the 'Purchaser') and a
wholly owned subsidiary of RES Holding Corporation, a Delaware corporation (the
'Parent'), hereby offers to purchase all of the outstanding shares of Common
Stock, par value $.01 per share (the 'Shares'), of Republic Engineered Steels,
Inc., a Delaware corporation (the 'Company'), at a purchase price of $7.25 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, as amended from time to time, together constitute
the 'Offer'). Parent has been organized by the Investors (as defined herein) in
connection with the Offer and the Merger (each as defined herein). Purchaser has
been organized at the direction of Parent in connection with the Offer and the
Merger.
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 Donaldson, Lufkin & Jenrette
Securities Corporation and Chase Securities Inc., each of which is acting as a
Dealer Manager for the Offer (each, in such capacity, a 'Dealer Manager'),
ChaseMellon Shareholder Services, L.L.C., which is acting as the Depositary (in
such capacity, the 'Depositary') and Mackenzie Partners, Inc., which is acting
as the Information Agent (in such capacity, the 'Information Agent'), incurred
in connection with the Offer. See Section 17.
The Board of Directors of the Company (the 'Board of Directors') has
approved the Merger Agreement (as defined herein) and the transactions
contemplated thereby, including the Offer and the Merger, and determined that
the terms of the Offer and the Merger are fair to, and in the best interests of,
the holders of the Shares and recommends that the holders of the Shares accept
the Offer and tender their Shares to the Purchaser.
The Board of Directors has received the written opinion dated July 23, 1998
of Lazard Freres & Co. LLC ('Lazard'), investment banker to the Company, to the
effect that, as of such date and based upon and subject to the assumptions and
other matters stated therein, the $7.25 cash consideration to be received in the
Offer and the Merger by holders of Shares was fair, from a financial point of
view, to such holders. A copy of the opinion of Lazard is attached to the
Company's Solicitation/Recommendation Statement on Form 14D-9 which is being
distributed to the stockholders of the Company, and stockholders are urged to
read the opinion carefully in its entirety for the assumptions made, matters
considered and limitations on the review undertaken by Lazard.
Approximately 53.5% of the outstanding Shares currently are held of record
by the Employee Common Stock Ownership Plan of the Company (the 'ESOP'). In
accordance with the requirements of the ESOP's governing documents, the
Administrative Committee of the ESOP (the 'Administrative Committee') will seek
instructions from ESOP participants (who consist predominantly of present and
former employees of the Company) as to how to respond to the Offer. Each of the
Administrative Committee and State Street Bank and Trust Company, the trustee of
the ESOP Trust (the 'Trustee'), has advised the Company that, as of the date of
the Merger Agreement, it had conducted such review of the terms of the Offer and
the Merger as it deemed appropriate and had determined that, if the Offer were
consummated on such date at the price and on the terms set forth in the Merger
Agreement, subject to their satisfaction with the information set forth herein,
the Administrative Committee would follow the proper directions of the ESOP
participants, and the Trustee would follow the proper directions of the
Administrative Committee, to tender Shares owned by the ESOP. The Trustee and
the Administrative Committee have informed the Purchaser that they intend to
mail separate materials to the ESOP participants with respect to the Offer.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE TIME THE OFFER WOULD OTHERWISE
EXPIRE SUCH NUMBER OF SHARES WHICH CONSTITUTES A MAJORITY 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 (WITHOUT GIVING EFFECT TO ANY VOTING RIGHTS OF THE
SPECIAL PREFERRED STOCK (THE 'SPECIAL PREFERRED STOCK'), PAR VALUE $.01 PER
SHARE, OF THE COMPANY) (THE 'MINIMUM CONDITION'), (II) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN BY THE ESOP PRIOR TO THE TIME THE OFFER
WOULD OTHERWISE EXPIRE A NUMBER OF SHARES
2
<PAGE>
SUCH THAT, IMMEDIATELY FOLLOWING THE PURCHASE OF SHARES PURSUANT TO THE OFFER,
THE ESOP WOULD HOLD LESS THAN 25% OF THE SHARES THEN OUTSTANDING (OR SUCH FEWER
NUMBER OF SHARES AS IS NECESSARY TO ELIMINATE THE VOTING RIGHTS OF THE SPECIAL
PREFERRED STOCK AND CAUSE SUCH STOCK TO BE REDEEMABLE AT THE OPTION OF THE
COMPANY) (THE 'ESOP CONDITION'), (III) THE EXPIRATION OR THE TERMINATION OF ANY
APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT
OF 1976, AS AMENDED (THE 'HSR ACT'), PRIOR TO THE EXPIRATION OF THE OFFER (THE
'HSR ACT CONDITION'), (IV) THE RATIFICATION BY THE MEMBERS OF THE UNITED
STEELWORKERS OF AMERICA (THE 'USWA') OF THE SETTLEMENT AGREEMENT (INCLUDING THE
NEW MASTER COLLECTIVE BARGAINING AGREEMENT ATTACHED AS AN EXHIBIT THERETO) (EACH
AS DEFINED HEREIN) SUBMITTED FOR THEIR RATIFICATION BY THE USWA IN CONNECTION
WITH THE OFFER (THE 'CBA RATIFICATION CONDITION') AND (V) THE RECEIPT BY RES
HOLDING CORPORATION OF THE FUNDS PURSUANT TO THE FINANCING COMMITMENTS ENTERED
INTO IN CONNECTION WITH THE MERGER AGREEMENT IN ORDER TO PURCHASE THE SHARES
PURSUANT TO THE OFFER AND THE MERGER AND TO PAY RELATED FEES AND EXPENSES (THE
'FINANCING CONDITION'). SEE SECTIONS 1, 9 AND 15. IF THE PURCHASER PURCHASES AT
LEAST THAT NUMBER OF SHARES NEEDED TO SATISFY BOTH THE MINIMUM CONDITION AND THE
ESOP CONDITION IT WILL BE ABLE TO EFFECT THE MERGER WITHOUT THE AFFIRMATIVE VOTE
OF ANY OTHER STOCKHOLDER OF THE COMPANY. SEE SECTIONS 12.
The Parent estimates that approximately $150 million of financing will be
required in connection with the transactions pursuant to the Merger Agreement
and, in addition, approximately $200 million principal amount of the Company's
Mortgage Notes (as defined herein) are expected to be refinanced pursuant to the
Debt Tender Offer (as defined herein) or a subsequent refinancing transaction.
See Section 12. The Parent has received from a group of lenders, for which The
Chase Manhattan Bank is acting as administrative agent, a commitment letter
indicating their commitment to lend to the Parent up to $65 million in the
aggregate to finance the Offer and the Merger. The remainder of the funds
necessary to finance the Offer and the Merger will consist of approximately
$95.5 million from the issuance and sale of common stock of the Parent ('Parent
Common Stock') to Blackstone Capital Partners II Merchant Banking Fund, L.P.,
Blackstone Offshore Capital Partners II, L.P. and Blackstone Family Investment
Partnership II, L.P. (together with their affiliates, 'Blackstone'), The Veritas
Capital Fund, L.P. (together with its affiliates, 'Veritas') and HVR Holdings,
LLC (the 'Veritas Coinvestor' and, together with Blackstone and Veritas, the
'Investors'). Any funds necessary to finance the Debt Tender Offer are expected
to come from the Company's Existing Credit Agreement and/or New Bridge Facility
(each as defined herein). Any other refinancing of the Mortgage Notes may be
effected through a debt offering, commercial loans or other means. For more
information concerning the financing of the Offer and the Merger and related
transactions, see Section 9. For more information concerning the financing of
the Debt Tender Offer, see Section 12.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 23, 1998 (the 'Merger Agreement'), by and among the Parent, the
Purchaser and the Company. The Merger Agreement provides, among other things,
for the making of the Offer by the Purchaser, and further provides that,
following the completion of the Offer, upon the terms and subject to the
conditions of the Merger Agreement, and in accordance with the Delaware General
Corporation Law (the 'DGCL'), the Purchaser will be merged with and into the
Company (the 'Merger'). Following the Merger, the Company will continue as the
surviving corporation (the 'Surviving Corporation') and become a wholly owned
subsidiary of the Parent, and the separate corporate existence of the Purchaser
will cease. See Section 11.
At the effective time of the Merger (the 'Effective Time'), each Share
issued and outstanding immediately prior to the Effective Time (other than
Shares owned by the Company and any Shares owned by the Parent, the Purchaser or
any other subsidiary of the Parent, which shall be cancelled, and other than
Shares, if any (collectively, 'Dissenting Shares'), held by stockholders who
have properly exercised appraisal rights under Section 262 of the DGCL) will, by
virtue of the Merger and without any action on the part of the holders of the
Shares be converted into the right to receive $7.25 in cash (the 'Merger
Consideration'), payable to the holder thereof, without interest, upon surrender
of the certificate formerly representing such Share, less any required
withholding taxes.
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.
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Promptly following commencement of the Offer, it is expected that the USWA
will seek ratification of the Settlement Agreement (including the new Master
Collective Bargaining Agreement attached as an exhibit thereto) from the members
(the 'Members') of the USWA employed at the Company and at Bar Technologies Inc.
('BarTech'), a Delaware corporation controlled by Blackstone and Veritas that is
not presently affiliated with the Company. The affirmative vote of at least a
majority of the Members voting thereon will be required for ratification, and
such ratification is a condition to the Offer. The Settlement Agreement
(including the new Master Collective Bargaining Agreement) and the CBA
Ratification Condition are more fully described in Section 12.
The Company has represented to the Parent and the Purchaser that as of July
23, 1998, there were 19,706,578 Shares issued and outstanding, 1,764,000 Shares
reserved for issuance upon the exercise of outstanding stock options and one
share of Special Preferred Stock outstanding. Based upon the foregoing, the
Purchaser believes that approximately 10,735,290 Shares constitute a majority of
the outstanding Shares on a fully-diluted basis.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
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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. The term
'Expiration Date' means 12:00 Midnight, New York City time, on Wednesday, August
26, 1998, unless and until the Purchaser, in its sole discretion in certain
circumstances and as required by the Merger Agreement in other circumstances
(but in all circumstances subject to the terms of the Merger Agreement), shall
have extended the period during which the Offer is open, in which event the term
'Expiration Date' shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SATISFACTION OF THE
MINIMUM CONDITION, THE ESOP CONDITION, THE HSR ACT CONDITION, THE CBA
RATIFICATION CONDITION, THE FINANCING CONDITION AND CERTAIN OTHER CONDITIONS.
SEE SECTION 15, WHICH SETS FORTH IN FULL THE CONDITIONS TO THE OFFER. SUBJECT TO
THE PROVISIONS OF THE MERGER AGREEMENT AND THE APPLICABLE RULES AND REGULATIONS
OF THE SECURITIES AND EXCHANGE COMMISSION (THE 'COMMISSION'), THE PURCHASER
RESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO WAIVE ANY OR ALL CONDITIONS TO
THE OFFER (OTHER THAN THE MINIMUM CONDITION AND THE ESOP CONDITION) AND TO
MODIFY THE TERMS OF THE OFFER (SUBJECT TO THE TERMS OF THE MERGER AGREEMENT).
SUBJECT TO THE TERMS OF THE MERGER AGREEMENT, INCLUDING THE PROVISIONS OF THE
MERGER AGREEMENT SET FORTH BELOW, AND THE APPLICABLE RULES AND REGULATIONS OF
THE COMMISSION, IF BY THE EXPIRATION DATE ANY OR ALL OF SUCH CONDITIONS TO THE
OFFER HAVE NOT BEEN SATISFIED, THE PURCHASER RESERVES THE RIGHT (BUT SHALL NOT
BE OBLIGATED) TO (I) TERMINATE THE OFFER AND RETURN ALL TENDERED SHARES TO
TENDERING STOCKHOLDERS, (II) WAIVE SUCH UNSATISFIED CONDITIONS AND PURCHASE ALL
SHARES VALIDLY TENDERED OR (III) EXTEND THE OFFER AND, SUBJECT TO THE TERMS OF
THE OFFER (INCLUDING THE RIGHTS OF STOCKHOLDERS TO WITHDRAW THEIR SHARES),
RETAIN THE SHARES WHICH HAVE BEEN TENDERED, UNTIL THE TERMINATION OF THE OFFER,
AS EXTENDED.
Subject to the applicable rules and regulations of the Commission and the
terms of the Merger Agreement, the Purchaser expressly reserves the right at any
time and from time to time, and regardless of whether or not any of the
conditions to consummation of the Offer shall have occurred, to (i) 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 (subject to the Company's right to terminate
the Merger Agreement, as discussed in section 11) and (ii) amend the Offer in
any respect by giving oral or written notice of such amendment to the
Depositary. During any such extension, all Shares previously tendered and not
properly withdrawn will remain subject to the Offer, subject to the right of a
tendering stockholder to withdraw such stockholder's Shares.
The Merger Agreement provides that, in the event that all of the conditions
to consummation of the Offer have occurred and at least 75% of the Company's
outstanding Shares have been validly tendered and not withdrawn pursuant to the
Offer, the Purchaser may, in its sole discretion, extend the period of time
during which the Offer is open from time to time for up to 15 business days. The
Merger Agreement further provides that, in the event that the Minimum Condition,
the ESOP Condition, the HSR Act Condition, the CBA Ratification Condition, the
Financing Condition and/or the condition relating to governmental intervention
(as described more fully in Section 15) have not been satisfied (or waived by
the Purchaser to the extent allowed pursuant to the Merger Agreement) as of the
Offer's scheduled expiration date, the Purchaser will extend the Offer from time
to time until the earliest of the consummation of the Offer or the termination
of the Merger Agreement (unless it is manifestly apparent that such condition(s)
will not be satisfied prior to the termination of the Merger Agreement or the
Purchaser and the Company otherwise agree not to extend the Offer).
The Merger Agreement further provides that, without the consent of the
Company, the Purchaser may not make any changes in the terms or conditions of
the Offer which decrease or change the form of the consideration payable in the
Offer, decrease the number of Shares sought pursuant to the Offer, impose
additional conditions to the Offer, modify the conditions to the Offer as set
forth in the Merger Agreement in a manner adverse to the holders of the Shares,
waive the Minimum Condition or the ESOP Condition or make any other change in
the terms of the Offer adverse to the holders of the Shares. The Purchaser shall
have no obligation to pay interest on
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the purchase price of tendered Shares. 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., New York City time, 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 14(d)6(d), under the Exchange Act which require
that material changes be promptly disseminated to holders of Shares), the
Purchaser shall 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 disseminate
additional tender offer material 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
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 federal holiday
and consists of the time period from 12:01 A.M. through 12:00 Midnight, New York
City time.
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. 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 accept for payment and will pay for all Shares validly tendered
and not properly withdrawn on or prior to the Expiration Date as soon as
practicable after the later to occur of (i) the Expiration Date and (ii) the
satisfaction or waiver of the conditions of the Offer set forth in Section 15,
including without limitation the Minimum Condition, the ESOP Condition, the HSR
Act Condition, the CBA Ratification Condition and the Financing Condition. 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
pending receipt of any other regulatory approvals specified in Section 16. Any
such delays will be effected in compliance with Rule 14e-l(c) under the Exchange
Act.
For information with respect to approvals required to be obtained prior to
the consummation of the Offer, including the HSR Act, see Section 16.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
Certificates for such Shares ('Share Certificates') or timely confirmation (a
'Book-Entry Confirmation') of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company (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 herein) 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 such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer
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Facility tendering the Shares that such participant has received and agrees to
be bound by the terms of the Letter of Transmittal and that the Purchaser may
enforce such agreement against 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
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 BY THE PURCHASER, 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 Rule 14e-l(c) under 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.
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 such Book-Entry Transfer Facility), as
promptly as practicable following the expiration, termination or withdrawal of
the Offer.
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, but any such
transfer or assignment will not relieve the Purchaser of its obligations under
the Offer and will in no way prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
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
accounts 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
such Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at such Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for such transfer. However, although delivery of
Shares may be effected through book-entry transfer at 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 SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE DEPOSITARY.
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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
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 which 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'), 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:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form made available by the Purchaser is
received by the Depositary as provided below on or prior to the Expiration
Date; and
(iii) the Share Certificates (or a Book-Entry Confirmation),
representing all tendered Shares in proper form for transfer, 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
National Association of Securities Dealers Inc. ('NASD') Nasdaq Stock
Market (the 'Nasdaq Stock Market') trading days after the date of execution
of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution 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.
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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 or other securities issued or issuable in respect of such
Shares on or after the date hereof). All such powers of attorney and proxies
shall 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 shall be final and binding on all parties. The Purchaser reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may in the opinion of its
counsel be unlawful. The Purchaser also reserves the absolute right to waive any
of the conditions of the Offer 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, either Dealer Manager, 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.
Backup Federal Income Tax Withholding and Substitute Form W-9. Under the
'backup withholding' provisions of 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 withholding. If a
stockholder does not provide its correct TIN or fails to provide the
certifications described above, the Internal Revenue Service ('IRS') 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.
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.
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4. WITHDRAWAL RIGHTS. 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 September 28, 1998. If the Purchaser extends the Offer, is delayed 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, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered the 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 an Eligible Institution. If Shares have been tendered
pursuant to the procedure for book-entry transfer as set forth in Section 3, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares, 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, either Dealer
Manager, 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. However, withdrawn Shares may be re-tendered at any time prior to the
Expiration Date by following one of the procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The 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, 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 Federal income tax purposes under the Internal Revenue Code of
1986, as amended (the 'Code'), and may also be a taxable transaction under
applicable state, local, foreign income or other tax laws. Generally, for
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 tendered by the stockholder and purchased pursuant to the Offer or
the Merger. For 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 effective date of the Merger, as the case may be.
There are limitations on the deductibility of capital losses.
The Merger Agreement provides that the Parent and the Purchaser will be
entitled to deduct and withhold from the consideration payable to any holder of
Shares pursuant to the Offer or the Merger such amounts as are required by the
Code or any other provisions of state, local or foreign tax law. See Section 11.
10
<PAGE>
6. PRICE RANGE OF SHARES; NO CASH DIVIDENDS. The Shares are listed and
traded on the Nasdaq Stock Market under the symbol 'REPS'. The following table
sets forth, for the quarters indicated, the high and low sales prices per Share
on the Nasdaq Stock Market as reported in the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1997 (the '1997 Annual Report') with
respect to periods occurring in the Company's fiscal year 1997 and as reported
by Bloomberg Quotes/Historical Pricing thereafter. As of the 1997 Annual Report,
the Company had not paid cash dividends on the Shares and did not anticipate the
payment of dividends on the Shares in the near future.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
Fiscal Year Ended June 30, 1997:
First Quarter....................................................... $ 4.875 $ 2.500
Second Quarter...................................................... $ 4.625 $ 1.375
Third Quarter....................................................... $ 2.750 $ 1.375
Fourth Quarter...................................................... $ 1.750 $ 1.250
Fiscal Year Ended June 30, 1998:
First Quarter....................................................... $ 2.375 $ 1.250
Second Quarter...................................................... $ 2.250 $ 1.375
Third Quarter....................................................... $ 4.625 $ 1.875
Fourth Quarter...................................................... $ 6.250 $ 2.625
</TABLE>
On June 3, 1998, the last full trading day prior to the Company's public
announcement that it had received an indication of interest in the possible
acquisition of the Company, the closing sale price per Share reported on the
Nasdaq Stock Market was $4.438. On July 23, 1998, the last full trading day
prior to announcement of the Offer, the closing sale price per Share reported on
the Nasdaq Stock Market was $4.500. On July 29, 1998, the last full trading day
before commencement of the Offer, the closing sale price per Share reported on
the Nasdaq Stock Market was $6.719. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT
MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The summary information
concerning the Company in this Section 7 and elsewhere in this Offer to Purchase
is derived from the 1997 Annual Report, the Company's Annual Reports on Form
10-K for the fiscal years ended June 30, 1996 and June 30, 1995, the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 and other
publicly available information. The summary information set forth below is
qualified in its entirety by reference to such reports (which may be obtained
and inspected as described below) and should be considered in conjunction with
the more comprehensive financial and other information in such reports and other
publicly available reports and documents filed by the Company with the
Commission and other publicly available information. Although neither the Parent
nor the Purchaser has any knowledge that would indicate that any statements
contained herein based upon such reports are untrue, the Parent and the
Purchaser do not assume any responsibility for the accuracy or completeness of
the information contained therein, or for any failure by the Company to disclose
events that may have occurred and may affect the significance or accuracy of any
such information but which are unknown to the Parent and the Purchaser.
General. The Company was formed in November 1989 to purchase substantially
all of the assets of LTV Steel Company Inc.'s Bar Division. Until the initial
public offering of 8,050,000 shares of Common Stock in April 1995, the Company
had been virtually wholly-owned by its employees through the ESOP. The Company's
principal executive offices are located at 410 Oberlin Road SW, Massillon, Ohio
44647. The telephone number of the Company at such offices is (330) 837-6000.
The Company is a major producer of special bar quality ('SBQ') steel and
specialty steel bars. SBQ steel bars are higher quality hot-rolled and
cold-finished carbon and alloy steel bars, and specialty steels are stainless,
tool and vacuum remelted steels.
Financial Information. Set forth below are certain selected consolidated
financial data for the Company's last three fiscal years and the nine month
periods ended March 31, 1997 and March 31, 1998 which were derived from the 1997
Annual Report and the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997 and March 31, 1998. 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 Company with the Commission, and the following financial data is
qualified in its entirety
11
<PAGE>
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 the Nasdaq Stock Market in the manner set forth below.
REPUBLIC ENGINEERED STEELS, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
ENDED JUNE 30, ENDED MARCH 31,
-------------------------------- --------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales................................................ $805,098 $746,174 $753,535 $554,705 $597,978
Cost of product sold..................................... 705,156 688,445 691,318 515,532 533,648
-------- -------- -------- -------- --------
Gross profit............................................. 99,942 57,729 62,217 39,173 64,330
Selling, general and administrative expenses............. 45,338 46,418 44,024 33,023 32,717
Special charges.......................................... 0 3,890 2,105 2,763 0
Non-cash deferred compensation charges................... 2,070 0 0 0 0
Other postretirement benefits charges.................... 14,610 13,821 16,940 12,957 11,173
Non-cash ESOP charges(1)................................. 33,448 32,304 30,500 23,092 16,919
Interest expense net(2).................................. 12,499 17,424 26,308 19,844 19,417
Other charges (credits), net............................. (811) (562) (772) (657) (313)
Income tax benefit....................................... (2,405) (22,136) (22,569) (20,740) (3,117)
-------- -------- -------- -------- --------
Net loss................................................. (4,807) (33,430) (34,319) (31,109) (12,466)
Preferred stock dividends paid........................... 6,402 0 0 0 0
-------- -------- -------- -------- --------
Net loss attributable to Common Stock.................... $(10,849) $(33,430) $(34,319) $(31,109) $(12,466)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
EARNINGS PER SHARE
Net loss................................................. $ (0.78) $ (1.69) $ (1.74) $ (1.58) $ (0.63)
Weighted average shares outstanding...................... 13,995 19,756 19,707 19,707 19,707
BALANCE SHEET DATA (AT END OF PERIOD)
Cash, cash equivalents and short term investments........ $ 4,609 $ 2,074 $ 6,412 $ 3,329 $ 8,436
Working Capital.......................................... 142,264 137,737 135,331 138,478 149,016
Property, plant and equipment, net....................... 309,621 331,079 313,235 315,592 302,847
Total assets............................................. 610,791 639,410 632,368 642,768 642,573
Total debt............................................... 243,272 280,956 273,939 280,944 273,926
Preferred stock.......................................... 2 2 2 2 2
Total stockholders' equity............................... 88,134 88,973 85,254 81,563 89,908
</TABLE>
- ------------------
(1) Non-cash ESOP charges represent contributions historically made by the
Company to the ESOP, which were immediately returned to the Company as
repayment of notes in respect of the loans then owed by the ESOP to the
Company. The final loan payment was made in the quarter ending March 31,
1998.
(2) Net of capitalized interest of $8,616, $8,491 and $0 for fiscal years 1995,
1996 and 1997, respectively.
The Shares are registered under the Exchange Act. Accordingly, the Company
is subject to the informational 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 Web site 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.,
12
<PAGE>
Washington, D.C. 20549. Except as otherwise noted in this Offer to Purchase, 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 PARENT, THE PURCHASER, BLACKSTONE,
VERITAS AND THE VERITAS COINVESTOR.
The Parent. The Parent is a newly formed Delaware corporation organized at
the direction of Blackstone and Veritas in connection with the Offer and the
Merger. At the time of the Merger, it is anticipated that the Parent Common
Stock will be owned approximately 73.33% by Blackstone, 24.04% by Veritas and
2.63% by the Veritas Coinvestor. Until the acceptance for payment of the Shares
pursuant to the Offer, it is not anticipated that the Parent will have any
significant assets or liabilities or engage in any activities other than those
incidental to its formation, the Offer, the Merger and the transactions in
connection therewith. The address of the Parent is c/o The Blackstone Group, 345
Park Avenue, New York, New York 10154.
The Purchaser. The Purchaser is a newly formed Delaware corporation
organized at the direction of the Parent in connection with the Offer and the
Merger. The address of the Purchaser is the same as the address of the Parent.
Blackstone. It is anticipated that Blackstone will invest in the Parent
Common Stock through Blackstone Capital Partners II Merchant Banking Fund L.P.
('BCP'), Blackstone Offshore Capital Partners II L.P. ('BOCP') and Blackstone
Family Investment Partnership II L.P. ('BFIP'). BCP and BFIP are Delaware
limited partnerships formed in 1993 to invest in securities selected by their
general partner. BOCP is a Cayman exempted limited partnership formed in 1993 to
invest in securities selected by its investment general partner. Blackstone
Management Associates II L.L.C. ('BMA'), a Delaware limited liability company,
is the general partner of both BCP and BFIP and the investment general partner
of BOCP. Blackstone Services (Cayman) LDC ('Blackstone Cayman'), a Cayman
Islands limited duration company, is the administrative general partner of BOCP.
The business of BMA consists of performing the functions of, and serving
as, the investment general partner of BOCP and the general partner of BCP, BFIP
and various other partnerships formed to invest in securities selected by BMA.
The address of BMA is c/o The Blackstone Group, 345 Park Avenue, New York, New
York 10154.
The business of Blackstone Cayman consists of performing the functions of,
and serving as, the administrative general partner of BOCP and various other
partnerships formed to invest in securities selected by their investment general
partner. The address of Blackstone Cayman is c/o The Blackstone Group, 345 Park
Avenue, New York, New York 10154.
The Company's major customers include American Axle & Manufacturing
('American Axle'), a company controlled by BCP. In fiscal 1997, the Company's
sales to American Axle constituted approximately 9.5% of the Company's total net
sales according to the Company's 1997 Annual Report.
Veritas. It is anticipated that Veritas will invest in the common stock of
the Parent through The Veritas Capital Fund, L.P. ('Veritas Cap L.P.'). Veritas
Cap L.P. is a Delaware limited partnership formed in 1997 to invest in
securities of entities selected by its general partner. The general partner of
Veritas Cap L.P. is Veritas Capital Management, L.L.C. ('Veritas Cap L.L.C.'), a
Delaware limited liability company.
The business of Veritas Cap L.L.C. consists of performing the functions of,
and serving as, the general partner of Veritas Cap L.P. The address of Veritas
Cap L.L.C. is 660 Madison Avenue, New York, New York 10021.
Veritas Coinvestor. It is anticipated that HVR Holdings, LLC (the 'Veritas
Coinvestor') will invest in the common stock of the Parent. The Veritas
Coinvestor is a limited liability company formed in 1998 to invest in the common
stock of the Parent. The address of the Veritas Coinvestor is 824 Market Street,
Suite 900, Wilmington, Delaware 19801.
The name, citizenship, business address, present principal occupation or
employment and five year employment history of directors and executive officers
of the Parent, the Purchaser, Blackstone Cayman and the Veritas Coinvestor and
members of BMA and Veritas Cap L.L.C. are set forth on Schedule I hereto.
13
<PAGE>
9. SOURCE AND AMOUNT OF FUNDS. The Purchaser estimates that it will
require approximately $150 million to (i) purchase the Shares pursuant to the
Offer and the Merger, (ii) pay certain fees and expenses to be incurred in
connection with the completion of the Offer, Merger and the financing
transactions in connection therewith and (iii) make certain cash payments to
employees in accordance with the Merger Agreement. See Section 11. The Offer is
conditioned upon, among other things, the Financing Condition, which includes
the Equity Financing Condition and the Bank Financing Condition (each as defined
herein). Of the funds required to finance the foregoing, approximately $95.5
million will be obtained by Parent from the sale by the Parent of Parent Common
Stock to the Investors (the 'Equity Financing'), and the balance of the funds
necessary to finance the foregoing will come from the proceeds of loans from the
Lenders (as defined herein) in the aggregate amount of up to $65 million (the
'Bank Financing' and, collectively with the Equity Financing, the 'Financing').
Such amounts will be furnished by the Parent to the Purchaser in the form of
capital contributions. In addition, the Parent estimates that up to $202 million
of additional financing may be required by the Company following consummation of
the Offer to refinance the Company's outstanding Mortgage Notes (as defined
herein) pursuant to the Debt Tender Offer, and anticipates that such funds will
come from the Company's Existing Credit Agreement (or a replacement facility)
and/or the New Bridge Facility for which the Company has received a commitment
letter in connection with the Offer and the Merger, followed by a refinancing of
such indebtedness from the proceeds of the issuance of New High-Yield Securities
(as defined herein) or other sources. See Section 12.
Set forth below is a summary description of the Financing. Consummation of
the Financing is subject to, among other things, the negotiation and execution
of definitive financing agreements on terms satisfactory to the parties thereto.
There can be no assurance that the terms set forth below will be contained in
such agreements or that such agreements will not contain materially different
provisions.
Parent Common Stock Investment by Blackstone, Veritas and the Veritas
Coinvestor. On July 22, 1998, each of Blackstone and Veritas delivered a
commitment letter pursuant to which Blackstone and Veritas have each agreed to
purchase shares of Parent Common Stock for a purchase price of approximately $70
million and $25.5 million, respectively, in connection with the Offer and the
Merger (collectively, the 'Investors' Commitments'), subject to satisfaction of
certain conditions including (i) the Minimum Condition, the ESOP Condition, the
Bank Financing Condition and all other applicable conditions of the Offer set
forth in the Merger Agreement, in each case without giving effect to any
modification or waiver of the Merger Agreement or Bank Commitment Letter
effected without the prior written consent of each of BCP and Veritas Cap L.P.
The Parent's receipt of funds pursuant to the Investors' Commitments is a
condition to consummation of the Offer (the 'Equity Financing Condition').
Pursuant to a side commitment letter between Veritas and the Veritas Coinvestor,
the Veritas Coinvestor has agreed to purchase shares of Parent Common Stock
directly from the Parent for a purchase price of approximately $2.5 million in
lieu of that amount of Parent Common Stock being purchased by Veritas; however,
the Parent is not a party to such side commitment with the Veritas Coinvestor
and the Parent's receipt of funds pursuant to such side commitment is not a
condition to consummation of the Offer, and Veritas remains obligated to the
Parent in accordance with the terms and conditions of Veritas' Investor
Commitment to purchase the entire approximately $25.5 million of Parent Common
Stock described above in the event that the Veritas Coinvestor does not purchase
its Parent Common Stock for any reason. Amounts contributed to the Parent by the
Investors in connection with the consummation of the Offer and the Merger are
hereinafter referred to as the 'Investors' Contributions.'
In connection with such investments in Parent Common Stock, in the event a
definitive agreement with respect to the BarTech Transaction (as defined herein)
is executed within nine months following the consummation of the Offer, the
Veritas Coinvestor has agreed to become a party to the BarTech Stockholders'
Agreement (as defined herein) and such agreement will govern the Investors'
investments in NuBar (as defined herein), and in the event such a definitive
agreement with respect to the BarTech Transaction is not executed within such
nine-month period, Blackstone, Veritas and the Veritas Coinvestor have agreed to
enter into a stockholders' agreement relating to their respective ownership
interests in the Parent on terms substantially similar to the BarTech
Stockholders' Agreement; prior to the foregoing, the Investors' have agreed not
to sell, transfer, pledge or otherwise dispose of or encumber their Parent
Common Stock without the consent of Blackstone and Veritas. See Section 12.
14
<PAGE>
Bank Financing. The Parent has received a Commitment Letter, dated as of
July 23, 1998 (the 'Bank Commitment Letter'), from The Chase Manhattan Bank
('Chase'), Chase Securities Inc. ('Chase Securities'), DLJ Capital Funding, Inc.
('DLJ Capital Funding') and DLJ Bridge Finance, Inc. ('DLJ Bridge Finance')
pursuant to which Chase and DLJ Capital Funding have committed, subject to the
conditions described below, to provide the Parent with 65% and 35%,
respectively, of a term loan facility in connection with the Offer and the
Merger (the 'Term Loan Facility') and Chase and DLJ Bridge Finance have
committed, subject to the conditions described therein, to provide the Company
with 65% and 35%, respectively, of the New Bridge Facility in connection with
the Debt Tender Offer (for a description of the New Bridge Facility and the Debt
Tender Offer, see Section 12). The Term Loan Facility consists of a $65 million
term loan facility to the Parent to fund the purchase of Shares pursuant to the
Offer (to the extent not funded by the Investors' Contributions), to fund the
payment of the Merger Consideration (to the extent not funded by the Investors'
Contributions), to pay certain fees and expenses associated with the
transactions herein described and to pay interest on loans made under the Term
Loan Facility. Chase's and DLJ Capital Funding's commitment to make loans under
the Term Loan Facility terminates on December 15, 1998 if the Offer is not
consummated by such time. Loans made thereunder will mature (the 'Final
Maturity') on a date that is the earlier of nine months after the consummation
of the Offer and twelve months after the date of the Bank Commitment Letter.
Chase and DLJ Capital Funding reserve the right to syndicate or otherwise assign
their commitments under the Term Loan Facility to additional lenders prior to or
after consummation of the Offer (any additional lenders, collectively with Chase
and DLJ Capital Funding, the 'Lenders'). The Parent's receipt of funds pursuant
to the Bank Commitment Letter is a condition to consummation of the Offer (the
'Bank Financing Condition' and, collectively with the Equity Financing
Condition, the 'Financing Condition').
Borrowings under the Term Loan Facility may be made by the Parent at its
option either in (a) a single drawing to be made upon consummation of the Offer
(the 'Single Loan') or (b) two drawings, (I) the first drawing to be made upon
consummation of the Offer (such drawing, the 'First Loan') in an amount equal to
the product of (A) .68 and (B) the portion of the Investors' Contributions made
upon or prior to the consummation of the Offer, which shall be in an amount not
less than the product of (C) .595 and (D) the aggregate amount of funds required
to (1) purchase Shares upon consummation of the Offer, (2) pay interest, fees
and expenses payable pursuant to the Term Loan Facility in connection with the
First Loan or the Single Loan and (3) pay any other fees and expenses to be
incurred by the Parent or the Purchaser prior to the Merger, and (II) the second
drawing (such drawing, the 'Second Loan') to be made concurrently with the
Merger in an amount equal to (A) the sum of (1) the Merger Consideration, (2)
all interest payable in connection with the Second Loan and (3) any other
expenses to be incurred by Parent or the Purchaser prior to the Maturity Date
(as defined herein) minus (B) that portion of the Investors' Contributions not
yet made at the time of the Merger.
The Lenders' obligation to make the Single Loan or the First Loan, as
applicable, under the Term Loan Facility is subject to the following conditions:
(a) the satisfaction of the Minimum Condition, the ESOP Condition, the HSR Act
Condition, the CBA Ratification Condition and the Equity Financing Condition,
and the Parent shall have made common equity contributions to the Purchaser in
an amount sufficient to enable the Purchaser to purchase the Shares in
connection with the Offer, (b) the consummation of the Offer (without any
waivers of conditions precedent not approved by the Administrative Agent that
are materially adverse to the Lenders), (c)(i) each of the lenders under the
Second Amended and Restated Revolving Credit Agreement (the 'Existing Credit
Agreement') dated as of April 25, 1997, among the Company, BankBoston, N.A., as
Agent, and the other lender parties thereto shall have agreed in writing to
waive any default or event of default occurring or to occur under such agreement
as a result of the Offer, the purchase of the Shares, the Merger or any of the
other transactions related thereto and the Existing Credit Agreement shall have
been amended to permit the incurrence by the Company of indebtedness under the
Company's New Bridge Facility (as defined herein) (or any refinancing thereof),
or (ii) the Existing Credit Agreement shall have been replaced with a new
facility of at least equal capacity, (d) the Company and its subsidiaries shall
have no preferred stock or indebtedness outstanding other than (i) loans under
the Existing Credit Agreement, (ii) the Company's 9% Solid Waste Revenue Bonds,
Series 1996, Due 2021 and the Company's 8 1/4% Solid Waste Revenue Bonds, Series
1994, Due 2014 (together the 'Waste Bonds'), (iii) the Company's 9 7/8% First
Mortgage Notes due 2001 (the 'Mortgage Notes'), (iv) the Special Preferred Stock
(provided that the ESOP Condition has been satisfied), and (v) certain other
limited permitted indebtedness, (e) the Parent shall have no preferred stock and
no indebtedness outstanding (other than indebtedness pursuant to the Term Loan
Facility) and no common stock outstanding other
15
<PAGE>
than that owned by the Investors, (f) the Purchaser shall have no preferred
stock and no indebtedness outstanding and no common stock outstanding other than
that owned by the Parent, (g) after giving effect to the Merger, the Company
shall have no common stock outstanding other than that owned by the Parent, (h)
the Company shall have used commercially reasonable efforts to secure
availability of at least $20 million under the Existing Credit Agreement to fund
the Debt Tender Offer, and the Company shall have entered into the New Bridge
Facility, (i) the Lenders shall have received such opinions of counsel to the
various parties to the transactions referred to herein, closing certificates,
corporate resolutions and similar documentation as to such matters as shall be
reasonably satisfactory to the Lenders, (j) the representations and warranties
of the Parent and the Purchaser set forth in the definitive documentation
relating to the Term Loan Facility shall be true and correct immediately prior
to, and after giving effect to, such funding, (k) the Lenders shall have
received financial statements and other financial information from the Parent
reasonably satisfactory to the Lenders, including a pro forma consolidated
balance sheet of the Parent, giving effect to the Offer, the Merger, the Debt
Tender Offer and the transactions contemplated in connection therewith, (l) the
Merger Agreement and all related documentation shall be in a form approved by
the Administrative Agent, (m) all accrued fees and expenses shall have been
paid, (n) reasonably satisfactory insurance shall have been obtained, (o)
appropriate filings shall have been made by all necessary parties under the HSR
Act, and the applicable waiting periods shall have expired or been terminated,
(p) all material governmental consents and approvals and third-party consents
and approvals necessary in connection with the Offer, the Merger, the Debt
Tender Offer and the Term Loan Facility shall have been obtained and be final
and shall remain in effect, and all applicable waiting periods shall have
expired without any action being taken by any competent authority and there
shall be no action, actual or threatened, that would have a reasonable
likelihood of restraining, preventing or imposing materially burdensome
conditions on the Offer, the Merger, the Debt Tender Offer and the Term Loan
Facility or the consummation of the other transactions contemplated herein, and
(q) all applicable material laws and regulations shall have been complied with.
The Lenders' obligation to make the Single Loan or the First Loan, as
applicable, under the Term Loan Facility also is subject to the following
additional conditions: (a) there not having occurred any material adverse effect
on the business, financial condition or results of operations of the Company and
its Subsidiaries, taken as a whole, since June 30, 1997, (b) there not having
occurred and being continuing any material disruption of, or material adverse
change in, the financial, banking or capital markets conditions since the date
of the Bank Commitment Letter and (c) satisfaction of Chase and DLJ Capital
Funding that, prior to and during any syndication of the Term Loan Facility,
there shall be no competing issues of debt securities or commercial bank or
other credit facilities of the Parent, the Purchaser or the Company or any of
their respective subsidiaries.
The Lenders' obligation to make the Second Loan under the Term Loan
Facility, if applicable, is subject to the following conditions: (a) the
Investors shall have made the remainder of the Investors' Contributions, to the
extent not made at the time of consummation of the Offer, (b) the consummation
of the Merger, (c) there shall be none of the following defaults under the Term
Loan Facility: (i) default in the payment of amounts due under the Term Loan
Facility, (ii) any bankruptcy event in respect of the Parent, the Purchaser or
any of their subsidiaries, (iii) any of the loan documentation related to the
Term Loan Facility not being in all material respects and not being asserted by
the Parent not to be a legal, valid and binding obligation or (iv) there not
having been any change of control (as defined in the definitive documentation
relating to the Term Loan Facility), (d) the Lenders not having accelerated
loans outstanding under the Term Loan Facility, (e) there having been no payment
default or payment event of default with respect to the Mortgage Notes, the
Existing Credit Agreement or the New Bridge Facility (or any indebtedness
refinancing the New Bridge Facility), (f) the Merger shall not be subject to any
injunction or similar order and there shall be no proceeding pending seeking
such an order and (g) the representations and warranties relating to corporate
organization and corporate and governmental authorization contained in the
definitive documentation relating to the Term Loan Facility shall be true and
correct.
The Term Loan Facility will be secured by a first priority security
interest in all cash held by the Parent and all of the capital stock of the
Company held by the Purchaser.
Loans under the Term Loan Facility will bear interest at a rate per annum
equal to, at the Parent's option, Adjusted LIBOR plus 4.0% or ABR plus 3.0%
(each as defined in the Bank Commitment Letter). The Parent may elect interest
periods of 1,2, 3 or 6 months for LIBOR borrowings and interest shall be payable
at the end of every interest period and, in any event, at least every three
months. The Lenders are entitled to receive
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commitment fees equal to .50% per annum on the unused amount of the Term Loan
Facility payable quarterly in arrears, commencing on the date of the initial
borrowing under the Term Loan Facility.
Loans under the Term Loan Facility may be prepaid at any time, in whole or
in part, at the Parent's option, in certain minimum amounts; provided that there
are customary 'breakage' fees for prepaying Adjusted LIBOR rate portions of such
loans.
In connection with the Bank Commitment Letter, the Parent has agreed to (i)
indemnify the Lenders and their affiliates against certain liabilities and
expenses incurred in connection with the transactions contemplated by the Bank
Commitment Letter and (ii) reimburse the Lenders for all reasonable
out-of-pocket expenses incurred in connection with the transactions contemplated
by the Bank Commitment Letter.
For a description of the New Bridge Facility and a discussion of plans to
refinance the Term Loan Facility, see Section 12.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY
Since its establishment in 1993, BCP has made numerous equity investments
in the industrial sector of the economy. In April 1996, BCP made its initial
investment in the SBQ steel industry through the purchase of a controlling stake
in BarTech. See Section 12. As part of its investigation of the SBQ steel
industry and its involvement with BarTech, BCP became aware of the Company. In
addition, representatives of Blackstone and BarTech have had, in the ordinary
course of business and from time to time, contact with representatives of the
Company. As a result of these contacts and because of BCP's view of
consolidation opportunities in the steel industry, BCP identified the Company as
a possible acquisition candidate.
In the summer of 1996, following the acquisition of BarTech, David
Stockman, a senior managing director of Blackstone, and Russell Maier, Chairman
and Chief Executive Officer of the Company, met to discuss a possible joint
venture or business combination between the Company and BarTech, and a series of
follow-up discussions ensued. No definitive proposal emerged from these
discussions. Between 1996 and 1998 BCP, BarTech and the Company continued to
have periodic contact in the ordinary course.
On April 23, 1998, Mr. Maier was contacted by Mr. Stockman, who indicated
that Blackstone was evaluating a potential transaction which would combine the
operating assets of BarTech and the Company and requested a meeting, which was
held on April 24, 1998. At the meeting Mr. Stockman indicated that Blackstone
and BarTech again wished to explore the feasibility of a business transaction
with the Company. On April 29, 1998, Blackstone, BarTech and the Company entered
into a confidentiality agreement pursuant to which the Company provided certain
non-public information to Blackstone and BarTech.
In May, 1998, Mr. Maier, Joseph Lapinsky, the President of the Company's
Hot Rolled Bar Division, Mr. Stockman, Anthony Grillo, a senior managing
director of Blackstone, and Thomas Tyrrell and Joseph Asimou of BarTech met to
further discuss a possible transaction, but no substantive proposal emerged from
the meeting. Following such meeting, in a telephone conversation with Mr. Maier,
Mr. Stockman inquired whether the Company would be interested in receiving an
acquisition proposal from Blackstone.
On May 26, 1998, the Board of Directors of the Company established a
Transaction Committee composed of five independent directors and retained Weil,
Gotshal & Manges LLP ('Weil Gotshal') to serve as its legal counsel and Lazard
Freres & Co. LLC ('Lazard') to serve as its investment banker.
On May 29, 1998, representatives of Blackstone and Simpson Thacher &
Bartlett ('Simpson Thacher'), legal counsel to Blackstone, met with
representatives of Lazard and Weil Gotchal to discuss Blackstone's interest in
the Company. At the meeting, the Blackstone representatives indicated that they
were interested in pursuing an acquisition of the Company in a negotiated
transaction pursuant to which the holders of Shares would receive a cash payment
for such Shares. Blackstone and Simpson Thacher also outlined the contemplated
features of the transaction (including financing). The Blackstone
representatives also discussed the status of their ongoing negotiation of a
Memorandum of Understanding (the 'MOU') with the USWA regarding the material
elements of a new collective bargaining agreement that would be in place
following consummation of the proposed transaction with the Company. At the
meeting, the Blackstone representatives indicated that Blackstone would be
interested in pursuing further discussions at a price of $6.00 per Share.
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On June 2, 1998, the Transaction Committee met with representatives of Weil
Gotshal and Lazard to discuss the May 29, 1998 meeting with Blackstone and
Simpson Thacher. At this meeting, the Transaction Committee and its advisors
determined the various steps that the Company and its advisors would be taking
to continue discussions with Blackstone. These steps included a detailed
financial analysis of the Company by Lazard.
On June 4, 1998, the Company publicly announced that it had received an
indication of interest relating to the possible acquisition of the Company.
Following the public disclosure, Lazard and representatives from the Company
sought to ascertain whether other parties were interested in pursuing a similar
transaction.
On June 5, 1998, the Company received a copy of the MOU.
On June 8, 1998, one industry participant submitted a written preliminary
indication of interest in acquiring the Company at a price of $5.00 to $6.00 per
Share but advised Lazard that it had no interest in a transaction above such
range. No other indications of interest were received by the Company or Lazard.
On June 16, 1998, Mr. Grillo forwarded a letter to Lazard stating that it
would be willing to propose a modest increase in its $6.00 per Share indication
of interest in exchange for the Company's agreement to immediate and exclusive
negotiations with Blackstone.
On June 16, 1998, the Transaction Committee met to review the business plan
of the Company's management and the status of the Blackstone indication of
interest. At such meeting, the Transaction Committee directed management to
consider the impact on the business plan of both an economic downturn and the
terms of the MOU.
On June 30, 1998, the Transaction Committee held a meeting by means of a
telephone conference call. Representatives of Lazard reviewed with the
Transaction Committee their preliminary financial analysis of the Company and
their views regarding the fairness of the price at which Blackstone indicated an
interest in acquiring the Company. The Transaction Committee discussed the
various assumptions contained in the Lazard analysis and the management's
business plan. After such discussions, the Transaction Committee directed Lazard
to inform Blackstone that the price at which it indicated an interest in
acquiring the Company was inadequate from a financial point of view.
On July 2, 1998, representatives of Lazard met with representatives of
Blackstone and informed them of the Transaction Committee's views regarding
Blackstone's indication of interest. At the meeting, Blackstone indicated that
it would be willing to proceed with discussions providing for a payment to the
Company stockholders of $6.75 per Share.
On July 6, 1998, the Transaction Committee met to review Lazard's meeting
with Blackstone and subsequent developments. The Transaction Committee
authorized Lazard to continue negotiations with Blackstone but directed Lazard
to again inform Blackstone that the indicated level of interest was inadequate
from a financial point of view.
On July 7, 1998, the Company publicly announced that it was in negotiations
with Blackstone regarding a possible sale of the Company. On the same day,
Blackstone informed Lazard that it would be willing to increase its proposal to
no higher than $7.25 per Share, subject to the satisfactory completion of
confirmatory due diligence and the preparation and negotiation of mutually
acceptable definitive documentation.
From July 7, 1998 through July 23, 1998, representatives of Blackstone, its
financing sources and Simpson Thacher conducted their due diligence reviews of
the Company, and Blackstone, the Company and their respective legal counsel
negotiated the Merger Agreement.
On July 23, 1998, the Transaction Committee and the Board of Directors met
with Lazard and Weil Gotshal to review the status of the negotiations with
Blackstone and the draft Merger Agreement. Representatives of Weil Gotshal
discussed the terms of the draft Merger Agreement, a copy of which previously
had been provided to the directors. Representatives of Lazard summarized their
financial analysis and advised the Board of Directors of the Company that it was
Lazard's opinion (which was subsequently confirmed in writing) that, as of such
date, and based upon and subject to the assumptions and other matters set forth
in the subsequent written opinion, the consideration to be received by the
holders of Shares in the Offer and Merger was fair, from a financial point of
view, to such holders. The Board of Directors voted unanimously (with one
director not present at the meeting) to
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approve the Offer, the Merger and the Merger Agreement and to recommend that all
the Company's stockholders tender their Shares pursuant to the Offer and approve
and adopt the Merger Agreement.
Following such approval, on the evening of July 23, 1998, the Company, the
Parent and the Purchaser entered into the Merger Agreement.
On the morning of July 23, 1998, the Company and Blackstone announced the
execution of the Merger Agreement.
11. THE MERGER AGREEMENT. The following is a summary of the Merger
Agreement, which summary is qualified in its entirety by reference to the copies
thereof filed as exhibits to the Tender Offer Statement on Schedule 14D-1.
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as practicable after the date of the Merger Agreement, but in no
event later than five business days following the date of public announcement of
the execution of the Merger Agreement. The obligation of the Purchaser to accept
for payment and to pay for the Shares tendered pursuant to the Offer is subject
only to the conditions described in Section 15. The Company will not tender
Shares held by the Company or its subsidiaries to the Purchaser pursuant to the
Offer. Under the Merger Agreement, the Purchaser expressly reserves the right,
in its sole discretion, to waive any conditions described in Section 15 (except
for the Minimum Condition and the ESOP Condition) and to make any other changes
in the terms and conditions of the Offer, provided that the Purchaser may not,
without the prior written consent of the Company, (a) decrease or change the
form of the consideration payable in the Offer, (b) decrease the number of
Shares sought pursuant to the Offer, (c) impose additional conditions to the
Offer, (d) modify the conditions to the Offer described in Section 15 in a
manner adverse to holders of the Shares or (e) waive the Minimum Condition or
the ESOP Condition or (f) make any other changes in the terms of the Offer
adverse to the holders of the Shares. Subject to the terms and conditions of the
Merger Agreement and the Offer, the Purchaser will accept for payment and pay
for all Shares validly tendered and not withdrawn pursuant to the Offer as soon
as it is permitted to do so under applicable law, provided that the Purchaser
shall have the right in its sole discretion to extend the Offer from time to
time for up to an aggregate of 15 business days, notwithstanding the prior
satisfaction of the conditions set forth in Section 15, in the event that at
least 75% of the Company's outstanding Shares have been validly tendered and not
withdrawn pursuant to the Offer. The Merger Agreement provides that, subject to
the next sentence, if the Minimum Condition or the ESOP Condition is not
satisfied or if the conditions set forth in paragraphs B, C, or E of Section 15
are not satisfied or, to the extent permitted by the Merger Agreement, waived by
the Purchaser as of the scheduled expiration date, the Purchaser will have the
right in its sole discretion to extend the Offer from time to time until the
earlier of the consummation of the Offer or the termination of the Merger
Agreement. The Merger Agreement further provides that, if the Minimum Condition,
the ESOP Condition or the HSR Condition or the conditions set forth in
paragraphs A, F, or G in Section 15 are not satisfied or, to the extent
permitted by the Merger Agreement, waived by the Purchaser as of the scheduled
expiration date, the Purchaser will, unless it is manifestly apparent that such
condition will not be satisfied prior to the termination of the Merger
Agreement, or the Purchaser and the Company shall otherwise agree in writing,
extend the Offer from time to time until the earlier of the consummation of the
Offer or the termination of the Merger Agreement.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof and in accordance with the DGCL and upon the filing of
a certificate of merger or a certificate of ownership and merger, as applicable,
with the Secretary of State of the State of Delaware (the 'Effective Time'), the
Purchaser will be merged with and into the Company. As a result of the Merger,
at the Effective Time the separate corporate existence of the Purchaser will
cease and the Company will continue as the surviving corporation and as a direct
wholly-owned subsidiary of the Parent (after giving effect to the Merger, the
Company is sometimes hereinafter referred to as the 'Surviving Corporation').
The Merger Agreement further provides that at the election of the Parent, any
direct or indirect wholly-owned subsidiary of the Parent organized in Delaware
may be substituted for the Purchaser as a party to the Merger. In such event,
the parties to the Merger Agreement have agreed to execute an appropriate
amendment to the Merger Agreement to reflect such substitution.
At the Effective Time, by virtue of the Merger and without any action on
the part of any holder of Shares, of Special Preferred Stock or of shares of
capital stock of the Purchaser, each Share issued and outstanding immediately
prior to the Effective Time (unless otherwise provided for) will be converted
into the right to receive
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$7.25 in cash or the price actually paid pursuant to the Offer, payable to the
holder thereof, without any interest thereon (the 'Merger Consideration'), upon
surrender and exchange of the certificate representing such Share in the manner
described in the Merger Agreement. In addition, as of the Effective Time, each
share of the capital stock of the Purchaser issued and outstanding immediately
prior to the Effective Time will be converted into and become one fully paid and
nonassessable share of common stock, par value $0.01 per share, of the Surviving
Corporation, and each Share that is owned by the Company, the Parent, the
Purchaser or any other subsidiary of the Parent will be canceled and retired and
will cease to exist, and no consideration shall be delivered in exchange
therefor.
The Merger Agreement provides that prior to the Effective Time, the Parent
will cause the Purchaser to pay or, to the extent funds for such purpose are
provided by the Parent to the Company, will pay each holder of a then
outstanding option to purchase Shares (including under the Company's 1995 Stock
Option Plan), whether or not then exercisable or vested (collectively, the
'Options'), in cancellation and settlement thereof, for each Share subject to
such Option an amount in cash equal to the excess, if any, of the Merger
Consideration over the per Share exercise price therefor (such amount, the
'Option Consideration'). However, with respect to any holder of an Option
subject to Section 16 of the Exchange Act, the Option Consideration will be paid
by the Purchaser or the Surviving Corporation as soon as practicable after the
first date payment can be made without liability to such person under Section
16(b) of the Exchange Act. Upon payment of the Option Consideration, each such
Option will be cancelled, and the payment to the holder entitled thereto of the
Option Consideration will be deemed a release of all rights the holder had or
may have had in respect of such Option.
The Merger Agreement provides that Shares that are outstanding immediately
prior to the Effective Time and that are held by stockholders who have not voted
in favor of the Merger (or consented thereto in writing) and who properly demand
appraisal for such Shares pursuant to Section 262 of the DGCL (collectively, the
'Dissenting Shares') will not be converted into or represent the right to
receive the Merger Consideration. Such stockholders instead will be entitled to
receive payment of the appraised value of such Shares held by them in accordance
with Section 262 of the DGCL; provided, however, that all Dissenting Shares held
by stockholders who fail to perfect or who effectively have withdrawn or
otherwise lost their rights to appraisal of such Shares under Section 262 of the
DGCL will thereupon be deemed to have been converted into and to have become
exchangeable, as of the Effective Time, for the right to receive, without any
interest thereon, the Merger Consideration upon surrender in the manner
described in the Merger Agreement of the certificate or certificates that,
immediately prior to the Effective Time, evidenced such Shares.
The Merger Agreement further entitles the Parent and the Purchaser to
deduct and withhold from the Merger Consideration payable pursuant to the Merger
Agreement to any holder of Shares or Options such amounts as required to be
deducted and withheld with respect to the making of such payment under the Code
or any provision of applicable state, local or foreign tax law. To the extent
that amounts are withheld in such manner, the withheld amounts are treated for
purposes of the Merger Agreement as having been paid to such holders in respect
of which such deduction or withholding was made.
The Merger Agreement also provides that at the Effective Time, the
certificate of incorporation and the by-laws of the Company, as in effect
immediately prior to the Effective Time, will be the certificate of
incorporation and the by-laws of the Surviving Corporation, until thereafter
changed or amended as provided therein or by applicable law; provided, however,
that each of the certificate of incorporation (other than Article First thereof)
and the by-laws of the Surviving Corporation will be amended at the Effective
Time to read in its entirety as the certificate of incorporation (other than
Article First thereof) and by-laws, respectively, of the Purchaser, as in effect
immediately prior to the Effective Date. The Merger Agreement further provides
that the directors of the Purchaser immediately prior to the Effective Time will
be the initial directors of the Surviving Corporation from and after the
Effective Time, and the officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation from
and after the Effective Time, in each case until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the certificate of incorporation and by-laws of the
Surviving Corporation.
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Redemption of Special Preferred Stock. Immediately following the
consummation of the Offer and the satisfaction of the ESOP Condition, the
Company will give due notice that the outstanding share of the Special Preferred
Stock will be redeemed at an aggregate redemption price of $1,500 within 30 days
(but not less than 20 days) after the giving of such notice. Concurrently with
the giving of such notice, the Company will (i) deposit the redemption price for
the share of Special Preferred Stock to be redeemed with a bank or trust
company, designated in the notice of such redemption, having an office in
Cleveland, Ohio, in Canton, Ohio or in Wilmington, Delaware, having combined
capital, surplus and undivided profits aggregating at least $50,000,000, in
trust for payment to the holder of the share of Special Preferred Stock to be
redeemed, and (ii) deliver irrevocable written instructions authorizing the
depositary to apply such deposit solely to the redemption of the share of
Special Preferred Stock to be redeemed.
Stockholders Meeting. Pursuant to the Merger Agreement, unless a
Short-Form Merger (as defined herein) is possible, the Company will, promptly
following the acceptance for payment of and payment for the Shares by the
Purchaser in the Offer, duly call, give notice of, convene and hold a meeting of
the Company's stockholders for the purpose of approving the Merger Agreement (or
instead take such action by written consent if permitted by applicable law). The
Company has represented, subject to the terms and conditions of the Merger
Agreement, that its Board of Directors (at a meeting duly called and held) has
resolved to recommend approval and adoption of the Merger Agreement by the
stockholders of the Company. At the meeting of the Company's stockholders (or
pursuant to such written consent), the Parent will cause all Shares owned by the
Parent and the Purchaser to be voted in favor of the Merger.
Proxy Statement. Unless a Short-Form Merger is possible, the Merger
Agreement provides that promptly following the acceptance for payment of and
payment for the Shares by the Purchaser pursuant to the Offer, the Company will
prepare and file with the Commission a proxy statement or information statement
relating to the Merger (the 'Proxy Statement') and will use all reasonable best
efforts to respond to all comments of the Commission with respect to the Proxy
Statement and to cause the Proxy Statement to be mailed to the Company's
stockholders at the earliest practicable date.
Short-Form Merger. Pursuant to the Merger Agreement, in the event that the
Parent and the Purchaser immediately following the purchase of Shares in the
Offer own 90% or more of the outstanding Shares, the Company, the Parent and the
Purchaser will take all necessary and appropriate action to cause the Merger to
become effective promptly after the expiration of the Offer without a meeting of
stockholders of the Company in accordance with Section 253 of the DGCL (the
'Short-Form Merger').
Company Board Representation. The Merger Agreement provides that, upon the
purchase by the Purchaser of a number of Shares pursuant to the Offer that
represents a majority of the outstanding shares and from time to time thereafter
until the Effective Time, the parties to the Merger Agreement will, subject to
the provisions of Section 14(f) of the Exchange Act and Rule 14f-1 under the
Exchange Act, promptly use all reasonable efforts to cause the following persons
to comprise a majority of the entire Board of the Company: David Blitzer, Thomas
Campbell, Marshall Cohen, Anthony Grillo, Glenn Hutchins, Robert McKeon and
David Stockman. The date on which such persons first comprise a majority of the
Company's Board of Directors is referred to as the 'Control Date.' From and
after the Control Date and prior to the Effective Time, for so as long as there
is at least one continuing director from the Company's existing Board of
Directors (each a 'Continuing Director' and, collectively, the 'Continuing
Directors'), all other directors will abstain from acting upon, and the approval
of a majority of the Continuing Directors will be required to authorize, (i) any
termination of the Merger Agreement by the Company, (ii) any amendment of the
Merger Agreement requiring action by the Board of Directors of the Company,
(iii) any extension of time for the performance of any obligation or other act
of the Parent or the Purchaser under the Merger Agreement and (iv) any waiver of
compliance with any provision of the Merger Agreement for the benefit of the
Company.
Access to Information; Confidentiality. Pursuant to the Merger Agreement,
upon reasonable notice, each of the Company or the Parent, as the case may be,
will, and will cause its subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of the other party (including, in
the case of the Parent and the Purchaser, the persons who have agreed to provide
financing to the Parent or the Surviving Company in connection with the Offer
and Merger and the transaction contemplated in connection therewith and, in the
case of the Company, the Administrative Committee and the Trustee of the ESOP
and their respective employees,
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accountants, counsel and other representatives) access during normal business
hours during the period prior to the Effective Time, to all its properties,
books, contracts, commitments and records and, during such period, such party
will (and will cause each of its subsidiaries to) promptly furnish to the other
party all filings made or received by it pursuant to federal or state securities
laws and all other information concerning its business, properties and personnel
as the other party may reasonably request.
The Merger Agreement provides that the terms of a Confidentiality Agreement
between BCP, the Company and certain other parties thereto will apply with
respect to information furnished thereunder or under the Merger Agreement.
No Solicitation of Transactions. Under the terms of the Merger Agreement,
the Company has agreed that it will not directly or indirectly initiate, solicit
or encourage (including by way of furnishing information or assistance), or take
any other action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal
(as defined herein), or enter into or maintain or continue discussions or
negotiate with any person or entity in furtherance of such inquiries or for the
purpose of obtaining an Acquisition Proposal, and the Company will not permit
any of its subsidiaries to take, and will use reasonable efforts to prevent the
officers, directors, employees, advisors, representatives, agents and affiliates
of the Company or any of its subsidiaries (including any investment banker,
attorney or accountant retained by the Company or any of its subsidiaries) (such
officers, directors, employees, representatives, advisors, agents, affiliates,
investment bankers, attorneys and accountants being referred to in the Merger
Agreement, collectively as 'Representatives') from taking, any such action;
provided, however, that nothing contained in such provision of the Merger
Agreement will prohibit the Board of Directors of the Company from any of the
following:
(a) furnishing information to, or entering into discussions or
negotiations with, any person or entity that makes a written, bona fide
Acquisition Proposal that was not solicited after the date of the Merger
Agreement if, and only to the extent that, (i) the Board of Directors of
the Company, after consultation with and based upon the advice of
independent legal counsel (who may be the Company's regularly engaged
independent legal counsel), and after consultation with a nationally
recognized investment banking firm, determines in good faith by majority
vote that (A) such Acquisition Proposal would, if consummated, constitute a
Superior Proposal (as defined herein), and (B) such action is necessary for
the Board of Directors of the Company to comply with its fiduciary duties
to stockholders under applicable law and (ii) prior to taking such action,
the Company (x) provides prior notice to the Parent to the effect that it
is taking such action and (y) receives from such person or entity an
executed confidentiality agreement in reasonably customary form. The
Company will promptly notify the Parent and the Purchaser if it is prepared
to provide access to the properties, books or records of the Company or any
of its Subsidiaries to any person who has made an Acquisition Proposal. The
Company will promptly (and in any event within one business day, and prior
to taking any of the foregoing actions) advise the Parent following the
receipt by it of any Acquisition Proposal or any inquiry or request
relating thereto and the substance thereof (including the identity of the
person making such Acquisition Proposal, a description of all material
terms thereof and a copy of any written proposal), and, if the Board of
Directors in good faith believes it is consistent with its fiduciary
duties, advise the Parent of any developments with respect to such
Acquisition Proposal, inquiry or request promptly upon the occurrence
thereof, including the Company's entering into discussions or negotiations
with respect thereto. The Board of Directors of the Company shall not, in
connection with any of the actions described in this section of the Merger
Agreement, take any action to cause any state takeover statute or other
similar state law to become applicable to the Offer or the Merger or
inapplicable to any Acquisition Proposal (until such time as the Merger
Agreement has been terminated in accordance with its terms). Pursuant to
the Merger Agreement, the Company agrees immediately to cease and cause to
be terminated any activities, discussions or negotiations conducted prior
to the date of the Merger Agreement with any parties other than the Parent
and its affiliates with respect to any of the foregoing;
(b) failing to make or reaffirm, withdrawing, adversely modifying or
taking a public position materially inconsistent with its recommendation
referred to in the Merger Agreement (which may include making any statement
required by Rule 14e-2 under the Exchange Act) if there exists an
Acquisition Proposal and the Board of Directors of the Company, after
consultation with and based upon the advice of independent legal counsel
(who may be the Company's regularly engaged independent counsel), and after
consultation with a nationally recognized investment banking firm,
determines in good faith by majority vote that (1) such
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Acquisition Proposal would, if consummated, constitute a Superior Proposal
and (2) such action is necessary for the Board of Directors of the Company
to comply with its fiduciary duties to stockholders under applicable law;
or
(c) making a 'stop-look-and-listen' communication with respect to an
Acquisition Proposal of the nature contemplated in, and otherwise in
compliance with, Rule 14d-9 under the Exchange Act as a result of receiving
an Acquisition Proposal.
The Merger Agreement defines an 'Acquisition Proposal' as any of the
following (other than the transaction among the Company, the Parent and the
Purchaser contemplated by the Merger Agreement) involving the Company or any of
its subsidiaries: (i) any proposed merger, consolidation, share exchange,
recapitalization, business combination or other similar transaction; (ii) any
proposed sale, lease, exchange, mortgage, pledge, transfer or other disposition
of assets that comprise more than 20% (computed based on the fair market value
of such assets as determined by the Board of Directors of the Company in good
faith) of the assets of the Company and its subsidiaries on a consolidated
basis, in a single transaction or series of transactions; (iii) any proposed
tender offer, exchange offer or other equity investment for more than 20% of the
outstanding shares of capital stock of the Company or the filing of a
registration statement under the Securities Act in connection therewith; or (iv)
any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
The Merger Agreement further provides that, except for the following, the
Board of Directors of the Company will not approve or recommend or permit the
Company to enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, if the Board of Directors of the Company, after
consultation with and based upon the advice of independent legal counsel (who
may be the Company's regularly engaged independent legal counsel), determines in
good faith that it is necessary to do so in order to comply with its fiduciary
duties to stockholders under applicable law, the Board of Directors of the
Company may approve or recommend a Superior Proposal (as defined below) or cause
the Company to enter into an agreement with respect to a Superior Proposal, but
in each case only if (i) the Company provides written notice to the Parent (a
'Notice of Superior Proposal') three business days prior to the time it intends
to cause the Company to enter into such an agreement advising the Parent that
the Board of Directors of the Company has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal, (ii) at the end of such
three business day period, the Company's Board of Directors continues to believe
that such Acquisition Proposal constitutes a Superior Proposal, including taking
into account any adjustment to the terms and conditions of the transaction
contemplated hereby proposed by Parent in response to such Acquisition Proposal,
and (iii) the Company terminates the Merger Agreement in accordance with the
requirements therein prior to taking any of the foregoing actions.
For purposes of the Merger Agreement, a 'Superior Proposal' is defined as
any bona fide Acquisition Proposal not directly or indirectly initiated,
solicited, encouraged or knowingly facilitated by the Company after the date of
the Merger Agreement which the Board of Directors of the Company determines in
good faith judgment (based on the advice of an investment banker of nationally
recognized reputation), taking into account all legal, financial, regulatory and
other aspects of the proposal and the person making the proposal, (i) would, if
consummated, result in a transaction that is more favorable to the Company's
stockholders (in their capacity as stockholders), from a financial point of
view, than the transaction contemplated by this Agreement and (ii) is reasonably
capable of being completed; provided, that for purposes of this definition, the
term Acquisition Proposal shall have the meaning assigned to such term above
except that each reference to 20% in the definition of 'Acquisition Proposal'
shall be deemed to be a reference to 70% and 'Acquisition Proposal' shall only
be deemed to refer to a transaction involving the Company or, with respect to
assets (including the shares of any subsidiary of the Company), the assets of
the Company and its subsidiaries taken as a whole (and not any of its
subsidiaries alone).
Directors' and Officers' Indemnification and Insurance. The Company will,
and from and after the Effective Time, the Surviving Company will indemnify,
defend and hold harmless each person who is at the time of the Merger Agreement,
or has been at any time prior to the date of the Merger Agreement or who becomes
prior to the Effective Time, an officer, director, employee or agent of the
Company or any of its subsidiaries (the 'Indemnified Parties') against all
losses, claims, damages, costs, expenses (including reasonable attorneys' fees
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and expenses), liabilities or judgments or amounts of or in connection with any
threatened or actual claim, action, suit, proceeding or investigation based on
or arising out of the fact that such person is or was (i) serving in such
person's capacity as a director, officer, employee or agent of the Company or
any of its subsidiaries, or a person serving at the request of the Company or
any of its subsidiaries as a trustee of a trust or (ii) serving in such person's
capacity as a trustee or member of an administrative committee, or in any other
Company fiduciary capacity with respect to any employee benefit or stock plan
maintained or sponsored by the Company or any of its subsidiaries, whether
pertaining to any matter existing or occurring at or prior to the Effective Time
or any acts or omissions occurring or existing at or prior to the Effective Time
and whether asserted or claimed prior to, or at or after, the Effective Time
('Indemnified Liabilities'), including all Indemnified Liabilities based on, or
arising out of, or pertaining to the Merger Agreement or the transaction
contemplated thereby, in each case to the fullest extent a corporation is
permitted under the DGCL to indemnify such persons (and the Company and the
Surviving Corporation, as the case may be, will pay expenses in advance of the
final disposition of any such action or proceeding to each Indemnified Party to
the fullest extent permitted by law, subject to delivery of the undertaking
described below). Without limiting the foregoing, in the event any such claim,
action, suit, proceeding or investigation is brought against any Indemnified
Party (whether arising before or after the Effective Time), (x) such Indemnified
Party may retain the Company's regularly engaged independent legal counsel or,
in the event that a conflict of interest precludes using such counsel in the
reasonable judgment of the Indemnified Party, counsel satisfactory to it and
reasonably satisfactory to the Company (and reasonably satisfactory to the
Surviving Corporation after the Effective Time) and the Company (or after the
Effective Time, the Surviving Corporation) will pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received; and (y) the Company (or after the Effective Time, the
Surviving Corporation) will use all reasonable best efforts to assist in the
vigorous defense of any such matter, provided that neither the Company nor the
Surviving Corporation will be liable for any settlement effected without its
prior written consent which consent will not unreasonably be withheld. Any
Indemnified Party, upon learning of any such claim, action, suit, proceeding or
investigation, will notify the Company (or after the Effective Time, the
Surviving Corporation) promptly (but the failure so to notify will not relieve a
party from any liability which it may have under this provision of the Merger
Agreement except to the extent such failure materially prejudices such party's
position with respect to such claims), and will deliver to the Company (or after
the Effective Time, the Surviving Corporation) the undertaking contemplated by
Section 145(e) of the DGCL. The Indemnified Parties as a group may retain only
one law firm (and one local counsel) to represent them with respect to each such
matter unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnified Parties in which case such additional counsel reasonably acceptable
to the Company as may be required (as will be reasonably determined by the
Indemnified Parties and the Company or the Surviving Corporation, as the case
may be) may be retained by the Indemnified Parties at the cost and expense of
the Company (or Surviving Corporation). Furthermore, the provisions with respect
to indemnification set forth in the certificate of incorporation of the
Surviving Corporation will not be amended at or following the Effective Time if
such amendment would materially and adversely affect the rights thereunder of
individuals who at any time prior to the Effective Time were directors,
officers, employees or agents of the Company in respect of actions or omissions
occurring at or prior to the Effective Time.
The Merger Agreement further provides that the Surviving Corporation will
cause to be maintained in effect the policies of directors' and officers'
liability insurance maintained by the Company and its subsidiaries providing
coverage for a period of six years after the Effective Time with respect to
matters arising before and acts or omissions occurring or existing at or prior
to the Effective Time, including the transaction contemplated by the Merger
Agreement; provided that in no event will the Surviving Corporation be required
to expend an amount prorated over the number of years covered in excess of 150%
of the annual premiums paid by the Company for such insurance at the time of the
Merger Agreement; and provided further, that if the premiums of such insurance
coverage exceed such amount, the Surviving Corporation will be obligated to
obtain a policy with the greatest coverage available for a cost not exceeding
such amount.
The foregoing provisions under the Merger Agreement are intended to be for
the benefit of, and will be enforceable by, each Indemnified Party, his heirs
and his personal representatives and will be binding on all successors and
assigns of the Parent, the Purchaser, the Company and the Surviving Corporation.
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Filings. Other Actions. The Merger Agreement provides that, upon the terms
and subject to the conditions thereof, each of the Company, Parent and the
Purchaser will (i) make promptly its respective filings, and thereafter make any
other required submissions, under the HSR Act, the Securities Act and the
Exchange Act, with respect to the Offer and the Merger and the transaction
contemplated in the Merger Agreement (together, the 'Transactions') and (ii) use
all reasonable 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 to
satisfy the conditions to the Offer and the Merger and to consummate and make
effective the Transactions. The Merger Agreement further provides that in case
at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of the Merger Agreement, the proper officers
and directors of each party to the Merger Agreement will use all reasonable
efforts to take all such action.
Pursuant to the Merger Agreement, the Parent agreed that it will, and it
will cause each of its affiliates to, use all reasonable efforts to obtain any
government clearances required for completion of the Offer and the Merger
(including through compliance with the HSR Act), to respond to any government
requests for information, and to contest and resist any action, including any
legislative, administrative or judicial action, and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order (whether
temporary, preliminary or permanent) (an 'Order') that restricts, prevents or
prohibits the consummation of the Merger, including by vigorously pursuing all
available avenues of administrative and judicial appeal. The Parent also agreed
to take, and to use all reasonable efforts to cause each of its affiliates to
take, any and all of the following actions to the extent necessary to obtain the
approval of any governmental entity with jurisdiction over the enforcement of
any applicable laws regarding the Offer and the Merger: entering into
negotiations; providing information; substantially complying with any second
request for information pursuant to the HSR Act; entering into and performing
agreements or submitting to judicial or administrative orders and selling or
otherwise disposing of, or holding separate (through the establishment of a
trust or otherwise) particular assets or categories of assets, or businesses of
the Parent, the Company or any of their affiliates; provided, however, that
notwithstanding the foregoing and anything else contained in the Merger
Agreement, neither the Parent nor any of its affiliates is required to take any
such action with respect to any assets or product lines that would have a
Material Adverse Effect on the Surviving Corporation and BarTech, taken as a
whole. The Merger Agreement also provides that the parties thereto will consult
and cooperate with one another, and consider in good faith the views of one
another, in connection with any analyses, appearances, presentations, memoranda,
briefs, arguments, opinions and proposals made or submitted by or in behalf of
any party thereto in connection with proceedings under or relating to the HSR
Act or any other federal, state or foreign antitrust law, or fair trade law.
Financing. The Merger Agreement provides that the Parent will take all
actions and do all things necessary, proper or advisable to obtain, prior to the
Expiration Date, commitment letters, reasonably satisfactory to the Company, to
provide all the financing required by the Surviving Corporation to repurchase
any of the Mortgage Notes (as defined herein) that may be tendered in connection
with the Debt Tender Offer (as defined herein) and to refinance any indebtedness
existing under the Existing Credit Agreement (as defined herein) or to waive any
event of default under such Existing Credit Agreement. The Merger Agreement
further provides that prior to the Control Date, the Company will consult with
the Parent with respect to any action taken by the Company in connection with
the Debt Tender Offer, and the Company will not file or otherwise publicly
release any documentation, nor make any public announcement, with respect
thereto without the consent of the Parent as to the form and substance thereof,
such consent not to be unreasonably withheld. See Section 12.
Refinancing. The Merger Agreement provides that, in connection with the
financing necessary to pay for Shares in the Offer and the Merger, the Parent
will not permit either the Purchaser or the Surviving Corporation to assume or
incur any indebtedness for borrowed money or guarantee any such indebtedness or
issue or sell any debt securities or warrants or rights to acquire any debt
securities of such party or guarantee any debt securities of others or create
any mortgages, liens, security interests or other encumbrances on the property
of the Purchaser or the Surviving Corporation in connection with any
indebtedness thereof, or enter into any 'keep well' or other agreement or
arrangement to maintain the financial condition of another person; provided,
however, that such restriction shall not apply to any financing that is both (i)
completed at the earliest of (A) three months after the Effective Time, (B) six
months after the Control Date provided that the Effective Time shall theretofore
have occurred or (C) the combination of the Parent or the Surviving Corporation
and BarTech or one of its Subsidiaries under a common parent or by merger and
(ii) in respect of which the Board of Directors of the
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Surviving Corporation, the Administrative Committee and the Trustee receive a
solvency opinion from a reputable appraiser or investment bank; and provided,
further, that such restriction shall not thereafter apply to any subsequent
refinancing.
Conduct of Business by Company Pending the Merger. Pursuant to the Merger
Agreement, the Company has covenanted and agreed that, during the period from
the date of the Merger Agreement and continuing until the Control Date, the
Company agrees as to the Company and each of its subsidiaries, in addition to
the restrictions upon solicitation of transactions discussed above, that (except
as expressly contemplated or permitted by the Merger Agreement, or the extent
that the Parent otherwise consents in advance in writing):
(a) each of the Company and its subsidiaries will carry on its
businesses in the usual, regular and ordinary course in substantially the
same manner as conducted before the Merger Agreement except that the
Company may continue its efforts to sell the assets of the Stainless and
Specialty Business of the Company, and the Company and each of its
subsidiaries will endeavor 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;
(b) the Company will not, nor will it permit any of its subsidiaries
to: (i) declare or pay any dividends on or make other distributions in
respect of any of its capital stock, other than dividends paid to the
Company; (ii) split, combine or reclassify any of its capital stock or
issue, authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock; or (iii)
repurchase, redeem or otherwise acquire, or permit any subsidiary to
purchase or otherwise acquire, any shares of its capital stock or such
other securities, except as required by the terms of its securities
outstanding or any employee benefit plan in effect on the date of the
Merger Agreement;
(c) the Company will not, nor will it permit any of its subsidiaries
to, (i) issue or grant any options, warrants or rights to purchase Shares
or other equity securities of the Company or its subsidiaries, (ii) amend
the terms of or reprice any Option or amend the terms of the 1995 Stock
Option Plan, or (iii) issue, deliver or sell, or authorize or propose to
issue, deliver or sell, any shares of its capital stock of any class or
series or other equity securities, any debt securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
securities, other than the issuance of Shares upon the exercise of Options
that are outstanding on the date the Merger Agreement;
(d) the Company will not, and will not permit any of its subsidiaries
to, amend or propose to amend its Restated Certificate of Incorporation or
By-laws or equivalent organizational documents;
(f) except as set forth in the disclosure schedules attached to the
Merger Agreement and other than the transaction contemplated therein, the
Company will not, nor will it permit any of its subsidiaries to, make any
acquisition, by means of merger, consolidation or otherwise, or any
disposition (including sale/leaseback transactions or similar arrangements)
of assets or securities, other than acquisitions of supplies and raw
materials and sales of inventory and worn-out or obsolete equipment and
other transactions in the ordinary course of business;
(g) the Company will promptly provide the Parent (or its counsel) with
copies of all filings made by the Company with (i) the SEC and (ii) other
state or federal court, administrative agency or commission or other
governmental authority or instrumentality in connection with the Merger
Agreement and the transaction contemplated thereby in the case of this
clause (ii);
(h) other than pursuant to the Merger Agreement, the Company will not
authorize, recommend, propose or announce an intention to adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or reorganization of the Company or any of
its subsidiaries;
(i) except as expressly permitted by the terms of the Merger
Agreement, the Company will not take or agree or commit to take, nor will
it knowingly permit any of its subsidiaries to take or agree or commit to
take, any action that would reasonably be expected to result in any of the
Company's representations or
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warranties thereunder being untrue in any material respect or in any of the
Company's covenants hereunder or any of the conditions to the Offer and the
Merger not being satisfied;
(j) the Company and its subsidiaries will not (without the prior
written consent of Parent): (i) grant any material increases in the
compensation of any of its directors or officers or in the payment of any
severance due to such directors or officers; (ii) pay or agree to pay any
pension, retirement allowance or other benefit not required or contemplated
to be paid prior to the Effective Time by any of the Company Plans as in
effect on the date of the Merger Agreement to any such director or officer,
whether past or present; (iii) enter into any new, or materially amend any
existing, employment or severance or termination agreement with any such
director or officer; or (iv) except as may be required to comply with
applicable law, become obligated under any new plan which if in effect on
the date hereof would be a Company Plan, or amend or modify any Company
Plan;
(k) except as set forth on the disclosure schedules attached to the
Merger Agreement and other than ordinary course borrowing pursuant to lines
of credit or facilities existing on the date of the Merger Agreement, the
Company will not, nor will the Company permit any of its subsidiaries to
assume or incur any indebtedness for borrowed money or guarantee any such
indebtedness or guarantee any debt securities of others or, except for
ordinary course leases of computer equipment, enter into any lease (whether
such lease is an operating or capital lease), or create any mortgages,
liens, security interests or other encumbrances on the property of the
Company or any of its subsidiaries in connection with any indebtedness
thereof;
(l) the Company and its subsidiaries will not take any action, other
than as required by the Commission, generally accepted accounting
principles or applicable law, with respect to accounting policies,
procedures and practices.
(m) the Company will not, and will not permit any of its subsidiaries
to: (i) except for the ESOP Amendment (as defined herein), enter into or
amend any contract, agreement, commitment or arrangement other than in the
ordinary course of business consistent with past practice; (ii) except as
set forth in the disclosure schedules attached to the Merger Agreement,
authorize or make any single capital expenditure (or series of related
capital expenditures) which is in excess of $5,000,000 or, in the case of
the Company's electric arc furnace project, $10,000,000; (iii) except as
set forth in the disclosure schedules attached to the Merger Agreement,
make or change any tax election, file any amended tax return, or settle or
compromise any material federal, state, local or foreign tax liability;
(iv) settle or compromise any pending suit, action or claim for an amount
in excess of $300,000 or which relates to the transaction contemplated
hereby; or (v) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of
liabilities in the ordinary course of business and consistent with past
practice; and
(n) the Company will cooperate with the Parent (i) in identifying,
making and obtaining the filings, consents, approvals, authorizations and
permits referred to in the Merger Agreement and (ii) as reasonably
requested in any syndication of the financing contemplated by the financing
commitments for the Offer and the Merger.
Employee Matters. The Merger Agreement provides that until at least the
second anniversary of the Effective Time, (i) the Parent will maintain or cause
to be maintained employee benefits and programs for retirees (other than former
members of the USWA), directors, officers and salaried employees of the Company
and each of its subsidiaries that are no less favorable in the aggregate than
those exiting on the date of execution of the Merger Agreement and (ii) the
Parent will cause the Surviving Corporation to assume the obligations of the
Company under the following: (x) the Change of Control Agreements previously
entered into between the Company and certain of its employees (as defined in the
Merger Agreement and set forth in a schedule attached thereto), with the Parent,
the Purchaser and the Company agreeing that for purposes of such agreements, at
not later than the consummation of the Offer (1) a Change of Control (as defined
in such agreements) shall have occurred, (2) Good Reason (as defined in such
agreements) shall have occurred for a period of six months following the
consummation of the Offer and (3) such agreements will be fully funded in
accordance with their terms, (y) the Severance Agreements entered into between
the Company and certain of its employees (as defined in the Merger Agreement and
set forth in a schedule attached thereto) and (z) the retention policies of the
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Company (as described in the schedules to the Merger Agreement) (see Section 12
for a description of such Change of Control Agreements, Severance Agreements and
retention policies.) For purposes of eligibility to participate in and vesting
in all benefits provided to retirees, directors, officers and salaried
employees, the retirees, directors, officers and salaried employees of the
Company and its subsidiaries will be credited with their years of service with
prior employers to the same extent service with prior employers is taken into
account under plans of the Company. The Merger Agreement further provides that
the foregoing provisions regarding employee matters are intended to be for the
benefit of, and will be enforceable by, each officer and salaried employee, in
each of their capacities as a third party beneficiary under the Merger
Agreement, and will be binding on all successors and assigns of the Parent, the
Purchaser, the Company and the Surviving Corporation.
Amendment of the ESOP. The Merger Agreement provides that following the
consummation of the Offer, the Company will promptly adopt, subject to the
approval of the USWA, in accordance with the ESOP's amendment provisions, an
amendment to the ESOP to provide that the ESOP (i) will be converted to a
profit-sharing plan that is not required to invest in or distribute employer
securities and (ii) will, subject to the requirements of the Code, permit
in-service distributions, in connection with the transactions contemplated by
the Merger Agreement, in cash or direct rollovers to eligible retirement plans
(as defined in the Code) (the 'ESOP Amendment').
Representation and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including,
without limitation, representations and warranties by the Company as to the
Company's organization, capitalization, authorization of the Merger Agreement,
receipt of consents and approvals and lack of violations relating to the
consummation of the Offer and the Merger, compliance with legal and contractual
obligations, real property (both owned and leased), intellectual property,
compliance with SEC filing requirements, preparation of financial statements,
absence of litigation, veracity of information supplied, taxes, employee
benefits plans and labor matters, absence of certain changes or events, receipt
of fairness opinion from an investment bank and environmental matters.
Pursuant to the Merger Agreement, the Company has further represented that
each of the Administrative Committee (the 'Administrative Committee') of the
ESOP and the Trustee (the 'Trustee') of the ESOP Trust (the 'ESOP Trust') has
advised the Company that, as of the date of the Merger Agreement, it had
conducted such review of the terms of the Offer and the Merger as it deemed
appropriate and had determined that, if the Offer were consummated on the date
of the Merger Agreement, and subject to their satisfaction with the information
to be set forth in documents relating to the Offer, the Administrative Committee
would follow the proper directions of the ESOP participants, and the Trustee
would follow the proper directions of the Administrative Committee, as the case
may be, to tender the Shares owned by the ESOP Trust.
In addition, the Merger Agreement contains representations and warranties
by the Parent and the Purchaser concerning their organization, authorization of
the Merger Agreement, receipt of consents and approvals and lack of violations
relating to the consummation of the Offer and the Merger, veracity of
information supplied, interim operations of the Purchaser, and financing
commitments.
Conditions of the Merger. Under the Merger Agreement, the respective
obligations of the Parent, the Purchaser and the Company to effect the Merger
will be subject to the satisfaction prior to the closing date of the following
conditions: (a) unless the Merger is consummated as a Short Form Merger, the
Merger Agreement will have been approved by the affirmative vote of the
stockholders of the Company by the requisite vote in accordance with applicable
law; (b) any applicable waiting period (and any extensions) applicable to the
Merger under the HSR Act will have been terminated or will have expired; (c) no
order, injunction or other legal restraint will have been issued by any court
prohibiting or preventing the consummation of the Merger (provided, that prior
to invoking this condition, each party will use all reasonable efforts to have
such order, injunction or other legal restraint vacated); (d) no statute, rule,
order, or regulation will have been enacted, entered, enforced, or promulgated
by any governmental entity which prohibits or restricts the consummation of the
Merger or makes such consummation illegal; and (e) the Purchaser will have
accepted for payment and have paid for the Shares duly tendered in the Offer
(provided, if the Purchaser fails to accept for payment and pay for Shares
pursuant to the Offer in violation of the Merger Agreement or the terms and
conditions of the Offer, this condition will be deemed to have been satisfied).
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Termination, Fees and Expenses. The Merger Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after approval of the Merger Agreement by the stockholders of the
Company or consummation of the offer, as follows:
(a) by the mutual written consent of the Boards of Directors of the
Parent, the Purchaser and the Company, respectively (but only by action of
the Continuing Directors (as defined in the Merger Agreement) after the
purchase of Shares pursuant to the Offer);
(b) by the Parent or the Company if, without any material breach by
such terminating party of its obligations under the Merger Agreement
causing or resulting in such delay, the purchase of Shares pursuant to the
Offer will not have occurred on or before October 30, 1998, provided that
such date may be extended at the option of Parent for 45 days, but only if
the Parent is then actively negotiating with the Antitrust Division (as
defined in Section 16) or the FTC (as defined in Section 16) regarding
satisfaction of the HSR Condition and/or the condition set forth in
paragraph A of Section 15 and certifies to the Company that, to its
knowledge, all other conditions to the Offer are satisfied or capable of
prompt satisfaction as of the date of such satisfaction as of the date of
such verification (provided further such certification will be without
prejudice to the requirement that such condition remain satisfied);
(c) by Parent or the Company, if the Offer expires or is terminated or
withdrawn pursuant to its terms without any Shares being purchased unless
Parent's termination of, or Purchaser's failure to accept for payment or
pay for any Shares tendered pursuant to, the Offer is in violation of the
terms of the Offer or the Offer or the Merger Agreement;
(d) by Parent or the Company, if a governmental entity of competent
jurisdiction will have (i) issued an order or taken any other action
permanently restraining, enjoining or otherwise prohibiting the purchase of
the Shares pursuant to the Offer or the Merger and such order or other
action shall have been final and nonappealable or (ii) failed to issue an
order or to take any other action which is necessary to fulfill the
conditions to the Offer set forth in Section 15 and the conditions to the
Merger, as applicable, and such denial of a request to issue such order or
to take such other action shall have become final and nonappealable
provided that the party seeking to terminate the Merger Agreement will have
complied with its obligations thereunder to attempt to remove or lift, or
to obtain, as applicable, such order;
(e) by the Company, if the Offer has not been timely commenced in
accordance with the terms of the Merger Agreement, unless the failure to
commence the Offer is due to the failure of the Company to perform in any
material respect any of its obligations under the Merger Agreement then
required to be performed under the Merger Agreement;
(f) by the Parent, if the Board of Directors of the Company has (i)
withdrawn, modified or changed its approval or recommendation of the Merger
Agreement or any of the transactions contemplated herein in a manner
adverse to the Parent, (ii) approved or recommended any Acquisition
Proposal other than by the Parent or Purchaser, (iii) failed to include in
the Proxy Statement such recommendation referred to in clause (i), or (iv)
resolved to do any of the foregoing;
(g) by the Company prior to consummation of the Offer, if (i) the
Board of Directors of the Company has determined that an Acquisition
Proposal constitutes a Superior Proposal, (ii) the Company has delivered to
the Purchaser a written notice of the determination by the Company's Board
of Directors to terminate the Merger Agreement and (iii) simultaneously
with such termination the Company has entered into a definitive
acquisition, merger or similar agreement to effect such Acquisition
Proposal and has made payment of the full fee and expense reimbursement
required by the Merger Agreement; or
(h) prior to the consummation of the Offer, by the Company or the
Parent (provided that the terminating party is not then in material breach
of any representation, warranty, covenant or other agreement contained in
the Merger Agreement) if there has been a material breach of any of the
covenants or agreements or any of the representations or warranties set
forth in the Merger Agreement on the part of the other party, which breach
is not cured within ten business days following written notice given by the
terminating party to the party committing such breach, or which breach, by
its nature, cannot be cured prior to the date on which the Offer expires.
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The Merger Agreement provides further that: (1) if the Parent terminates
the Merger Agreement pursuant to clause (f) above; (2) if the Company terminates
the Merger Agreement pursuant to clause (g) above or (3) if (A) the Parent or
the Company terminates the Merger Agreement pursuant to clause (b) or (c) above
due to the failure to meet the Minimum Condition or the ESOP Condition; or the
Parent terminates the Merger Agreement pursuant to clause (h) above and (B) at
any time prior to such termination an Acquisition Proposal (except the reference
to 20% in such definition for the purposes of this section in the Merger
Agreement is 50%) shall have been publicly disclosed, in the case of a
termination pursuant to clauses (b) or (c) above, or communicated to the Company
in the case of a termination pursuant to clause (h) above, and (C) within 12
months after such termination the Company enters into an agreement with respect
to, or consummates, a transaction contemplated by such Acquisition Proposal,
then in each case the Company will pay to Blackstone Management Partners L.P.
('BMP'), simultaneously or shortly thereafter (depending upon which grounds for
termination apply), a fee, in cash of $4,250,000 (and Blackstone has agreed to
share such fee on a pro rata basis with Veritas based upon the respective
amounts of their equity commitments to the Parent pursuant to the Investors'
Commitments); provided, however, that the Company will not in any event be
obligated to pay more than one such fee with respect to all such terminations
and transactions. Upon the payment of any fee pursuant to this paragraph, the
Merger Agreement provides that the party paying such fee will be fully released
and discharged from any liability or obligation resulting under the Merger
Agreement (however, the obligations under the Confidentiality Agreement will
survive such payment).
The Merger Agreement provides that, except as otherwise provided therein,
the Surviving Corporation will be responsible for any transfer, sales or similar
taxes resulting from the Merger. Except as otherwise provided in the Merger
Agreement, whether or not the Offer or Merger is consummated, all costs and
expenses incurred in connection with the Merger Agreement are to be paid by the
party incurring such expense.
Amendment, Extensions and Waiver. Pursuant to the Merger Agreement and
subject to applicable law, the Merger Agreement may be amended, modified or
supplemented only by written agreement of the Parent, the Purchaser and the
Company at any time prior to the Effective Time with respect to the terms
contained therein, provided, however, that, after the consummation of the Offer,
no term or condition contained in the Merger Agreement will be amended or
modified if such change will have an adverse effect on the holders of the Shares
(including, by reducing the amount of or changing the form of the Merger
Consideration).
Subject to the provisions in the Merger Agreement, at any time prior to the
Effective Time, the parties to the Merger Agreement (by action taken or
authorized by their respective Boards of Directors) may, to the extent legally
allowed: (i) extend the time for the performance of any obligations or other
acts of the other parties, (ii) waive any inaccuracies in the representations
and warranties in the Merger Agreement or in any document delivered pursuant
thereto, and (iii) waive compliance with any of the agreements or conditions
contained in the Merger Agreement, provided, however, that, after consummation
of the Offer, no term or condition contained in the Merger Agreement will be
amended, modified or waived if such change will materially and adversely affect
the holders of the Shares. Any agreement by any party of the Merger Agreement to
an extension or waiver will be valid only if set forth in a written instrument
signed by such party, and the failure of any party to assert any of its rights
under the Merger Agreement will not constitute a waiver of such rights.
12. PURPOSE OF THE OFFER; THE MERGER; PLANS FOR THE COMPANY.
Purpose. 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.
Vote Required to Approve the Merger. The Board of Directors of the Company
has approved the Merger Agreement in accordance with the DGCL. If required for
approval of the Merger, the Company has agreed, subject to the satisfaction of
the conditions to the Merger set forth in the Merger Agreement, in accordance
with and subject to the DGCL, to duly convene a meeting of its stockholders as
promptly as practicable following the purchase of Shares pursuant to the Offer
for the purpose of considering and taking action on the Merger Agreement (or to
take such action by written consent in lieu of a stockholders meeting if
permitted by applicable law). If stockholder approval is required, the Merger
Agreement must generally be approved by the vote of the
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holders of a majority of the outstanding Shares entitled to vote thereon. In
addition, the holder of the outstanding share of Special Preferred Stock
currently has the right to vote as a separate class on any merger proposal
presented to the stockholders of the Company. However, if the ESOP Condition is
satisfied, the Special Preferred Stock thereafter will have no voting rights,
and if the Minimum Condition also is satisfied, the Purchaser will have the
power to approve the Merger Agreement without the affirmative vote of any other
stockholder of the Company. The Offer is conditioned on both the Minimum
Condition and the ESOP Condition being satisfied.
Appraisal Rights. Stockholders do not have appraisal rights as a result of
the Offer. However, if the Merger is consummated, holders of Shares at the time
of the Merger who do not vote in favor of the Merger and comply with all
statutory requirements will have the right under the DGCL to demand appraisal
of, and receive payment in cash of the fair value of, their Shares outstanding
immediately prior to the effective date of the Merger in accordance with Section
262 of the DGCL.
Under the DGCL, stockholders who properly demand appraisal and otherwise
comply with the applicable statutory procedures will be entitled to receive a
judicial determination of the fair value of their Shares (exclusive of any
element of value arising from the accomplishment or expectation of the Merger)
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 equal to or higher or lower than the price per Share paid pursuant to
the Offer or the consideration per Share to be paid in the Merger.
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 cashout merger is the right to appraisal
described above. However, a damages remedy or injunctive relief may be available
if a merger is found to be the product of unfairness, including fraud,
misrepresentation or other misconduct.
THE FOREGOING SUMMARY OF THE RIGHTS OF 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 PRESENTATION AND EXERCISE OF
APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE
DELAWARE LAW.
The foregoing description of certain provisions 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
which is applicable to certain 'going private' transactions and which 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 per Share price 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 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
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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. If the Purchaser obtains control of the Company
pursuant to the Offer, the Parent expects to conduct a detailed review of the
Company and its businesses, assets, corporate structure, capitalization,
operations, properties, policies, management and personnel to consider changes
that may be desirable in light of the circumstances that then exist. As
described below, certain specific changes currently are expected to be made,
including changes to the Company's corporate structure, capitalization,
management and personnel, and other changes also may be made to the Company's
businesses, assets, operations, properties and policies.
Board of Directors and Executive Officers. Pursuant to the terms of the
Merger Agreement, promptly following consummation of the Offer, the Parent, the
Purchaser and the Company will use all reasonable efforts to cause persons
identified by the Parent to comprise a majority of the Board of Directors of the
Company. See Section 11. Such efforts are expected to include seeking the
resignations of a sufficient number of current directors of the Company to make
available such director positions. In addition, the Parent has indicated to the
Company a desire to pursue discussions with certain of the executive officers of
the Company regarding their positions with the Company following consummation of
the Offer. The nature of such positions, the amounts to be paid in connection
therewith and the other terms of any such person's arrangements with the Company
following consummation of the Offer will be determined by negotiation between
the Parent and each such person, and as of the date hereof, no agreements have
been reached with respect to such matters.
Mortgage Notes. Consummation of the Offer will result in a 'change of
control' under the Indenture, dated as of December 15, 1993, between the Company
and the Bankers Trust Company, governing the Mortgage Notes (the 'Existing
Indenture'). Upon the occurrence of a change of control the Company is required
to offer to purchase the Mortgage Notes from the holders thereof at a price
equal to 101% of the principal amount thereof (the 'Debt Tender Offer'). The
Mortgage Notes also may be redeemed, at the Company's option, commencing on
December 15, 1998, at specified premiums. As described below, it is expected
that any Mortgage Notes remaining outstanding following the Debt Tender Offer
will need to be refinanced in any event in order to refinance the Term Loan
Facility and/or pursue the BarTech Transaction.
Pursuant to the Bank Commitment Letter, Chase and DLJ Bridge Finance have
committed to provide the Company with 65% and 35%, respectively, of a bridge
loan facility in an aggregate principal amount of up to $202 million (the 'New
Bridge Facility') to provide financing for the purchase of any Mortgage Notes
validly tendered pursuant to the Debt Tender Offer, subject to conditions
substantially similar to those set forth in Section 9 with respect to the Term
Loan Facility. Pursuant to the terms of the Bank Commitment Letter, the Parent
is required to use commercially reasonable efforts to secure the availability of
at least $20 million under the Existing Credit Agreement to finance the Debt
Tender Offer. It is anticipated that, if such availability is obtained, the
Company will use funds available under the Existing Credit Agreement (or, if a
replacement facility is obtained, under such replacement facility) to purchase
Mortgage Notes tendered in the Debt Tender Offer if no more than $20 million of
Mortgage Notes are tendered, and otherwise will use the New Bridge Facility to
purchase all Mortgage Notes tendered in the Debt Tender Offer. Chase, DLJ Bridge
Finance and any additional lenders to which all or a portion of the New Bridge
Facility may be syndicated or otherwise assigned are referred to herein as the
'Bridge Lenders.' The Company also may use proceeds of the issuance of its New
High-Yield Securities (as defined herein) to finance the Debt Tender Offer, as
discussed below.
BarTech Transaction. The Parent anticipates that, following consummation
of the Merger, the Company and BarTech, a Delaware corporation controlled by
Blackstone and Veritas, will engage in a business combination transaction (the
'BarTech Transaction' and, the resulting combined entity, 'NuBar'). BarTech
produces and markets hot rolled engineered and cold finished steel bar products
direct to the automotive, machinery, industrial equipment and tool industries,
and to cold finished bar producers, independent forgers and steel service
centers.
In connection with their investments in BarTech, Blackstone and Veritas are
parties to an Amended and Restated Stockholders Agreement with BarTech providing
for, among other things, customary restrictions on the transfer of stock,
customary 'tag-along' and 'drag-along' rights giving each investor the right to
participate in, and require participation in, certain sales of BarTech stock,
customary registration rights and certain corporate governance matters (the
'BarTech Stockholders' Agreement').
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It is anticipated that Donaldson, Lufkin & Jenrette Securities Corporation
('DLJ Securities') will act as a financial advisor to Blackstone and/or the
Company, and that Blackstone will act as a financial advisor to the Company
and/or BarTech, in connection with the BarTech Transaction and that each will
receive customary fees in connection therewith.
Settlement Agreement, Master Collective Bargaining Agreement and CBA
Ratification Condition. The Company currently is party to a collective
bargaining agreement with the USWA which governs employment matters relating to
the Company's hourly workers at all of the Company's operating facilities and
expires on November 1, 1999. BarTech also currently is party to a collective
bargaining agreement with the USWA which governs employment matters relating to
BarTech's hourly workers at certain of BarTech's operating facilities, and two
of BarTech's subsidiaries also currently are parties to separate collective
bargaining agreements with the USWA governing employment matters relating to
such subsidiaries' hourly workers at certain of such subsidiaries' operating
facilities.
In connection with the transactions described herein, the Parent and
BarTech expect to enter into a Settlement Agreement (the 'Settlement Agreement')
with the USWA promptly following commencement of the Offer which includes as an
exhibit a single Master Collective Bargaining Agreement which would cover all
USWA-represented facilities of the Company and BarTech, would replace each of
the current collective bargaining agreements described above and would expire on
October 31, 2003 (the 'Master Collective Bargaining Agreement'). The Master
Collective Bargaining Agreement would 'harmonize' wages and benefits (except at
one of BarTech's Canadian subsidiaries) over the term of the agreement and would
provide for workforce flexibility, union 'partnership' provisions including
management neutrality, employment security for covered employees, a
significantly reduced number of uniform job classifications, the appointment of
a director of the Company agreed to by the Parent and the USWA and certain
capital expenditures with respect to existing and new facilities of the Company.
In addition, the Settlement Agreement will provide for the Company's facilities
and certain of BarTech's facilities a voluntary 'Early Retirement Buyout' and
'Voluntary Severance Plan' which have been agreed to for the purpose of
permanently reducing the hourly workforce at such facilities by a net reduction
of approximately 1,400 hourly employees.
Promptly following commencement of the Offer, it is expected that the USWA
will seek ratification of the Settlement Agreement (including the Master
Collective Bargaining Agreement) from the members of the USWA employed at the
Company and BarTech (the 'Members'). The affirmative vote of at least a majority
of the Members voting thereon will be required for ratification, and such
ratification is a condition to the Offer. If ratified, the Settlement Agreement
and Master Collective Bargaining Agreement would become effective, with respect
to the Company, upon consummation of the Offer, and with respect to BarTech,
upon the earlier of consummation of the BarTech Transaction or five months after
consummation of the Merger.
Pursuant to the Master Collective Bargaining Agreement, the employees
covered by such agreement are expected to be offered the opportunity to purchase
up to $15 million worth of common stock of NuBar no later than six months after
consummation of the BarTech Transaction (if consummated) at a price per share
equal to the effective price per share paid by the Investors for shares they
acquire in the BarTech Transaction. Pursuant to the Master Collective Bargaining
Agreement, such shares of common stock of NuBar would be subject to customary
restrictions on transfer and receive customary registration rights in connection
with such sale.
Refinancing of Term Loan Facility, New Bridge Facility, Remaining Mortgage
Notes and BarTech Indebtedness. Following consummation of the Offer, it is
anticipated that the Company will engage in a public offering or private
placement of up to approximately $334.5 million aggregate principal amount of
debt securities to refinance any remaining Mortgage Notes and indebtedness
incurred in connection with the Offer and the Merger, to facilitate the BarTech
Transaction and to provide funds for the purpose of making capital expenditures.
Pursuant to the Bank Commitment Letter, the Parent is required, as soon as
practicable following consummation of the Offer, to engage one or more
investment banks to publicly sell or privately place not less than $334.5
million aggregate principal amount of debt securities of the Company acceptable
to the Bridge Lenders (the 'New High-Yield Securities'), the proceeds of which
will be used, if such sale or placement is completed prior to consummation of
the Debt Tender Offer, to provide funds (i) first, to finance the Debt Tender
Offer and to refinance any outstanding amounts under the Term Loan Facility
(with amounts utilized to finance
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the Debt Tender Offer also reducing the unutilized commitments under the New
Bridge Facility), (ii) second, to refinance the Mortgage Notes (in an amount
equal to the aggregate principal amount of such Notes not tendered in connection
with the Debt Tender Offer) and (iii) third, for capital expenditures and other
general corporate purposes of the Company. If such sale or placement is
completed after the making of loans under the New Bridge Facility to finance the
Debt Tender Offer, then the proceeds of such sale or placement will be used (i)
first, to refinance loans under the New Bridge Facility and, if applicable, to
refinance any outstanding amounts under the Term Loan Facility (and thereby
reduce the unutilized commitments under the New Bridge Facility), (ii) second,
to refinance the Mortgage Notes (in an amount equal to the aggregate principal
amount of such Notes not tendered in connection with the Debt Tender Offer) and
(iii) third, for capital expenditures and other general corporate purposes of
the Company. Chase Securities and DLJ Securities have been retained by the
Parent as underwriters in connection with such sale of New High-Yield Securities
and will receive customary fees in connection therewith.
Pursuant to the Bank Commitment Letter, the Parent also is required, at any
time that there are loans outstanding under the New Bridge Facility in excess of
$35 million, upon notice from the Bridge Lenders to cause the Company to issue
New High-Yield Securities (secured if required by the Bridge Lenders) for gross
proceeds sufficient to refinance all of the outstanding loans under the Bridge
Facility and the Mortgage Notes on terms specified by the Bridge Lenders (but
subject to certain restrictions set forth in the Bank Commitment Letter).
Pursuant to the Bank Commitment Letter, the Parent also is required, upon the
request of Chase Securities and DLJ Securities at any time there are loans
outstanding under the New Bridge Facility in excess of $35 million, to promptly
(a) cause to be redeemed on the next redemption date permitted under the
Existing Indenture all of the outstanding Mortgage Notes, or (b) if the Mortgage
Notes cannot then be redeemed under the terms of the Existing Indenture, to
commence a tender offer for all of the outstanding Mortgage Notes, subject to
receiving financing therefor.
In connection with the BarTech Transaction, it is anticipated that certain
existing indebtedness of BarTech will be refinanced from the proceeds of new
indebtedness incurred by NuBar (pursuant to new bank facilities and/or publicly
offered debt securities of NuBar or one or more of its subsidiaries), and that
the proceeds of such new NuBar indebtedness also may be used to refinance some
or all of the following indebtedness of the Parent and/or the Company (depending
upon the timing of consummation of the BarTech Transaction and the availability
of such financing): (i) the Term Loan Facility, (ii) the Existing Credit
Agreement (or any replacement facility) and/or (iii) the New Bridge Facility. To
the extent any such NuBar indebtedness otherwise would be incurred prior to or
simultaneously with the incurrence of indebtedness by the Company pursuant to
the Existing Credit Facility and/or the New Bridge Facility in connection with
the Debt Tender Offer or pursuant to the issuance of New High-Yield Securities,
it is anticipated that such indebtedness incurred by NuBar may replace or be
incurred in lieu of some or all of the foregoing indebtedness otherwise expected
to be incurred by the Company (subject to the approval of the Lenders and/or the
Bridge Lenders to the extent required under any of the foregoing facilities).
The foregoing plans for the Company constitute forward-looking statements
which are based on estimates and assumptions, which, although believed to be
reasonable, are inherently uncertain. No assurance can be given that any of the
matters discussed under 'Plans for the Company' will occur or will occur in the
manner set forth under such heading.
Except as described in this Offer to Purchase, neither the Parent nor the
Purchaser has any present plans or proposals that would relate to or result in
an extraordinary corporate transaction such as a merger, reorganization or
liquidation involving the Company or any of its subsidiaries or a sale or other
transfer of a material amount of assets of the Company or any of its
subsidiaries, any material change in the capitalization or dividend policy of
the Company or any other material change in the Company's corporate structure or
business or the composition of its Board of Directors or management.
13. DIVIDENDS AND DISTRIBUTIONS. If the Company should, on or after the
date of the Merger Agreement (except as contemplated thereby), split, combine or
otherwise change the Shares or its capitalization, or disclose that it has taken
any such action, then without prejudice to the Purchaser's rights under Section
15, 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.
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If on or after the date of the Merger Agreement (except as contemplated
thereby), the Company should declare or pay any cash or stock dividend or other
distribution on, or issue any right 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 under Section 15,
(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 tendering stockholder shall 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 STOCK MARKET
LISTING AND EXCHANGE ACT REGISTRATION. The purchase of Shares pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
will reduce the number of holders of Shares. This could adversely affect the
liquidity and market value of the remaining Shares held by the public. Depending
upon the number of Shares purchased pursuant to the Offer, the Shares may no
longer meet the requirements of the NASD for continued inclusion in the Nasdaq
National Market, which require, among other things, that an issuer have at least
200,000 publicly held shares, held by at least 300 shareholders, with a market
value of at least $1 million and have net tangible assets of at least $1
million, $2 million or $4 million, depending on profitability levels during the
issuer's four most recent fiscal years. If these and certain other standards are
not met, the Shares might nevertheless continue to be included in the NASD's
Nasdaq Stock Market with quotations published in the Nasdaq 'additional list' or
in one of the 'local lists', but if the number of holders of the Shares were to
fall below 300, or if the number of publicly held Shares were to fall below
200,000 or there were not at least two registered and active market makers for
the Shares, the NASD's rules provide that the Shares would no longer be
'qualified' for Nasdaq Stock Market reporting and the Nasdaq Stock Market would
cease to provide any quotations. 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. According to the 1997 Annual
Report, as of September 15, 1997 there were 354 holders of record of Shares.
If, as a result of the purchase of Shares pursuant to the Offer or
otherwise, the Shares no longer meet the requirements of the NASD for continued
inclusion in the Nasdaq National Market or in any other tier of the Nasdaq Stock
Market and the Shares are no longer included in the Nasdaq National Market or in
any other tier of the Nasdaq Stock Market, as the case may be, the market for
Shares could be adversely affected.
In the event that the Shares no longer meet the requirements of the NASD
for continued inclusion in any tier of the Nasdaq Stock Market, it is possible
that the Shares would continue to trade in the over-the-counter market and that
price quotations would be reported by other sources. The extent of the public
market for the Shares and the availability of such quotations would, however,
depend upon the number of holders of Shares remaining, at such time, the
interest in maintaining a market in Shares on the part of securities firms, the
possible termination of registration of the Shares under the Exchange Act, as
described below, and other factors.
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 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.
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15. CERTAIN CONDITIONS OF THE OFFER. 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), to pay for any Shares tendered pursuant to the Offer, and may postpone
the acceptance for payment or, subject to the restriction referred to above,
payment for any Shares tendered pursuant to the Offer, and, subject to the
provisions of the Merger Agreement, may amend or terminate the Offer as to any
Shares whether or not theretofore purchased or paid for if (i) there have not
been validly tendered and not properly withdrawn prior to the time of the Offer
will otherwise expire a number of Shares which constitutes a majority 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 (without giving effect to any voting rights of the
Special Preferred Stock), (ii) the ESOP has not validly tendered and not
withdrawn prior to the time the Offer will otherwise expire a number of Shares
such that immediately following the purchase of Shares pursuant to the Offer the
ESOP would hold less than 25% of the Shares then outstanding (or such fewer
number of Shares as is necessary to eliminate the voting rights of the Special
Preferred Stock and cause such Special Preferred Stock to be immediately
redeemable at the Company's option), (iii) any waiting periods under the HSR Act
applicable to the purchase of Shares in the Offer and the Merger will not have
expired or been terminated prior to the Expiration Date or (iv) at any time on
or after the date of the Merger Agreement and before acceptance for payment of,
or payment for, such Shares any of the following events have occurred:
(A) any court, administrative agency or commission or other
governmental authority or instrumentality will have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, interpretation, judgment, injunction or other order which
(i) is in effect and which materially restricts, prevents or prohibits
consummation of the Offer, the Merger or any transaction contemplated by
the Merger Agreement, provided, however, that such effect has not resulted
from the Parent or the Purchaser breaching its obligations in the Merger
Agreement to cause any such decree, judgment, injunction or other order to
be vacated or lifted or to oppose any such action or proceeding, or which
(ii) notwithstanding that the Parent has complied fully with its
obligations in the Merger Agreement, makes materially more costly the
making of the Offer, the acceptance for payment of, payment for, or
ownership, directly or indirectly, of some or all of the Shares or of the
Company (including by reason of imposing a material liability on the
Company, the Parent or the Purchaser or materially encumbering any of their
respective assets), the consummation of the transactions contemplated by
the Merger Agreement or materially delays the Merger, or which (iii)
notwithstanding that the Parent has complied fully with Section 6.5 of the
Merger Agreement, materially limits the ownership or operation by the
Company, any of its subsidiaries, the Parent or any of its affiliates of
all or any material portion of the business or assets of the Company or any
of its subsidiaries, or compels the Parent or any of its affiliates to
sell, dispose of or hold separate (through the establishment of a trust or
otherwise) all or any material portion of the business or assets of the
Company, its subsidiaries or any other such person, as a result of the
transactions contemplated by the Merger Agreement, or which (iv)
notwithstanding that the Parent has complied fully with Section 6.5 of the
Merger Agreement, imposes or confirms limitations on the ability of the
Purchaser, the Parent or any of its affiliates effectively to acquire or
hold or to exercise full rights of ownership of the Shares, including
without limitation the right to vote any Shares acquired or owned by the
Purchaser, the Parent or any of its affiliates on all matters properly
presented to the shareholders of the Company, including without limitation
the adoption and approval of the Merger Agreement and the Merger or the
right to vote any shares of capital stock of any subsidiary directly or
indirectly owned by the Company; or (v) any court, administrative agency or
commission or other governmental authority or instrumentality shall have
instituted or threatened in writing to institute any action or proceeding
which could reasonably be expected to have or result in any of the
foregoing effects;
(B) the representations and warranties of the Company set forth in the
Merger Agreement (without giving effect to any 'Material Adverse Effect',
'materiality' or similar qualifications contained therein) will not be true
and correct in all respects, as of the date of consummation of the Offer as
though made on and as of such date except (1) for changes specifically
permitted by the Merger Agreement, (2) that those representations and
warranties which address matters only as of a particular date will remain
true and correct as of such date, and (3) for breaches or inaccuracies
which, individually or in the aggregate, would not
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(a) have a Material Adverse Effect on the Company or (b) materially
adversely affect the ability of the parties to the Merger Agreement to
consummate the transaction contemplated thereby;
(C) the obligations of the Company contained in the Merger Agreement
to be performed at or prior to the consummation of the Offer will not have
been performed or complied with in all material respects by the Company
prior to the consummation of the Offer;
(D) the Merger Agreement will have been terminated in accordance with
its terms or the Offer shall have been terminated with the consent of the
Company;
(E) (i) it shall have been publicly disclosed or the Parent shall have
otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth in Rule 13d-3 promulgated under the Exchange
Act) of more than 20.0% of the outstanding Shares has been acquired by any
corporation (including the Company or any of its subsidiaries or
affiliates), partnership, person or other entity or group (as defined in
Section 13(d)(3) of the Exchange Act), other than the Parent or any of its
affiliates or the ESOP, or (ii) (A) the Board of Directors of the Company
shall have withdrawn or modified in a manner adverse to the Purchaser the
approval or recommendation of the Offer, the Merger or the Merger
Agreement, or approved or recommended any Acquisition Proposal or any other
acquisition of Shares other than the Offer and the Merger or (B) any such
corporation, partnership, person or other entity or group shall have
entered into a definitive agreement or an agreement in principle with the
Company with respect to an Acquisition Proposal;
(F) Parent fails to receive funds pursuant to the Investors'
Commitment or the Bank Commitment Letter.
(G) members of the USWA have not ratified the Settlement Agreement and
the Collective Bargaining Agreement submitted for their ratification by the
USWA in connection with the transactions contemplated by the Merger
Agreement in the manner determined to be appropriate by the USWA for such
ratification; or
A 'Material Adverse Effect' means any events, changes or effects which,
individually or in the aggregate, would have a material adverse effect on the
business operations, assets, liabilities, properties, results of operations or
financial condition of the Company and its subsidiaries, taken as a whole.
16. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
General. Except as set forth below, 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 (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 Parent's present intention to seek such
approval or action. 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 (subject
to the terms of the Merger Agreement) to terminate the Offer without the
purchase of the Shares thereunder. 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.
State Takeover Laws. A number of states have adopted takeover laws and
regulations which purport to varying degrees to be applicable to attempts to
acquire securities of corporations which 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
37
<PAGE>
believes that such laws conflict with 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. However, in 1987, 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
acquiror 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.
The Company is incorporated in Delaware. Section 203 of the DGCL generally
prohibits such a Delaware corporation from engaging in certain 'business
combinations' (defined to include mergers and consolidations) with an
'interested stockholder' (defined generally as any person that beneficially owns
15% or more of the outstanding voting stock of the corporation) for a period of
three years after the date the person became an interested stockholder unless,
before such date, the board of directors or the corporation approved either the
business combination or the purchase of 15% or more of the corporation's voting
stock by the interested stockholder or certain other statutory conditions have
been met. On July 23, 1998, the Company's Board of Directors voted unanimously
(with one director not present at the meeting) to approve the acquisition of
beneficial ownership of Shares contemplated by the Offer, the Merger and the
Merger Agreement for purposes of Section 203. Accordingly, Section 203 is
inapplicable to, and will not prevent consummation of, the Merger.
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 and the rules that have been promulgated
thereunder by the Federal Trade Commission ('FTC'), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the 'Antitrust
Division') and the FTC and certain waiting period requirements have been
satisfied. Blackstone's purchase of Parent Common Stock pursuant to its Investor
Commitment and the purchase of Shares pursuant to the Offer and the Merger
(collectively, the 'HSR Covered Transactions') are subject to such requirements
and, as a result thereof, the capitalization of the Parent and the acquisition
of Shares may not be consummated until expiration of the waiting period under
the HSR Act with respect to the HSR Covered Transactions. See Section 2.
Blackstone has filed with the FTC and the Antitrust Division two Pre-merger
Notification and Report Forms in connection with the HSR Covered Transactions.
Under the provisions of the HSR Act, Blackstone's purchase of Parent Common
Stock pursuant to its Investor Commitment may not be consummated until the
expiration of a 30-calendar day waiting period following the filing by
Blackstone unless both the Antitrust Division and the FTC terminate such waiting
period prior thereto, and the purchase of Shares pursuant to the Offer and the
Merger may not be consummated until the expiration of a 15-calendar day waiting
period following the filing by Blackstone unless both the Antitrust Division and
the FTC terminate such waiting period prior thereto. If, within such 30-calendar
day and 15-calendar day waiting periods, either the Antitrust Division or the
FTC requests additional information or documentary material from Blackstone the
applicable waiting period(s) would be extended for an additional 20 calendar
days or 10 calendar days, respectively, following substantial compliance by
Blackstone
38
<PAGE>
with such request. Thereafter, the waiting periods could be extended only by
court order. If the HSR Covered Transactions are delayed pursuant to a request
by the FTC or the Antitrust Division for additional information or documentary
material pursuant to the HSR Act, the Offer may (and, to the extent required by
the Merger Agreement, shall), be extended, and in any event the purchase of and
payment for Shares will be deferred until either 20 or 10 days after the request
is substantially complied with, unless the waiting period is sooner terminated
by the FTC and the Antitrust Division or a court order is obtained by the FTC or
the Antitrust Division prohibiting the HSR Covered Transactions. See Section 2.
Only one extension of such waiting periods pursuant to a request for additional
information is authorized by the HSR Act and the rules promulgated thereunder,
except by court order. 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.
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 of the FTC and the
Antitrust 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 may
also bring legal action under federal or state antitrust laws under certain
circumstances.
Based upon an examination of publicly available information relating to the
businesses in which the Company and its subsidiaries are engaged, the Purchaser
believes that the acquisition of Shares pursuant to the Offer would not violate
the antitrust laws. There can be no assurance, however, that a challenge to the
Offer on antitrust grounds will not be made or, if such challenge is made, what
the outcome will be. See Section 15 for certain conditions to the Offer,
including conditions with respect to litigation and certain government actions.
Margin Credit Regulations Reserve Board. Federal Regulations T, U and X
(the 'Margin Credit Regulations') restrict the extension or maintenance of
credit for the purpose of buying or carrying margin stock, including the Shares,
if the credit is secured directly or indirectly thereby. Such secured credit may
not be extended or maintained in an amount that exceeds the maximum loan value
of the margin stock. Under the Margin Credit Regulations, the Shares are
presently margin stock and the maximum loan value thereof is generally 50% of
their current market value. The definition of 'indirectly secured' contained in
the Margin Credit Regulations provides that the term does not include an
arrangement with a customer if the lender in good faith has not relied upon
margin stock as collateral in extending or maintaining the particular credit.
17. FEES AND EXPENSES. DLJ Securities and Chase Securities are acting as
the Dealer Managers in connection with the Offer. As compensation for its
services as Dealer Manager, DLJ Securities will receive a fee of $200,000. As
compensation for its services as Dealer Manager, Chase Securities will receive a
fee of $100,000. The Purchaser will also reimburse the Dealer Managers for
reasonable out-of-pocket expenses,including reasonable attorney's fees and have
also agreed to indemnify the Dealer Managers against certain liabilities and
expenses in connection with the Offer, including certain liabilities under the
Federal securities laws. For a discussion of certain fees and expenses payable
to the Lenders under the Term Loan Facility, see Section 9.
The Purchaser has retained Mackenzie Partners, Inc. to act as the
Information Agent and ChaseMellon Shareholder Services, L.L.C. 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 Dealer Managers, the Information Agent and the Depositary).
Brokers, dealers, commercial banks and trust companies will, upon request, be
reimbursed by
39
<PAGE>
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
Purchase 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 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 the Dealer Managers or 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 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 8 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.
RES ACQUISITION CORPORATION
JULY 30, 1998
40
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT, THE PURCHASER, BLACKSTONE CAYMAN
AND THE VERITAS COINVESTOR AND MEMBERS OF BMA AND VERITAS CAP L.L.C.
1. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT AND THE PURCHASER. The
name, present principal occupation or employment and five-year employment
history of each director and executive officer of the Parent and the Purchaser
are set forth below. All persons listed below are citizens of the United States.
The business address of each of the Parent and the Purchaser is c/o The
Blackstone Group, 345 Park Avenue, New York, New York 10154.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
- ------------------------------------- --------------------------------------------------------------------------
<S> <C>
David Stockman President of the Parent and the Purchaser. Senior Managing Director of
Blackstone.
Anthony Grillo Vice President, Treasurer and Assistant Secretary of the Parent and the
Purchaser. Senior Managing Director of Blackstone.
David Blitzer Vice President, Secretary and Assistant Treasurer of the Parent and the
Purchaser. Vice President of Blackstone.
</TABLE>
2. MEMBERS OF BMA. The name, present principal occupation or employment
and five-year employment history of each member of BMA is set forth below. All
persons listed below are citizens of the United States. The business address of
all of the persons set forth below is c/o The Blackstone Group, 345 Park Avenue,
New York, New York 10154.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
- ------------------------------------- --------------------------------------------------------------------------
<S> <C>
Peter G. Peterson Chairman of Blackstone.
Stephen A. Schwarzman President and Chief Executive Officer of Blackstone.
James J. Mossman Senior Managing Director of Blackstone.
David A. Stockman Senior Managing Director of Blackstone.
Howard A. Lipson Senior Managing Director of Blackstone.
Mark T. Gallogly Senior Managing Director of Blackstone.
Michael B. Hoffman Senior Managing Director and the Co-Head of the Merger and Acquisition
Advisory business of Blackstone.
Anthony Grillo Senior Managing Director of Blackstone.
J. Tomilson Hill Senior Managing Director and Co-Head of the Merger and Acquisition
Advisory business of Blackstone.
Glenn H. Hutchins Senior Managing Director in the principal investment group of Blackstone
since 1994. Prior to 1994, Mr. Hutchins was a Managing Director at the
Thomas H. Lee Company.
Thomas J. Saylak Senior Managing Director of Blackstone.
John Z. Kukral Senior Managing Director of Blackstone.
Kenneth C. Whitney Senior Managing Director of Blackstone.
Michael Puglisi Senior Managing Director of Blackstone.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
- ------------------------------------- --------------------------------------------------------------------------
Arthur Newman Senior Managing Director of Blackstone.
<S> <C>
Timothy R. Coleman Senior Managing Director of Blackstone.
</TABLE>
3. DIRECTORS AND EXECUTIVE OFFICERS OF BLACKSTONE CAYMAN. The name,
present principal occupation or employment and five-year employment history of
directors and executive officers of Blackstone Cayman are set forth below. Mr.
Daly is a citizen of Ireland, Ms. Perinchief is a citizen of the United Kingdom
and Mr. Puglisi is a citizen of the United States. The mailing address of each
of the persons listed below in such capacities is c/o The Blackstone Group, 345
Park Avenue, New York, New York 10154.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
- ------------------------------------- --------------------------------------------------------------------------
<S> <C>
Ronan Daly Director of Blackstone Cayman. Since December 1996, Mr. Daly has been
Legal Counsel to Hemisphere Management Limited. Between December 1996 and
January 1997 Mr. Daly was Legal Counsel to The Bank of Bermuda Limited.
Before such time, Mr. Daly was a solicitor at Berwin Leighton.
Michael Puglisi Director of Blackstone Cayman. Mr. Puglisi is a Senior Managing Director
and the Chief Financial Officer and the Chief Administrative Officer of
Blackstone.
Christine Perinchief Secretary of Blackstone Cayman. Since January 1997, Ms. Perinchief has
been a Corporate Manager at Hemisphere Management Limited. Before such
time, Ms. Perinchief was the Administration Manager/Personnel Officer at
BMT Defence Services Limited.
</TABLE>
4. MEMBERS OF VERITAS CAP L.L.C. The name, present principal occupation or
employment and five-year employment history of each member of Veritas Cap L.L.C.
are set forth below. All persons listed below are citizens of the United States.
The business address of Veritas Cap L.L.C. is 660 Madison Avenue, New York, New
York 10021.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
- ------------------------------------- --------------------------------------------------------------------------
<S> <C>
Robert B. McKeon Member, Veritas Capital Management, L.L.C., 1997 to present. President,
Veritas Capital, Inc., 1992 to 1997.
Thomas J. Campbell Member, Veritas Capital Management, L.L.C., 1997 to present. Partner,
Veritas Capital, Inc., 1993 to 1997.
</TABLE>
5. DIRECTORS AND EXECUTIVE OFFICERS OF THE VERITAS COINVESTOR. The name,
present principal occupation or employment and five-year employment history of
each director and executive officer of the Veritas Coinvestor are set forth
below. All persons listed below are citizens of the United States. The business
address of the Veritas Coinvestor is c/o Wilmington Investments, Inc., 824
Market Street, Suite 900, Wilmington, Delaware 19801.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
- ------------------------------------- --------------------------------------------------------------------------
<S> <C>
Joan E. Bachner Assistant Treasurer of Veritas Coinvestor. Ms. Bachner is also the
Assistant Treasurer of Wilmington Investments, Inc.
H. Vaughan Blaxter III President and Secretary of Veritas Coinvestor. Mr. Blaxter is also the
Vice President, Secretary & General Counsel of The Hillman Company.
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
- ------------------------------------- --------------------------------------------------------------------------
Charles H. Bracken, Jr. Treasurer of Veritas Coinvestor. Mr. Bracken is also the Treasurer of The
Hillman Company.
<S> <C>
Darlene Clarke Director of Veritas Coinvestor. Currently retired. Before January 1998,
Ms. Clarke was a Vice President with Wilmington Investments, Inc.
Lario M. Marini Director of Veritas Coinvestor. Currently retired. Mr. Marini formerly was
with Wilmington Investments, Inc.
Andrew H. McQuarrie Director of Veritas Coinvestor. Vice President, Treasurer and Chief
Financial Officer of Wilmington Investments, Inc since November 1997.
Before November 1997, Mr. McQuarrie was an Operations Analyst/Manager of
Production Planning with Tektronix Corporation since February 1996. Before
February 1996, Mr. McQuarrie was a Senior Financial Analyst at the Intel
Corporation since October 1995. Prior to such time, Mr. McQuarrie was a
Financial Analyst at the Hillman Company.
</TABLE>
I-3
<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:
CHASEMELLON SHAREHOLDER SERVICES
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Courier Delivery:
Reorganization Department Reorganization Department Reorganization Department
P.O. Box 3301 120 Broadway 85 Challenger Road
South Hackensack, New Jersey 07606 13th Floor Mail Stop-Reorg
New York, New York 10271 Ridgefield Park, New Jersey 07660
</TABLE>
By Facsimile Transmission:
(201) 296-4293 (for eligible institutions only)
Confirm by Telephone:
(201) 296-4860
Any questions and requests for assistance may be directed to the
Information Agent or either of the Dealer Managers at their respective telephone
numbers and addresses 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:
[MACKENZIE PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
CALL TOLL-FREE (800) 322-2885
The Dealer Managers for the Offer are:
<TABLE>
<S> <C>
DONALDSON, LUFKIN & JENRETTE CHASE SECURITIES INC.
277 Park Avenue 270 Park Avenue
New York, New York 10172 New York, New York 10017
(877) 893-0576 (Toll-Free) (212) 270-1100
(212) 892-8017
</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
REPUBLIC ENGINEERED STEELS, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JULY 30, 1998
BY
RES ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
RES HOLDING CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, AUGUST 26, 1998 UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES
<TABLE>
<S> <C> <C> <C> <C>
By Mail: By Hand: By Overnight Courier Delivery: By Facsimile Confirm by Telephone:
Reorganization Dept. Reorganization Dept. Reorganization Dept. Transmission: (201) 296-4860
P.O. Box 3301 120 Broadway 85 Challenger Road (201) 296-4293
South Hackensack, NJ 13th Floor Mail Stop-Reorg (for eligible
07606 New York, NY 10271 Ridgefield Park, NJ 07660 institutions only)
</TABLE>
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.
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 utilized, if
tenders of Shares are to be made by book-entry transfer into the account of
ChaseMellon Shareholder Services, L.L.C. as Depositary (the 'Depositary'), at
the Depository Trust Company ('DTC') (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'.
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
- --------------------------------------------------------------------------------
SHARES CERTIFICATE(S) AND SHARE(S)
TENDERED (ATTACH ADDITIONAL SIGNED LIST
IF NECESSARY)
- ---------------------------------------
TOTAL NUMBER NAME(S) & ADDRESS(ES) OF REGISTERED
SHARE OF SHARES NUMBER OF HOLDER(S)
CERTIFICATE REPRESENTED BY SHARES (PLEASE FILL IN, IF BLANK, EXACTLY AS
NUMBER(S)* CERTIFICATE(S)* TENDERED** NAME(S) APPEAR(S) ON CERTIFICATE(S))
- --------------------------------------------------------------------------------
_______________________________________
_______________________________________
_______________________________________
TOTAL SHARES...............
_______________________________________
- --------------------------------------------------------------------------------
* Need not be completed by Book-Entry Stockholders.
** Unless otherwise indicated, all Shares represented by certificates
delivered to the Depositary will be deemed to have been tendered. See
Instruction 4.
<PAGE>
/ / 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 ______________________________________________
Check box of Book-Entry Transfer Facility:
/ / The Depositary 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, check box of Book-Entry Transfer
Facility:
/ / The Depositary Trust Company
Account Number ________________ Transaction Code Number ________________
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to RES Acquisition Corporation, a Delaware
corporation (the 'Purchaser'), a wholly owned subsidiary of RES Holding
Corporation, a Delaware corporation (the 'Parent'), the above-described shares
of Common Stock, $.01 par value per share (the 'Shares'), of Republic Engineered
Steels, Inc., a Delaware corporation (the 'Company'), at a purchase price of
$7.25 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
July 30, 1998 (the 'Offer to Purchase') and in this Letter of Transmittal (which
together constitute the 'Offer'). 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, 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 dividends, distributions (including additional Shares) or
rights declared, paid or issued with respect to the tendered Shares on or after
the date hereof 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 (as defined herein) (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 the date hereof. 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.
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 September 28, 1998. See Section 4 of the Offer to
Purchase.
3
<PAGE>
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. Unless otherwise indicated herein under 'Special Payment
Instructions', please credit any Shares tendered herewith by book-entry transfer
that are not accepted for payment by crediting the account at the Book-Entry
Transfer Facility (as defined herein) designated above. The undersigned
recognizes that the Purchaser has no obligation, pursuant to the Special Payment
Instructions, to transfer any Shares from the name(s) of the registered
holder(s) thereof if the Purchaser does not accept for payment any of the Shares
so tendered.
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Shares not To be completed ONLY if certificate(s) for Shares not
tendered or not accepted for payment and/or the check for tendered or not accepted for payment and/or the check for
the purchase price of Shares accepted for payment are to the purchase price of Shares accepted for payment are to
be issued in the name of someone other than the be sent to someone other than the undersigned or to the
undersigned or if Shares tendered by book-entry transfer undersigned at an address other than that shown above.
which are not accepted for payment are to be returned by
credit to an account maintained at the Book-Entry
Transfer Facility.
Issue: / / check / / certificates to: Mail: / / check / / certificates to:
Name Name
------------------------------------------------ -------------------------------------------------
(PLEASE PRINT) (PLEASE PRINT)
Address Address
------------------------------------------------ -------------------------------------------------
- -------------------------------------------------------- ---------------------------------------------------------
(INCLUDE ZIP CODE) (INCLUDE ZIP CODE)
- -------------------------------------------------------- ---------------------------------------------------------
(TAX ID. OR SOCIAL SECURITY NO.) (TAX ID. OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON THE REVERSE SIDE) (SEE SUBSTITUTE FORM W-9 ON THE REVERSE SIDE)
/ / Credit Shares tendered by book-entry transfer that
are not accepted for payment to:
/ / DTC
---------------------------------------------------
(DTC ACCOUNT NO.)
</TABLE>
4
<PAGE>
SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9
X ______________________________________________________________________________
X ______________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S))
Dated ___________________________ , 1998
(Must be signed by 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 Number ___________________________________
COMPLETE SUBSTITUTE FORM W-9
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature ___________________________________________________________
Name ___________________________________________________________________________
(PLEASE PRINT)
Name of Firm ___________________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number _________________________________________________
Dated ___________________________ , 1998
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE 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 which 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 utilized, 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 evidencing tendered Shares, or timely
confirmation (a 'Book-Entry Confirmation') of a book-entry transfer of 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 AN OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND
THE DELIVERY WIN BE DEEMED MADE ONLY WHEN ACTUARY RECEIVED BY THE DEPOSITORY
(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 AN 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 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.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any 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
6
<PAGE>
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 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
boxes on this Letter of Transmittal must be completed. A Book-Entry Stockholder
may request that Shares not accepted for payment be credited to such account
maintained at the Book-Entry Transfer Facility as such Book-Entry Stockholder
may designate under 'Special Payment Instructions'. If no such instructions are
given, such Shares not accepted for payment will be returned by crediting the
account at the Book-Entry Transfer Facility designated above.
8. WAIVER OF CONDITIONS. Subject to the terms and conditions of the Merger
Agreement (as defined in the Offer to Purchase), the conditions of the Offer
(other than the Minimum Condition and the ESOP Condition (as defined in the
Offer to Purchaser) 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') 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.
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 may 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 (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the
7
<PAGE>
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 Dealer Managers or the Information Agent
at their respective addresses 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 the
Dealer Managers 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 Information Agent at 1-800-322-2855. 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), 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>
<TABLE>
<S> <C>
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND
FORM W-9 CERTIFY BY SIGNING AND DATING BELOW. ------------------------------
Social Security Number
DEPARTMENT OF THE TREASURY OR
INTERNAL REVENUE SERVICE
------------------------------
PAYER'S REQUEST FOR Employer Identification Number
TAXPAYER --------------------------------------------------------------------------------------------
IDENTIFICATION PART 2 PART 3--
NUMBER (TIN) CERTIFICATION--Under the penalties of perjury, I certify Awaiting TIN
that: -----------------
(1) The number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number to be
issued to me), and
(2) I am not subject to backup withholding because (a) I am
exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service (the 'IRS')
that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the
IRS has notified me that I am no longer subject to
backup withholding.
------------------------------------------------------------------------------------------
CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have been notified by
the IRS that you are currently subject to backup withholding because of under-reporting
interest or dividends on your tax return. However, if after being notified by the IRS that
you were subject to backup withholding you received another notification from the IRS that
you are no longer subject to backup withholding, do not cross out such item (2).
SIGN HERE SIGNATURE
---------------------------------------------------------------------------------
DATE
--------------------------------------------------------------------------------------
</TABLE>
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 THE SUBSTITUTE FORM W-9.
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 ____________________________________, 1998
9
<PAGE>
The Information Agent for the Offer is:
[MACKENZIE PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
CALL TOLL-FREE (800) 322-2885
The Dealer Managers for the Offer are:
<TABLE>
<S> <C>
DONALDSON, LUFKIN & JENRETTE CHASE SECURITIES INC.
277 Park Avenue 270 Park Avenue
New York, New York 10172 New York, New York 10017
(877) 893-0576 (Toll-Free) (212) 270-1100
(212) 892-8017
</TABLE>
July 30, 1998
<PAGE>
NOTICE OF GUARANTEED DELIVERY
TO
TENDER SHARES OF COMMON STOCK
OF
REPUBLIC ENGINEERED STEELS, INC.
As set forth in Section 3 of the Offer to Purchase described 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 ChaseMellon Shareholder Services, L.L.C. ('the
Depositary') on or prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase) or if the procedure for delivery by book-entry transfer
cannot be completed on a timely basis. This instrument may be delivered by hand
or transmitted by facsimile transmission or mailed to the Depositary.
The Depositary for the Offer is:
---------------------------------------------
CHASEMELLON SHAREHOLDER SERVICES
---------------------------------------------
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Courier Delivery:
Reorganization Dept. Reorganization Dept. Reorganization Dept.
P.O. Box 3301 120 Broadway 85 Challenger Road
South Hackensack, NJ 07606 13th Floor Mail Stop-Reorg
New York, NY 10271 Ridgefield Park, NJ 07660
</TABLE>
By Facsimile Transmission:
(201) 296-4293
(for eligible institutions only)
Confirm by Telephone:
(201) 296-4860
DELIVERY OF THIS INSTRUMENT 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 in the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tender(s) to RES Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of RES Holding Corporation, a Delaware
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated July 30, 1998 (the 'Offer to Purchase'), and in the related
Letter of Transmittal (which together constitute the 'Offer'), receipt of which
is hereby acknowledged, the number of shares of Common Stock, par value $.01 per
share (the 'Shares'), of Republic Engineered Steels, Inc., a Delaware
corporation, pursuant to the guaranteed delivery procedure set forth in Section
3 of the Offer to Purchase.
Signatures(s): _________________________________________________________________
________________________________________________________________________________
Name(s) of Record Holder(s):
________________________________________________________________________________
PLEASE TYPE OR PRINT
Number of Shares _______________________________________________________________
Certificate Nos. (If Available)
________________________________________________________________________________
________________________________________________________________________________
Dated: ___________________________________________________________________, 1998
Address(es):____________________________________________________________________
________________________________________________________________________________
Zip Code
Area Code and Tel. No(s)________________________________________________________
(Check the box below if Shares will be tendered by book-entry transfer)
/ / The Depository Trust Company
Account Number: ________________________________________________________________
________________________________________________________________________________
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which 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, (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 (the 'Book-Entry Transfer Facility'), in either case
together with the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees 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
________________________________________________________________________________
Address
________________________________________________________________________________
Zip Code
Area Code & Tel. No. ___________________________________________________________
________________________________________________________________________________
Authorized Signature
________________________________________________________________________________
Name (Please type or print)
________________________________________________________________________________
Title
Dated: _______________________________________________________________, 1998
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES
FOR SHARES SHOULD BE SENT WITH THE LETTER OF TRANSMITTAL.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
REPUBLIC ENGINEERED STEELS, INC.
AT
$7.25 NET PER SHARE
BY
RES ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
RES HOLDING CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, AUGUST 26, 1998 UNLESS THE OFFER IS
EXTENDED.
July 30, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by RES Acquisition Corporation, a Delaware
corporation (the 'Purchaser') and a wholly owned subsidiary of RES Holding
Corporation, a Delaware corporation (the 'Parent'), to act as the Dealer
Managers in connection with the Purchaser's offer to purchase for cash all the
outstanding shares of Common Stock, par value $.01 per share (the 'Shares'), of
Republic Engineered Steels, Inc., a Delaware corporation (the 'Company'), at a
purchase price of $7.25 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 July 30, 1998 (the 'Offer to Purchase'), and in the related
Letter of Transmittal (which, as amended from time to time, together constitute
the 'Offer') enclosed herewith. 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.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated July 30, 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
ChaseMellon Shareholder Services, L.L.C. (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 Chairman and
Chief Executive Officer of the Company, accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9.
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 for Certification of Taxpayer Identification Number on
Substitute Form W-9.
7. A return envelope addressed to ChaseMellon Shareholder Services,
L.L.C., 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, NEW YORK CITY TIME, ON WEDNESDAY, AUGUST 26, 1998 UNLESS THE
OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not properly withdrawn prior to the time the Offer would otherwise
expire such number of Shares which constitutes a majority 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 (without giving effect to any voting rights of the
Special Preferred Stock (as defined in the Offer to Purchase), (ii) there being
validly tendered and not properly withdrawn by the Employee Common Stock
Ownership Plan of the Company (the 'ESOP') prior to the time the Offer would
otherwise expire a number of Shares such
<PAGE>
that, immediately following the purchase of Shares pursuant to the Offer, the
ESOP would hold less than 25% of the Shares then outstanding (or such fewer
number of Shares as is necessary to eliminate the voting rights of the Special
Preferred Stock and cause such stock to be redeemable at the option of the
Company), (iii) the expiration or the termination of any applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, prior to the expiration of the Offer, (iv) the ratification by the
members of the United Steelworkers of America (the 'USWA') of the Settlement
Agreement (including the new Master Collective Bargaining Agreement attached as
an exhibit thereto) (each as defined in the Offer to Purchase) submitted for
their ratification by the USWA in connection with the Offer and (v) the receipt
by RES Holding Corporation of the funds pursuant to the financing commitments
entered into in connection with the Merger Agreement (as defined below) in order
to purchase the Shares pursuant to the Offer and the Merger and to pay related
fees and expenses.
The Board of Directors of the Company (the 'Board of Directors') has
approved the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger (as defined below) and determined that terms
of the Offer and the Merger are fair to, and in the best interests of, the
holders of the Shares and recommends that the holders of the Shares accept the
Offer and tender their Shares to the Purchaser.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 23, 1998 (the 'Merger Agreement'), by and among the Parent, the
Purchaser and the Company. The Merger Agreement provides, among other things,
for the making of the Offer by the Purchaser, and further provides that,
following the completion of the Offer, upon the terms and subject to the
conditions of the Merger Agreement, and in accordance with the Delaware General
Corporation Law, the Purchaser will be merged with and into the Company (the
'Merger'). Following the Merger, the Company will continue as the surviving
corporation and become a wholly owned subsidiary of the Parent, and the separate
corporate existence of the Purchaser will cease.
In order to take advantage of 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 the Dealer Managers, the Depositary and Mackenzie
Partners, Inc. (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 you for customary clerical and mailing
expenses incurred by you in forwarding any of the enclosed materials to your
clients. The Purchaser will pay or cause to be paid any stock transfer taxes
payable on the transfer of Shares to it, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
Inquiries you may have with respect to the Offer should be addressed to the
Information Agent or the undersigned, at the respective addresses 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,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CHASE SECURITIES INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE PARENT, THE DEALER MANAGERS,
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.
2
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
REPUBLIC ENGINEERED STEELS, INC.
AT
$7.25 NET PER SHARE
BY
RES ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
RES HOLDING CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, AUGUST 26, 1998,
UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated July 30, 1998
(the 'Offer to Purchase'), and the related Letter of Transmittal relating to an
offer by RES Acquisition Corporation, a Delaware corporation (the 'Purchaser'),
and a wholly owned subsidiary of RES Holding Corporation, a Delaware corporation
(the 'Parent'), to purchase all of the outstanding shares of Common Stock, $.01
par value per share (the 'Shares'), of Republic Engineered Steels, Inc., a
Delaware corporation (the 'Company'), at a purchase price of $7.25 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, as amended from time to time, together constitute the
'Offer'). 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 ChaseMellon Shareholder
Services, L.L.C., the Depositary, 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.
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 $7.25 per share, net to the seller in cash
without interest thereon.
2. The Offer is made for all of the outstanding Shares.
3. The Board of Directors of the Company has approved the Merger
Agreement (as defined below) and the transactions contemplated
thereby, including the Offer and the Merger (as defined below) and
determined that the terms of the Offer and the Merger are fair to,
and in the best interests of, the holders of the Shares and
recommends that holders of the Shares accept the Offer and tender
their Shares to the Purchaser.
4. The Offer is being made pursuant to an Agreement and Plan of
Merger, dated as of July 23, 1998 (the 'Merger Agreement') by and
among the Parent, the Purchaser and the Company. The Merger
Agreement provides, among other things, that subsequent to the
consummation of the Offer, the Purchaser will merge with and into
the Company (the 'Merger'). At the effective time of the
<PAGE>
Merger (the 'Effective Time'), each Share issued and outstanding
immediately prior to the Effective Time (other than Shares owned by
the Company and any Shares owned by the Parent, the Purchaser or
any other subsidiary of the Parent, which shall be cancelled, and
other than Shares, if any, held by stockholders who have properly
exercised appraisal rights under Section 262 of the Delaware
General Corporation Law) will, by virtue of the Merger and without
any action on the part of the holders of the Shares be converted
into the right to receive $7.25 in cash, payable to the holder
thereof, without interest, upon surrender of the certificate
formerly representing such Share, less any required withholding
taxes.
5. The offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Wednesday, August 26, 1998, unless the Offer is
extended.
6. 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.
7. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not properly withdrawn prior to the time the
Offer would otherwise expire such number of Shares which
constitutes a majority 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 (without giving effect to any voting
rights of the Special Preferred Stock (as defined in the Offer to
Purchase), (ii) there being validly tendered and not properly
withdrawn by the Employee Common Stock Ownership Plan of the
Company (the 'ESOP') prior to the time the Offer would otherwise
expire a number of Shares such that, immediately following the
purchase of Shares pursuant to the Offer, the ESOP would hold less
than 25% of the Shares then outstanding (or such fewer number of
Shares as is necessary to eliminate the voting rights of the
Special Preferred Stock and cause such stock to be redeemable at
the option of the Company), (iii) the expiration or the termination
of any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, prior to the
expiration of the Offer, (iv) the ratification by the members of
the United Steelworkers of America (the 'USWA') of the Settlement
Agreement (including the new Master Collective Bargaining Agreement
attached as an exhibit thereto) (each as defined in the Offer to
Purchase) submitted for their ratification by the USWA in
connection with the Offer and (v) the receipt by RES Holding
Corporation of the funds pursuant to the financing commitments
entered into in connection with the Merger Agreement in order to
purchase the Shares pursuant to the Offer and the Merger and to pay
related fees and expenses.
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 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 Donaldson, Lufkin
& Jenrette Securities Corporation and Chase Securities Inc., the Dealer Managers
for the Offer, 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 the Shares held by us for your
account, please instruct us by completing, executing and returning to us the
instruction form contained in this letter. If you authorize 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
OF
REPUBLIC ENGINEERED STEELS, INC.
BY
RES ACQUISITION CORPORATION
The undersigned acknowledge(s) receipt of your letter enclosing the Offer
to Purchase dated July 30, 1998 (the 'Offer to Purchase') and the related Letter
of Transmittal pursuant to an offer by RES Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of RES Holding Corporation, a Delaware
corporation, to purchase all outstanding shares of Common Stock, $.01 par value
per share (the 'Shares'), of Republic Engineered Steels, Inc., a Delaware
corporation at a purchase price of $7.25 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 the related Letter of Transmittal.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) which are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer to Purchase and in the related Letter of Transmittal
furnished to the undersigned.
<TABLE>
<S> <C>
Number of Shares to be Tendered*
_________ Shares
Dated ___, 1998 SIGN HERE
------------------------------
------------------------------
Signature(s)
------------------------------
Please Print Name(s)
------------------------------
Address
------------------------------
Area Code and Telephone Number
------------------------------
Tax, Identification, or
Social Security Number
------------------------------
</TABLE>
- ------------------
* Unless otherwise indicated, it will be assumed that all of your Shares held by
us for your account are to be tendered.
<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., 00-00000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
GIVE THE
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 of the account or,
(joint account) if combined funds, the first
individual on the account(1)
3. Husband and wife The actual owner of the account or,
(joint account) if joint funds, either person(1)
4. Custodian account of a minor (Uniform The minor(2)
Gift to Minors Act)
5. Adult and minor The adult or, if the minor is the
(joint account) only contributor, the minor(1)
6. Account in the name of guardian or The ward, minor, or incompetent
committee for a designated ward, person(3)
minor or incompetent person
7. a. The usual revocable savings trust The grantor-trustee(1)
account (grantor is also a
trustee)
b. So-called trust account that is The actual owner(4)
not a legal or valid trust under
State law
8. Sole proprietorship account The owner(4)
</TABLE>
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
GIVE THE EMPLOYER IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ----------------------------------------------------------------
<S> <C> <C>
9. A valid trust, estate, or pension The legal entity (do not furnish the
trust identifying number of the personal
representative or trustee unless the
legal entity itself is not
designated in the account title)(5)
10. Corporate account The corporation
11. Religious, charitable, or educational The organization
organization account
12. Partnership account held in the name The partnership
of the partnership
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public 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 person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show your individual name. You may also enter your business name. You may
use either your Social Security number or your Employer Identification
Number.
(5) List first and circle the name of the legal trust, estate or pension trust.
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
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
business and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service (the 'IRS') and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
o A corporation.
o A financial institution.
o An organization exempt from tax under section 501(a) of the Internal Revenue
Code of 1986, as amended (the 'Code'), or an individual retirement plan.
o The United States or any agency or instrumentalities.
o A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality.
o A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
o An international organization or any agency or instrumentality thereof.
o A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a) of the Code.
o An exempt charitable remainder trust, or non-exempt trust described in section
4947(a)(1) of the Code.
o An entity registered at an times under the Investment Company Act of 1940.
o A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under section 1441 of
the Code
o Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
o Payments of patronage dividends where the amount received is not paid in
money.
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
o 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.
o Payments of tax-exempt interest (including exempt-interest dividends under
section 852 of the Code).
o Payments described in section 6049(b)(5) of the Code to nonresident aliens.
o Payments on tax-free covenant bonds under section 1451 of the Code.
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Exempt payees described above should file a 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, SIGN AND DATE THE
FORM AND RETURN IT TO THE PAYER. 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 sections 6041, 6041A(a), 6045, 6050A and 6050N of
the Code and the regulations promulgated therein.
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 the IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividends 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) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis that results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase, dated July
30, 1998, and the related Letter of Transmittal and any amendments thereto, 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 a state statute. If the Purchaser becomes aware of any state where
the making of the Offer is 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) the holders of Shares in such
state. In those jurisdictions 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 Donaldson, Lufkin, & Jenrette
Securities Corporation or Chase Securities Inc. or one or more registered
brokers or dealers licensed under the laws of such jurisdictions.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
REPUBLIC ENGINEERED STEELS, INC.
AT
$7.25 NET PER SHARE
BY
RES ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
RES HOLDING CORPORATION
RES Aquisition Corporation, a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of RES Holding Corporation, a Delaware corporation (the
"Parent"), is offering to purchase all of the outstanding shares of Common
Stock, par value $.01 per share (the "Shares"), of Republic Engineered Steels,
Inc., a Delaware corporation (the "Company"), at a purchase price of $7.25 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 July 30,
1998 (the "Offer to Purchase"), and in the related Letter of Transmittal
(which, as amended from time to time, together constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, AUGUST 26, 1998, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not properly withdrawn prior to the time the Offer would
otherwise expire such number of Shares which constitutes a majority of the
voting power (on a fully-diluted basis) on the date of purchase of all the
securities entitled to vote generally in the election of directors or in a
merger (without giving effect to any voting rights of the Company's Special
Preferred Stock (as defined in the Offer to Purchase)), (ii) there being
validly tendered and not properly withdrawn by the Company's Employee Common
Stock Ownership Plan (the "ESOP") prior to the time the Offer would otherwise
expire a number of Shares such that, immediately following the purchase of
Shares pursuant to the Offer, the ESOP would hold less than 25% of the Shares
then outstanding (or such fewer number of Shares as is necessary to eliminate
the voting rights of the Company's Special Preferred Stock and cause such stock
to be redeemable at the option of the Company), (iii) the expiration or the
termination of any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, prior to the expiration of the
Offer, (iv) the ratification by the members of the United Steelworkers of
America (the "USWA") of the Settlement Agreement (including the new Master
Collective Bargaining Agreement attached thereto) (each as defined in the Offer
to Purchase) submitted for their ratification by the USWA in connection with
the Offer and (v) the receipt by the Parent of the funds pursuant to the
financing commitments entered into in connection with the Merger Agreement
(as defined below) in order to purchase the Shares pursuant to the Offer and
the Merger (as defined below) and to pay related fees and expenses.
<PAGE>
The purpose of the Offer is to acquire control of, and the entire equity
interest in, the Company. Following consummation of the Offer, the Purchaser
intends to effect the Merger, as described below.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 23, 1998 (the "Merger Agreement"), by and among the Parent, the
Purchaser and the Company. The Merger Agreement provides, among other things,
for the making of the Offer by the Purchaser, and further provides that,
following the completion of the Offer, upon the terms and subject to the
conditions of the Merger Agreement, and in accordance with the Delaware General
Corporation Law ("DGCL"), the Purchaser (or another wholly owned subsidiary of
the Parent) will be merged with and into the Company (the "Merger"), and each
Share issued and outstanding immediately prior to the effective time of the
Merger (other than Shares owned by the Company, the Parent, the Purchaser or any
other subsidiary of the Parent, which shall be cancelled, and other than Shares,
if any, held by stockholders who have properly exercised appraisal rights under
the DGCL) will, by virtue of the Merger and without any action on the part of
the holders of the Shares, the Special Preferred Stock or the capital stock of
the Purchaser, be converted into the right to receive $7.25 in cash, payable to
the holder thereof, without interest, upon the surrender of the certificate
formerly representing such Share, less any required withholding taxes. The
Merger Agreement is more fully described in Section 11 of the Offer to Purchase.
The Board of Directors of the Company has approved the Merger Agreement and
the transactions contemplated thereby, including the Offer and the Merger, and
determined that the terms of the Offer and the Merger are fair to, and in the
best interests of, the holders of Shares and recommends that stockholders of the
Company accept the Offer and tender their Shares to the Purchaser.
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
ChaseMellon Shareholder Services, L.L.C. (the "Depositary") of the Purchaser's
acceptance of such Shares for payment pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payments from the Purchaser and transmitting such payments
to stockholders whose Shares have been accepted for payment. Under no
circumstances will interest on the purchase price for Shares be paid by the
Purchaser, regardless of any extension of the Offer or any delay in making such
payment. In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) certificates representing Shares (the "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
defined in Section 2 of the Offer to Purchase) in connection with a book-entry
transfer, and (iii) any other documents required by the Letter of Transmittal.
Subject to the applicable rules and regulations of the Securities and
Exchange Commission and the terms of the Merger Agreement, the Purchaser
expressly reserves the right, in its sole discretion, at any time and from time
to time, and regardless of whether or not any of the events set forth in Section
15 of the Offer to Purchase shall have occurred, to (i) 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 and (ii) amend the Offer in any respect by giving
oral or written notice of such amendment to the Depositary. Any extension,
delay, termination, waiver or amendment will be followed as promptly as
practicable by public announcement to be made no later than 9:00 A.M., New York
City time, on the next business day after the previously scheduled Expiration
Date. During any such extension, all Shares previously tendered and not properly
withdrawn will remain subject to the Offer, subject to the right of a tendering
stockholder to withdraw such stockholder's Shares.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Wednesday, August 26, 1998, unless and until the Purchaser, in its sole
discretion (but subject to the terms and conditions of the Merger Agreement),
shall have extended the period during which the Offer is open, in which event
the term "Expiration Date" shall mean the latest time and date at which the
Offer, as so extended by the Purchaser, shall expire.
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
September 28, 1998. For a withdrawal to be effective, a written, telegraphic,
telex or facsimile transmission notice of withdrawal must be timely received by
the Depositary at one of its addresses set forth on the back cover of the Offer
to Purchase. Any notice of withdrawal must specify the name of the person who
tendered such 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 signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution (as defined in Section 3 of the
Offer to Purchase) unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedure
for book-entry transfer as set forth in Section 3 of the Offer to Purchase, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which
case a notice of withdrawal will be effective if delivered to the Depositary by
any method of delivery described in the second 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, which
determination will be final and binding.
<PAGE>
The Information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided the Purchaser with the Company's stockholder list
and security position for the purpose of disseminating the Offer to holders of
Shares. The 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.
The Offer to Purchase and the related Letter of Transmittal contain
important information which should be read carefully before any decision is made
with respect to the Offer.
Questions and requests for assitance may be directed to the Dealer Managers
or the Information Agent as set forth below. Requests for copies of the Offer to
Purchase and the related Letter of Transmittal and other tender offer materials
may be directed to the Information Agent, and copies will be furnished promptly
at the Purchaser's expense. The Purchaser will not pay any fees or commissions
to any broker or dealer or any other person (other than the Dealer Managers, the
Depositary and the Information Agent) for soliciting tenders of Shares pursuant
to the Offer.
The information Agent for the Offer is:
[MACKENZIE PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
The Dealer Managers for the Offer are:
[DONALDSON, LUFKIN & JENRETTE LOGO] [CHASE SECURITIES INC. LOGO]
277 Park Avenue 270 Park Avenue
New York, New York 10172 New York, New York 10017
(877) 893-0576 (Toll-Free) (212) 270-1100
(212) 892-8017
July 30, 1998
<PAGE>
FOR IMMEDIATE RELEASE
MEDIA AND INVESTOR CONTACT: MEDIA CONTACTS:
THE BLACKSTONE GROUP REPUBLIC ENGINEERED STEELS, INC.
Stephen A. Schwarzman Harold V. Kelly
President and CEO Executive Vice President
(212) 836-9823 (330) 837-6340
Marian J. Carpenter
Director, Corporate Communications
(330) 837-6302
e-mail: [email protected]
INVESTOR RELATIONS CONTACT:
John B. George
Treasurer
(330) 837-6491
MASSILLON, Ohio -- July 24, 1998 -- Republic Engineered Steels, Inc., along
with an affiliate of Blackstone Capital Partners II Merchant Banking Fund L.P.
and Veritas Capital Partners L.P. announced today that they have agreed on the
acquisition of Republic by the Blackstone-Veritas affiliate for a cash price
of $7.25 per share of Republic common stock. The acquisition of Republic will
occur by means of a cash tender offer for all issued and outstanding shares,
followed by a merger in which all remaining shares will be converted into the
same cash consideration. Including acquired debt, the total purchase price is
$420 million.
Following consummation of this transaction, Blackstone and Veritas
intend to combine Republic with Bar Technologies, Inc., (known as BarTech)
which they control. However, the proposed acquisition of Republic is not
conditioned on combining Republic and BarTech.
<PAGE>
2
"Republic has made significant achievements in its 9 year history and
acknowledges the contributions all of its constituents made to those
successes. Now, the potential acquisition of the Company by an affiliate of
Blackstone and Veritas can position Republic to move aggressively into the
next century to satisfy the needs and demands of its customers," said Russell
W. Maier, Chairman and Chief Executive Officer of Republic.
David A. Stockman of the Blackstone Group stated, "Following the
transaction our plan is to combine the best operations of both companies,
invest substantial capital in new mills and upgraded facilities, and implement
a constructive new relationship with the Steelworkers Union -- including a
new, 5-year contract with improved wages, pensions and productivity practices.
These elements will make Republic/BarTech a world-class SBQ bar steel supplier
with the best range of product and customer service in the marketplace."
Steelworker President George Becker offered an enthusiastic
endorsement of the proposed transaction. He said, "The Union looks forward to
working with Blackstone/BarTech to create a world class company. Our
experience with them so far has been a very constructive one. Together we have
fashioned a new labor agreement which both fully recognized the union's
security and economic needs and gives the company the ability to be
competitive on a global basis. The final decision on the new agreement
obviously belongs to our members, but we
<PAGE>
3
are very hopeful that they will support this new beginning for their
companies.."
Securities law requires the acquiring party to begin its tender offer
for Republic's stock no later than July 30, 1998. The transaction is subject
to customary conditions, including financing, applicable regulatory
clearances, and to ratification by USWA represented employees of a new
collective bargaining agreement intended to be applicable to Republic and
BarTech. The new collective bargaining agreement has been endorsed by the
United Steelworkers of America.
The Board of Directors of Republic has approved the merger agreement
and recommended that Republic's stockholders accept the tender offer and
approve and adopt the merger agreement. The Board of Directors was advised on
the financial aspects of the transaction by Lazard Freres & Co. LLC.
Republic Engineered Steels, is a leading domestic producer of carbon
and alloy high-quality engineered bar, stainless, tool steels, and remelted
specialty steels designed to meet the world's most demanding applications.
Headquartered in Massillon, Ohio, Republic has 10 plants located in Ohio,
Pennsylvania, Connecticut, Maryland, Indiana and Illinois and is one of the
leading recyclers in Ohio.
Bar Technologies Inc. produces and markets hot rolled engineered and
cold finished steel bar products direct to the automotive,
<PAGE>
4
machinery, industrial equipment, and tool industries, and to cold finished bar
producers, independent forgers and steel service centers.
The Blackstone Group was founded in 1985 by its current Chairman,
Peter G. Peterson and its current President and CEO, Stephen A. Schwarzman. In
addition to sponsoring the largest private equity fund for corporate
investments raised in 1997, The Blackstone Group is also a leader in real
estate investing, as well as mergers and acquisitions and restructuring and
reorganization advisory services, and liquid alternative asset investing.
Veritas Capital is a private investment fund founded by Robert B.
McKeon in 1992. Veritas and Blackstone have been partners in Bar Technologies,
Inc. since April 1996.
<PAGE>
THE CHASE MANHATTAN BANK DLJ BRIDGE FINANCE, INC.
270 Park Avenue DLJ CAPITAL FUNDING, INC.
New York, New York 10017 277 Park Avenue
New York, New York 10017
RES Holding Corporation
c/o Blackstone Management Partners L.P.
345 Park Avenue
New York, New York 10154
Attention of David A. Stockman
Anthony Grillo
Project NuBar
-------------
$65,000,000 Holdco Facility
---------------------------
$202,000,000 RES Facility
-------------------------
Commitment Letter
-----------------
Ladies and Gentlemen:
You have advised The Chase Manhattan Bank ("Chase"), Chase
Securities Inc. ("CSI"), DLJ Bridge Finance, Inc. ("DBFI") and DLJ Capital
Funding, Inc. ("DCFI" and, together with DBFI, "DLJ"; DLJ, together with
Chase, are referred to collectively as the "Agents") that you and RES
Acquisition Corporation ("MergerSub") intend to effect the Equity Tender
Offer, the Merger and the other Transactions (such terms and each other
capitalized term used but not defined herein having the meanings assigned to
them in the Summary of Principal Terms and Conditions attached hereto as
Exhibit A (the "Holdco Facility Term Sheet")). You have further advised the
Agents and CSI that, in connection with the Transactions, (a) Holdco will
obtain the Holdco Facility and (b) RES will obtain the RES Facility. The
Holdco Facility and the RES Facility are referred to collectively herein as
the "Facilities".
In connection with the Transactions, (a) Chase is pleased to
advise you of its commitment (the "Chase Commitment") to provide 65% of each
of the Facilities on the terms and subject to the conditions set forth or
referred to in this Commitment Letter
<PAGE>
2
(this "Commitment Letter") and in the Holdco Facility Term Sheet or the
Summary of Principal Terms and Conditions attached hereto as Exhibit B (the
"RES Facility Term Sheet" and, together with the Holdco Facility Term Sheet,
the "Term Sheets"), as applicable, (b) DCFI is pleased to advise you of its
commitment (the "DCFI Commitment") to provide 35% of the Holdco Facility on
the terms and subject to the conditions set forth or referred to in this
Commitment Letter and in the Holdco Facility Term Sheet and (c) DBFI is
pleased to advise you of its commitment (collectively with the Chase
Commitment and the DCFI Commitment, the "Commitments") to provide 35% of the
RES Facility on the terms and subject to the conditions set forth or referred
to in this Commitment Letter and in the RES Facility Term Sheet. You hereby
appoint CSI to act, and CSI hereby agrees to act, as sole and exclusive
advisor and arranger for each of the Facilities on the terms and subject to
the conditions set forth or referred to in this Commitment Letter and in the
Term Sheets.
Chase will act as the sole and exclusive Administrative
Agent and Collateral Agent for each of the Facilities, DLJ will act as the
sole and exclusive Documentation Agent for each of the Facilities and CSI will
act as the sole and exclusive Arranger and Syndication Agent for each of the
Facilities, and each will, in such capacities, perform the duties customarily
associated with such roles. No other agents or co-agents will be appointed,
and no other titles will be awarded to any Lender (as defined below), unless
approved by the Agents, CSI and you. It is further understood and agreed that
no Lender will receive compensation outside the terms contained herein and in
the Fee Letters (as defined below) in order to obtain its commitment to
participate in the Facilities.
Although the Agents do not presently contemplate syndicating
their Commitments, the Agents reserve the right, after consultation with you
and prior to or after the execution of definitive documentation for the
Facilities, to syndicate all or a portion of their respective Commitments to
one or more financial institutions, reasonably acceptable to the Agents and
you, that will become parties to such definitive documentation pursuant to a
syndication or syndications to be managed by CSI and DLJ (the financial
institutions becoming parties to such definitive documentation being
collectively called the "Lenders"). You agree that, if the Agents decide after
consultation with you to syndicate either or both of the Facilities, upon the
request of the Agents, you will actively assist CSI and the Agents in
achieving timely and orderly syndications (at times mutually agreed upon) of
such Facilities that are satisfactory to CSI, the Agents and you. This will be
accomplished by a variety of means, including direct contact during the
syndication or syndications (at times mutually agreed upon) among the senior
officers, representatives and advisors of you, Blackstone Management Partners
L.P. ("BMP"), MergerSub and (after the Closing Date) RES, on the one hand, and
the proposed Lenders, on the other hand. Such assistance shall also include
your using reasonable efforts to have the syndication and arrangement efforts
benefit from the Fund's and (after the Closing Date) RES's existing lending
relationships. Notwithstanding any terms to the contrary herein, it is
understood and agreed that, without the prior consent of Holdco, the
<PAGE>
3
Agents shall at all times together hold Commitments and Loans representing (a)
at least 50.1% of the aggregate amount of the original Commitments hereunder
in respect of the Holdco Facility and (b) at least 50.1% of the aggregate
amount of the original Commitments hereunder in respect of the RES Facility,
provided that, unless Chase and DLJ shall otherwise agree, each of Chase and
DLJ shall at all times hold Commitments and Loans representing (i) at least
50.1% of the amount of its original Commitment hereunder in respect of the
Holdco Facility and (ii) at least 50.1% of the amount of its original
Commitment hereunder in respect of the RES Facility.
It is understood and agreed that CSI will, in consultation
with DLJ and you, manage all aspects of any syndication, including selection
of Lenders reasonably acceptable to you, determination of when CSI will
approach potential Lenders and of the time of acceptance of the Lenders'
commitments, any naming rights and the final allocations of the commitments
among the Lenders. It is also understood and agreed that the amount and
distribution of fees among the Lenders will be at CSI's sole discretion, after
consultation with DLJ and you. To assist CSI in its syndication efforts, you
agree, upon CSI's reasonable request, (a) promptly to provide, and to cause
your affiliates and advisors to provide (and to use reasonable efforts to
cause RES to provide), to CSI and the Agents financial and other information
in your or their possession with respect to you, MergerSub, RES, the Equity
Tender Offer, the Merger, the other Transactions and any other transactions
contemplated hereby, including but not limited to information and projections
prepared by you or BMP or by your or its advisors on your or its behalf
relating to you, MergerSub, RES, the Equity Tender Offer, the Merger, the
other Transactions or the other transactions contemplated hereby, (b) to make
your senior officers, and to use reasonable efforts to cause RES's senior
officers to be made, available to prospective Lenders, (c) to assist, and to
use reasonable efforts to cause RES's and your affiliates and advisors to
assist, CSI in the preparation of a Confidential Information Memorandum and
other marketing materials to be used in connection with the syndication or
syndications and (d) to host, with CSI, a meeting or meetings of prospective
Lenders.
As consideration for the Commitments and CSI's agreement to
structure, arrange and syndicate the Facilities and to provide advisory
services in connection therewith, you agree to pay (or cause RES to pay) the
fees as set forth in the Term Sheets and in the Fee Letters dated the date
hereof and delivered herewith with respect to the Facilities (the "Fee
Letters"). Once paid, such fees shall not be refundable under any
circumstances.
You hereby represent and covenant that (a) to the best of
your knowledge, all information (excluding information of a general economic
nature and financial projections) concerning you, MergerSub, RES, the Equity
Tender Offer, the Merger, the other Transactions and the other transactions
contemplated hereby (the "Information") that has been or will be prepared by
or on behalf of you, MergerSub, BMP or any of your or their authorized
representatives and that has been made or will be made available to
<PAGE>
4
CSI, Chase or DLJ by you, MergerSub, BMP, the Fund or any of your or their
authorized representatives in connection with the transactions contemplated
hereby, when taken as a whole, will be complete and correct in all material
respects (after giving effect to all written updates thereto delivered to the
Agents or CSI prior to the Closing Date) and will not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements contained therein not materially misleading in
light of the circumstances under which such statements are made and (b) to the
best of your knowledge, all financial projections concerning you, MergerSub,
RES, the Equity Tender Offer, the Merger, the other Transactions and the other
transactions contemplated hereby (the "Projections") that have been prepared
by or on behalf of you, MergerSub, BMP or any of your or their authorized
representatives and that have been or will be made available to CSI, Chase or
DLJ by you, MergerSub, BMP or any of your or their authorized representatives
in connection with the transactions contemplated hereby have been and will be
prepared in good faith based upon assumptions believed by you to be
reasonable. You agree to supplement the Information and the Projections from
time to time until the closing of the Facilities so that the representations
and covenants in the preceding sentence remain correct. In arranging the
Facilities, including the syndication of the Facilities, CSI and the Agents
will be using and relying primarily on the Information and the Projections
without independent verification thereof.
Each of the Commitments is subject to (a) there not having
occurred any material adverse effect on the business, financial condition or
results of operations of RES and its subsidiaries, taken as a whole, since
June 30, 1997, (b) there not having occurred and being continuing any material
disruption of, or material adverse change in, the financial, banking or
capital markets conditions since the date hereof, (c) the Agents' satisfaction
that prior to and during any syndication of either of the Facilities, there
shall be no competing issues of debt securities or commercial bank or other
credit facilities of you, MergerSub, RES or any of your or their respective
subsidiaries and (d) the other conditions set forth herein and in the Term
Sheets.
In addition, the Commitments with respect to each of the
Holdco Facility and the RES Facility are subject to the negotiation, execution
and delivery of definitive documentation with respect to each such Facility
reasonably satisfactory to the Agents and you. Such documentation shall
contain such indemnities, covenants, representations and warranties, events of
default (including but not limited to Change in Control (to be defined)),
conditions precedent, security arrangements and other terms and conditions
that are customary for facilities and transactions of this type and reasonably
satisfactory to the Agents and you. Those matters that are not covered by or
made clear under the provisions hereof or of the Term Sheets are subject to
the approval and agreement of the Agents and you (it being understood that the
terms and conditions of the definitive documentation with respect to the
Facilities shall not be inconsistent with the terms and conditions set forth
herein or in the Term Sheets).
<PAGE>
5
You agree to engage one or more investment banks
(collectively, the "Investment Bank") reasonably satisfactory to the Bridge
Lenders (as defined in Exhibit B hereto) to publicly sell or privately place
not less than $342,000,000 aggregate principal amount of debt securities of
RES acceptable to the Bridge Lenders (the "Securities", the proceeds of which
will be used (a) to provide funds (i) first, to finance the Debt Tender Offer
if such sale or placement of Securities is completed on or prior to the
consummation of the Debt Tender Offer and to refinance any outstanding amounts
under the Holdco Facility (and thereby reduce on a dollar for dollar basis the
aggregate amount of the unutilized commitments, if any, of the Bridge Lenders
hereunder in respect of the Initial Loans (as defined in Exhibit B hereto)
under the RES Facility and thereby release an amount of the unutilized
commitment, if any, of each Bridge Lender which is in the same proportion as
the commitment of such Bridge Lender bears to the total commitments
hereunder), (ii) second, to refinance the Existing Notes and (iii) third, for
capital expenditures and other general corporate purposes of RES or (b) to the
extent such sale or placement occurs subsequent to the making of loans under
the RES Facility, (i) first, to refinance loans under the RES Facility and, if
applicable, to refinance any outstanding amounts under the Holdco Facility as
contemplated by clause (a)(i) above, (ii) second, to refinance the Existing
Notes and (iii) third, for capital expenditures and other general corporate
purposes of RES. You shall take any and all actions necessary or desirable so
that the Investment Bank can, as soon as practicable after the consummation of
the Equity Tender Offer, publicly sell or privately place the Securities. Upon
notice by the Investment Bank (a "Securities Demand"), at any time that there
are any loans outstanding under the RES Facility in excess of $35,000,000, you
will cause the issuance and sale of Securities (secured if required by the
Bridge Lenders) for gross proceeds sufficient to refinance all of the
outstanding loans under the Bridge Facility and the Existing Notes in their
entirety upon such terms and conditions as specified in the Securities Demand;
provided that (a) the interest rate (whether floating or fixed) shall be
determined by the Investment Bank in light of the then prevailing market
conditions, but in no event shall the effective yield on the Securities exceed
15.5% per annum; (b) the Investment Bank and you shall determine whether the
Securities shall be issued through a public offering or a private placement;
(c) the Securities will be issued pursuant to an indenture substantially in
the form negotiated by you and the Investment Bank prior to the consummation
of the Transactions and which shall contain such terms, conditions and
covenants as are typical and customary for similar financings and as are
reasonably satisfactory in all respects to the Investment Bank and its counsel
and you and your counsel; and (d) all other arrangements with respect to the
Securities shall be reasonably satisfactory in all respects to the Investment
Bank and you in light of the then prevailing market conditions.
By executing this Commitment Letter you agree (a) to
indemnify and hold harmless CSI, each of the Agents and the other Lenders and
their respective officers, directors, employees, affiliates, agents and
controlling persons from and against any and all losses, claims, damages,
liabilities and expenses, joint or several, to which any such persons may
become subject arising out of or in connection with this Commitment Letter,
<PAGE>
6
the Fee Letters, the Term Sheets, the Equity Tender Offer, the Merger, the
other Transactions, the Facilities or any related transaction or any claim,
litigation, investigation or proceeding relating to any of the foregoing,
regardless of whether any of such indemnified parties is a party thereto, and
to reimburse each of such indemnified parties upon demand for any legal or
other expenses reasonably incurred in connection with investigating or
defending any of the foregoing, provided that the foregoing indemnity will
not, as to any indemnified party, apply to losses, claims, damages,
liabilities or related expenses to the extent they result primarily from the
wilful misconduct or gross negligence of any indemnified party, and (b) to
reimburse CSI and each of the Agents from time to time, upon presentation of a
summary statement in reasonable detail, for all reasonable out-of-pocket
expenses (including but not limited to expenses of due diligence
investigation, local counsel and other consultants' fees (if such local
counsel or consultants are engaged with your prior written consent),
syndication expenses, travel expenses and reasonable fees, disbursements and
other charges of counsel) incurred in connection with the Facilities and the
preparation of this Commitment Letter, the Term Sheets, the Fee Letters, the
definitive documentation for the Facilities and the security arrangements in
connection with the Facilities. No person indemnified under this paragraph
shall be responsible or liable to any other person for consequential damages
that may be alleged as a result of this Commitment Letter, the Fee Letters,
the Term Sheets, the Equity Tender Offer, the Merger, the other Transactions,
the Facilities or any related transaction. Subject to the provisions of the
thirteenth paragraph of this Commitment Letter, the provisions contained in
this paragraph shall remain in full force and effect notwithstanding the
termination of this Commitment Letter or the Commitments.
You agree that you will not disclose this Commitment Letter,
the Term Sheets, the Fee Letters, the contents of any of the foregoing or the
activities of CSI, Chase or DLJ pursuant hereto or thereto to any person
without the prior approval of CSI, Chase and DLJ, except that (a) you may
disclose this Commitment Letter, the Term Sheets, the Fee Letters and the
contents hereof and thereof (i) to MergerSub and your and its respective
officers, employees, attorneys and advisors and to the respective officers,
employees, attorneys, advisors and members of The Blackstone Group L.P. and
its affiliates, in each case on a confidential and need-to-know basis and (ii)
as required by applicable law or compulsory legal process or in the
prosecution of any proceeding initiated by you, the Fund, MergerSub or RES,
(b) you may disclose this Commitment Letter, the Term Sheets and the contents
hereof and thereof to RES and the United Steelworkers of America and their
respective directors, officers, employees, agents, attorneys and advisors on a
confidential basis in connection with the consummation of the Transactions
contemplated hereby and (c) after your acceptance of the terms of this
Commitment Letter and of the Fee Letters, you may disclose the existence of
this Commitment Letter and a summary of the principal terms and conditions of
the Commitments hereunder (or the full Commitment Letter if advisable in the
reasonable opinion of you and your counsel or RES and its counsel, as
applicable) in any public filings to be made in connection with the Equity
Tender Offer, the Debt Tender Offer or
<PAGE>
7
RES's solicitation of proxies from or provision of information to its
stockholders for purposes of or in connection with obtaining the approval of
such stockholders for the Transactions, provided that any such disclosure that
is in writing shall be subject to the Agents' prior review and approval (such
approval not to be unreasonably withheld), it being expressly understood and
agreed that neither the Fee Letters nor the contents thereof may be so
disclosed pursuant to clause (b) or (c) above without the consent of CSI,
Chase and DLJ. The provisions contained in this paragraph shall remain in full
force and effect notwithstanding the termination of this Commitment Letter or
the Commitments.
Neither this Commitment Letter nor the Commitments shall be
assignable by you without the prior written consent of Chase and DLJ, and any
attempted assignment shall be void, provided that this Commitment Letter and
the Commitments hereunder, to the extent they relate to the RES Facility, may
be assigned by you to RES pursuant to a document reasonably satisfactory to
the Agents, so long as you remain liable for all your obligations hereunder.
This Commitment Letter may not be amended or any provision hereof waived or
modified except by an instrument in writing signed by each of CSI, Chase, DLJ
and you. This Commitment Letter may be executed in any number of counterparts,
each of which shall be an original and all of which, when taken together,
shall constitute one agreement. Delivery of an executed counterpart of a
signature page of this Commitment Letter by facsimile transmission shall be
effective as delivery of a manually executed counterpart of this Commitment
Letter. This Commitment Letter is intended to be solely for the benefit of the
parties hereto and is not intended to confer any benefits upon, or create any
rights in favor of, any person other than the parties hereto. This Commitment
Letter shall be governed by, and construed in accordance with, the laws of the
State of New York. Chase may perform certain of the duties and activities
described hereunder through any of its affiliates, including, without
limitation, CSI. The provisions of the second preceding paragraph shall apply
with equal force and effect to any of such affiliates so performing any of
such duties or activities.
Your obligations and representations under this Commitment
Letter as they relate to each Facility, other than those arising under the
fourth, fifth and eleventh paragraphs of this Commitment Letter, shall
automatically terminate and be superseded by the provisions of the definitive
documentation for such Facility upon the closing of such Facility.
Please indicate your acceptance of the terms hereof and of
the Fee Letters by signing in the appropriate space below and in the Fee
Letters and returning to CSI and the Agents the enclosed duplicate originals
of this Commitment Letter and the Fee Letters not later than 5:00 p.m., New
York City time, on July 30, 1998. The Commitments will expire at such time in
the event that the Agents have not received such executed duplicate originals
in accordance with the immediately preceding sentence. In the event that the
initial borrowing under the Credit Agreement does not occur on or before
December 15, 1998 (or such later date as may be agreed to among the Agents,
CSI and you), then this
<PAGE>
8
Commitment Letter and the Commitments shall automatically terminate unless
each of CSI, Chase and DLJ shall agree to an extension.
<PAGE>
9
CSI and the Agents are pleased to have been given the
opportunity to assist you in connection with the financing for the
Transactions.
Very truly yours,
THE CHASE MANHATTAN BANK,
by /s/ Lenard Weiner
------------------------
Name: Lenard Weiner
Title: Managing Director
CHASE SECURITIES INC.,
by /s/ Rohan Paul
------------------------
Name: Rohan Paul
Title: Managing Director
DLJ CAPITAL FUNDING, INC.,
by /s/ Harold J. Philipps
------------------------
Name: Harold J. Philipps
Title: Managing Director
DLJ BRIDGE FINANCE, INC.,
by /s/ Cameron Fleming
----------------------
Name: Cameron Fleming
Title: Vice President
Accepted and agreed to as of the date first written above:
RES HOLDING CORPORATION,
by
<PAGE>
10
/s/ David Stockman
----------------------------
Name: David Stockman
Title: President
<PAGE>
CONFIDENTIAL
July 23, 1998 EXHIBIT A
$65,000,000 Holdco Facility
---------------------------
Summary of Principal Terms and Conditions
-----------------------------------------
Borrower: RES Holding Corporation, a newly formed
Delaware corporation ("Holdco") that
will be, directly or indirectly, (a) at
least 51% owned by Blackstone Capital
Partners II Merchant Banking Fund L.P.
(the "Fund") and one or more other
persons or entities (collectively with
the Fund, the "Investors"), which will
consist principally of affiliates of
the Fund, and (b) up to 49% owned by
investors designated by affiliates of
Veritas Capital Inc. or the Fund.
Transactions: Holdco intends to acquire all the
outstanding common stock, par value
$0.01 per share (the "Shares"), of
Republic Engineered Steels, Inc., a
Delaware corporation ("RES"), pursuant
to an Agreement and Plan of Merger (the
"Merger Agreement") among Holdco, RES
Acquisition Corporation, a newly formed
Delaware corporation that is a direct
wholly owned subsidiary of Holdco
("MergerSub") and RES.
Pursuant to or in connection with the
Merger Agreement, MergerSub will make a
tender offer (the "Equity Tender
Offer") to acquire all the outstanding
Shares (the number of which is
anticipated to be approximately
19,708,000) for a purchase price per
Share of $7.25. The consummation of the
Equity Tender Offer will be conditioned
upon, among other things, the purchase
by MergerSub of (a) not less than a
majority (or such other higher portion
as shall be necessary under the
governing documents of RES and
applicable law to approve the Merger
(as defined below) without the vote of
any other stockholder) of the Shares,
determined on a fully diluted basis
assuming the exercise of all options,
warrants, rights, conversion privileges
or similar rights with respect to
Shares, and (b) a sufficient number of
the Shares held by RES's employee stock
ownership plan or other employee
benefit plans to ensure that the holder
of the outstanding share of special
preferred stock (the "Special Preferred
Stock") issued by RES will not be
entitled to vote with respect to the
Merger.
<PAGE>
2
In addition, prior to the consummation
of the Equity Tender Offer, either (a)
the lenders under the Second Amended
and Restated Revolving Credit Agreement
(the "Existing Credit Agreement") dated
as of April 25, 1997, among RES,
BankBoston, N.A., as agent, and such
lenders will (i) waive any "Default" or
"Event of Default" under and as defined
in the Existing Credit Agreement that
may occur as a result of the
consummation of the Equity Tender Offer
or the Merger and (ii) amend (together
with the waiver referred to in clause
(a)(i) above, the "Waiver and
Amendment") the Existing Credit
Agreement to permit the incurrence by
RES of indebtedness under the RES
Facility (as defined below) (or any
refinancing thereof), the proceeds of
which are used to finance the purchase
by RES of any of its 9-7/8% First
Mortgage Notes due 2001 (the "Existing
Notes") issued under the indenture
dated as of December 15, 1993 (the
"Indenture"), governing the Existing
Notes that are tendered pursuant to the
Debt Tender Offer (as defined below) or
(b) RES will replace the Existing
Credit Agreement with a replacement
revolving credit facility (the
"Replacement Credit Facility").
As promptly as practicable following
the acceptance of Shares pursuant to
the Equity Tender Offer, (a) MergerSub
will merge (the "Merger") with and into
RES, with RES as the surviving
corporation of the Merger, and, as a
result of the Merger, RES will become a
wholly owned subsidiary of Holdco, (b)
subject to stockholders' appraisal
rights, each outstanding Share not
acquired in the Equity Tender Offer
(the "Untendered Shares") will be
converted into the right to receive an
amount in cash equal to the per-Share
price paid in connection with the
Equity Tender Offer and (c) each
outstanding option to acquire Shares
will be converted into the right to
receive either (i) an amount in cash
equal to the positive difference, if
any, between the Cash Merger
Consideration and the exercise price of
such option or (ii) options to acquire
shares of capital stock of Holdco on
terms satisfactory to the
Administrative Agent (as defined below)
(the aggregate amount paid pursuant to
clauses (b) and (c), the "Cash Merger
Consideration").
<PAGE>
3
In connection with the foregoing, (a)
substantially simultaneously with the
purchase by MergerSub of Shares
pursuant to the Equity Tender Offer,
(i) the Investors will make common
equity contributions to Holdco in cash
in an aggregate amount of not less than
the product of (A) 95.5 divided by
160.5 and (B) the sum of (such sum, the
"Closing Date Funded Amount") (1) the
amount of the Closing Date Purchase
Price (as defined below), (2) all
interest and fees that will be payable
in respect of loans made on the Closing
Date under the Holdco Facility and (3)
any other fees and expenses expected to
be incurred by Holdco or MergerSub on
or after the Closing Date and prior to
the Merger Date (the "Closing Date
Equity Contribution"); (ii) Holdco will
obtain the Holdco Facility (as defined
below); and (iii) Holdco will make
common equity contributions to
MergerSub in cash in an aggregate
amount sufficient to enable MergerSub
to purchase the Shares pursuant to the
Equity Tender Offer; (b) following the
consummation of the Equity Tender
Offer, RES will borrow up to
$202,000,000 from one or more lenders
under a new senior secured facility
(the "RES Facility"), on the terms set
forth or referred to in Exhibit B to
the Commitment Letter to which this
Exhibit A is attached, to finance the
purchase of any Existing Notes tendered
pursuant to the Debt Tender Offer; (c)
following the consummation of the
Equity Tender Offer, either (i) the
Existing Credit Agreement will remain
in effect (as waived and amended as
contemplated hereby) or (ii) the
Replacement Credit Facility will become
effective, in either case with
$115,000,000 of commitments (used and
unused) available thereunder; (d)
immediately prior to the Merger, (i)
the Investors will make common equity
contributions in cash in an aggregate
amount of not less than $95,500,000
(the "Total Equity Contribution") minus
the amount of the Closing Date Equity
Contribution (the "Merger Date Equity
Contribution") and (ii) Holdco will
make a common equity contribution to
MergerSub in an amount equal to the
aggregate Cash Merger Consideration
payable under the Merger Agreement to
the holders of Untendered Shares and
options to acquire Shares; (e) as soon
as practicable following the
consummation of the Equity Tender Offer
(and, in any event, prior to the
special meeting of RES's
<PAGE>
4
stockholders to vote on the Merger),
RES will redeem the Special Preferred
Stock; and (f) costs and expenses (the
"Transaction Costs") incurred in
connection with the Transactions (as
defined below) will be paid. The Equity
Tender Offer, the Debt Tender Offer,
the Merger and the other transactions
described above are collectively
referred to herein as the
"Transactions".
Following the date of acceptance of
Shares for payment pursuant to the
Equity Tender Offer (such date, the
"Closing Date"), RES will make a tender
offer (the "Debt Tender Offer") for all
the outstanding Existing Notes in
accordance with the terms of the change
of control and other provisions of the
Indenture.
Facility: A Senior Secured Term Loan Facility
(the "Holdco Facility") providing for
term loans to Holdco in an aggregate
principal amount of $65,000,000.
Arranger: Chase Securities Inc. ("CSI") will act
as arranger and syndication agent for
the Holdco Facility, and will perform
the duties customarily associated with
such roles.
Administrative Agent: The Chase Manhattan Bank ("Chase")
will act as administrative agent and
collateral agent (collectively, the
"Administrative Agent") for a syndicate
of financial institutions reasonably
satisfactory to Chase and Holdco (the
"Lenders"), and will perform the duties
customarily associated with such roles.
Documentation Agent: DLJ Capital Funding, Inc. will act as
documentation agent (together with
Chase, the "Agents") for the Lenders.
Purpose: The proceeds of the borrowings under the
Holdco Facility will be used, together
with the proceeds of the Equity
Contribution, solely (a) on the Closing
Date, to finance the cash purchase
price (the "Closing Date Purchase
Price") to be paid by MergerSub in
respect of the Shares purchased in the
Equity Tender Offer, (b) on the date of
consummation of the Merger (the "Merger
Date"), to finance the aggregate Cash
Merger Consideration to be paid by
MergerSub to holders of the Untendered
Shares, if any, and holders of options
to
<PAGE>
5
acquire Shares in connection with the
Merger, including any amounts to be
paid on or after the Merger Date in
connection with the exercise by such
holders of appraisal rights, and (c)
from time to time on and after the
Closing Date, to pay (i) the
Transaction Costs and (ii) interest on
loans made under the Holdco Facility.
The estimated sources and uses of the
funds necessary to consummate the
Transactions and the other transactions
contemplated hereby are set forth on
Annex II hereto.
Fees and Interest Rates: As set forth on Annex I hereto.
Availability: At Holdco's option, loans under the
Holdco Facility will be available prior
to the Maturity Date (as defined below)
either in (a) a single drawing to be
made on the Closing Date or (b) up to
two drawings, (i) the first (the "First
Borrowing") of which will be made on
the Closing Date and will be in an
amount equal to the product of (A) the
Closing Date Equity Contribution and
(B) 65.0 divided by 95.5 and (ii) the
second (the "Second Borrowing") of
which will be made on the Merger Date
(if different from the Closing Date)
and will be in an amount equal to the
product of (A) the Merger Date Equity
Contribution and (B) 65.0 divided by
95.5. Amounts repaid or prepaid under
the Holdco Facility may not be
reborrowed. If Holdco borrows the
aggregate principal amount of loans
available under the Holdco Facility in
a single drawing on the Closing Date,
any amount (the "Excess Amount") in
excess of the Closing Date Funded
Amount will be deposited in a
collateral account (the "Collateral
Account") to be maintained by Chase for
the benefit of the Lenders. The Excess
Amount will be released by Chase from
the Collateral Account subject to the
following conditions: (a) the Merger
shall be consummated simultaneously
with such release in accordance with
applicable law, the Merger Agreement
and all related documentation, in each
case in the form previously approved by
Chase, and otherwise on terms
reasonably satisfactory to Chase; and
(b) the accuracy of the representation
and warranty relating to use of
proceeds.
Final Maturity: Loans made under the Holdco Facility
will mature on the date (the "Maturity
Date") that is the earlier of (a) nine
<PAGE>
6
months after the Closing Date and (b)
twelve months after the date hereof.
Security: The obligations of Holdco under the
Holdco Facility will be secured by a
valid, perfected first-priority
security interest in (a) all cash held
by Holdco (which will be deposited in
the Collateral Account) and (b) all the
capital stock of RES that is owned by
Holdco (collectively, the
"Collateral").
Such security interest will be created
pursuant to documentation reasonably
satisfactory in all respects to the
Administrative Agent, and on the
Closing Date such security interest
shall have become perfected and the
Administrative Agent shall have
received reasonably satisfactory
evidence as to the enforceability and
priority thereof. The Collateral will
not be subject to any other liens.
Optional Prepayment: Loans under the Holdco Facility may
be prepaid in whole or in part at any
time in minimum amounts to be agreed upon
at Holdco's option. Any optional
prepayment of loans bearing interest
based on Adjusted LIBOR other than at the
end of an interest period will be subject
to reimbursement of the Lenders'
redeployment costs.
Facility Documentation: Usual for facilities and transactions of
this type and reasonably acceptable to
Holdco and its counsel, Chase and counsel
for the Administrative Agent. The
documentation will include, among other
documents, a single credit agreement (the
"Credit Agreement"), a pledge agreement
and other appropriate documents.
Representations and Usual for facilities and transactions of
Warranties: this type (including materiality concepts
and other exceptions to be agreed upon)
and reasonably acceptable to Holdco and
its counsel, the Agents and counsel for
the Administrative Agent, including but
not limited to accuracy of financial
statements; no material adverse change;
absence of litigation and arbitrations;
no violation of agreements or
instruments; compliance with laws
(including but not limited to ERISA,
margin regulations, bank regulatory
limitations and environmental laws);
payment of taxes; ownership of
<PAGE>
7
properties; insurance; inapplicability
of the Investment Company Act;
solvency; environmental matters;
accuracy of information; and validity,
priority and perfection of the security
interest in the Collateral.
Conditions Precedent to First Usual for facilities and transactions of
Borrowing: this type and reasonably acceptable to
Holdco and its counsel, the Agents and
counsel for the Administrative Agent,
including but not limited to delivery
of reasonably satisfactory legal
opinions and reasonably satisfactory
financial information; accuracy of
representations and warranties;
evidence of authority; material
consents of all persons; compliance
with applicable material laws and
regulations; payment of fees and
expenses; and obtaining of reasonably
satisfactory insurance.
The Equity Tender Offer, the Waiver and
Amendment (or the Replacement Credit
Facility) and the other transactions to
occur on the Closing Date shall be
consummated simultaneously with the
closing under the Holdco Facility in
accordance with applicable law, the
Merger Agreement and all related
documentation, in each case in the form
previously approved by, and reasonably
acceptable to, Chase, and otherwise on
terms reasonably satisfactory to Chase.
The conditions to Holdco's obligations
set forth in the Merger Agreement shall
have been satisfied without giving
effect to waivers or amendments not
approved by Chase that are materially
adverse to the Lenders.
After giving effect to the Transactions
to occur on the Closing Date, (a) RES
and its subsidiaries shall have
outstanding no preferred stock and no
indebtedness other than (i) loans under
the Existing Credit Agreement, (ii)
$53,700,000 aggregate principal amount
of RES's 9% Solid Waste Revenue Bonds,
Series 1996, Due 2021, (iii)
$20,200,000 aggregate principal amount
of RES's 8 1/4% Solid Waste Revenue
Bonds, Series 1994, Due 2014, (iv)
$200,000,000 in principal amount of the
Existing Notes, (v) other limited
indebtedness reasonably satisfactory to
the Agents and (vi) if it is not
reasonably practicable for RES to
redeem the Special Preferred Stock on
the Closing Date or if the Special
Preferred Stock is to be canceled in
the Merger, the Special Preferred
Stock, provided that if the Special
<PAGE>
8
Preferred Stock is outstanding
following the Closing Date, the holder
of the Special Preferred Stock will not
be entitled to vote with respect to the
Merger, (b) Holdco shall have
outstanding (i) no preferred stock and
no indebtedness other than the loans
under the Holdco Facility and (ii) no
common stock other than common stock
owned by the Investors and (c)
MergerSub shall have outstanding (i) no
preferred stock or indebtedness and
(ii) no common stock other than common
stock owned by Holdco. After giving
effect to the Merger and prior to the
payment in full of all amounts
outstanding under the Holdco Facility,
RES shall have outstanding no common
stock other than common stock owned by
Holdco.
The Agents shall have received a pro
forma consolidated balance sheet of
Holdco giving effect to the
Transactions, together with a
certificate of Holdco to the effect
that such pro forma balance sheet
fairly presents in all material
respects the pro forma financial
position of Holdco and its subsidiaries
in accordance with generally accepted
accounting principles, and the Agents
shall be reasonably satisfied that such
balance sheet and the transactions in
connection with the Transactions and
the financing arrangements contemplated
hereby are consistent with the sources
and uses shown on Annex II hereto in
all material respects and are not
materially inconsistent with the
information or projections and the
financial model delivered to the Agents
prior to the date hereof. Holdco will
also have provided such other financial
information as the Agents may
reasonably request in connection with
the Transactions.
All requisite material governmental
authorities shall have approved or
consented to the Transactions and the
other transactions contemplated hereby
to the extent required, all applicable
appeal periods shall have expired and
there shall be no governmental or
judicial action, actual or threatened,
that has or could have a reasonable
likelihood of restraining, preventing
or imposing materially burdensome
conditions on the Transactions or the
consummation of the other transactions
contemplated hereby.
<PAGE>
9
RES shall have used its commercially
reasonable efforts to secure
availability of at least $20,000,000
under the Existing Credit Agreement to
fund up to $20,000,000 of the Debt
Tender Offer in lieu of any funds being
drawn under the RES Facility for that
purpose.
Conditions Precedent to The Second Borrowing will be subject
Second Borrowing: only to the following conditions
precedent:(a) substantially
simultaneously with the Second
Borrowing, the Investors will have made
the Merger Date Equity Contribution;
(b) at the time of and immediately
after the Second Borrowing, there not
having occurred and being continuing a
Default or Event of Default under the
Credit Agreement in respect of (i) any
payment to be made under the Credit
Agreement (without regard to any
applicable grace periods), (ii) any
bankruptcy event in respect of Holdco,
RES or any of their respective
subsidiaries (without regard to any
applicable grace periods in the case of
an involuntary proceeding), (iii) the
Credit Agreement or any other loan
document relating to the Holdco
Facility not being in all material
respects, and not being asserted by
Holdco not to be, a legal, valid and
binding obligation or (iv) any Change
in Control (to be defined); (c) the
Lenders not having accelerated all or
any of the loans under the Credit
Agreement; (d) there not having
occurred and being continuing any
payment default or payment event of
default with respect to the Existing
Notes, the Existing Credit Agreement or
the RES Facility (or any indebtedness
refinancing the RES Facility), as the
case may be; (e) there not being in
effect a temporary restraining order,
preliminary or permanent injunction or
other order issued by any court of
competent jurisdiction or other legal
restraint or prohibition preventing or
rendering illegal the consummation of
the Merger, and there shall not be
pending any proceeding by any
governmental entity seeking any of the
foregoing; and (f) the accuracy in all
material respects of the
representations and warranties relating
to corporate organization and corporate
and governmental authorization.
In addition, the Merger shall be
consummated simultaneously with the
making of such loans pursuant to the
Second Borrowing in accordance with
applicable
<PAGE>
10
law, the Merger Agreement and all
related documentation, in each case in
the form previously approved by Chase,
and otherwise on terms reasonably
satisfactory to Chase.
Affirmative Covenants: Usual for facilities and transactions of
this type (including materiality
concepts and other exceptions to be
agreed upon) and reasonably acceptable
to Holdco and its counsel, Chase and
counsel for the Administrative Agent.
Covenants will address, with respect to
Holdco and its subsidiaries, without
limitation, maintenance of corporate
existence and rights; performance of
obligations; delivery of financial
information prepared in accordance with
United States generally accepted
accounting principles, including annual
and quarterly consolidated financial
statements, and compliance
certificates; delivery of notices of
default, litigation and other adverse
matters; maintenance of properties in
good working order; maintenance of
reasonably satisfactory insurance;
compliance with applicable laws and
regulations; inspection of books and
properties; payment of taxes and other
liabilities; and further assurances in
respect of guarantees and security
interests.
Holdco will effect the Merger as soon
as reasonably practicable after the
Closing Date.
Holdco will provide to the Lenders
annually, prior to the end of each
fiscal year, an operating and capital
expenditure budget for RES for the next
succeeding fiscal year.
Negative Covenants: Usual for facilities and transactions of
this type (including materiality
concepts and basket and other
exceptions to be agreed upon) and
reasonably acceptable to Holdco and its
counsel, Chase and counsel for the
Administrative Agent. Covenants will
address, with respect to Holdco and its
subsidiaries, without limitation,
limitations on dividends and
distributions on capital stock;
limitations on redemptions and
repurchases of capital stock and debt;
limitations on prepayment of debt (with
exceptions for the repurchase of
Existing Notes pursuant to the Debt
Tender Offer and the prepayment of
loans under the RES Facility with the
proceeds of any
<PAGE>
11
senior secured notes (the "New Notes")
to be issued by RES in a public
offering or a Rule 144A private
placement and other exceptions to be
agreed upon); limitations on liens and
sale/leaseback transactions;
limitations on loans and investments
other than Permitted Investments (to be
defined); limitations on debt (which
limitations will (a) prohibit the
incurrence of any indebtedness by
Holdco and MergerSub other than, in the
case of Holdco, indebtedness under the
Holdco Facility and (b) permit (i) the
issuance of the New Notes or the
incurrence of indebtedness under the
RES Facility, (ii) subject to certain
conditions, the refinancing, renewal or
extension of the New Notes or the RES
Facility and (iii) borrowings incurred
under the Existing Credit Agreement);
limitations on mergers, acquisitions
and asset sales (which limitations
shall prohibit any sale by Holdco of
capital stock of RES); limitations on
transactions with affiliates (which
limitations shall permit certain
transactions between RES and BarTech to
be agreed upon); limitations on fees
payable to the Fund and its affiliates;
limitations on changes in business
conducted (which limitations shall
restrict (a) MergerSub from conducting
any activities prior to the
consummation of the Merger and (b)
Holdco from conducting any activities
other than holding the capital stock of
RES and complying with its obligations
in respect of the Holdco Facility and
other activities reasonably incidental
to the foregoing); and limitations on
amendment of debt (which limitations
shall permit amendments that increase
RES's operating flexibility) and other
material agreements (including the
Merger Agreement).
In addition, the Credit Agreement will
provide that the aggregate capital
expenditures made by Holdco and its
subsidiaries from March 31, 1998, through
the final maturity of the Holdco Facility
will not exceed an amount to be agreed
upon.
Events of Default: Usual for facilities and transactions of
this type (including grace periods and
materiality concepts to be agreed upon)
and reasonably acceptable to Holdco and
its counsel, Chase and counsel for the
Administrative Agent, including but not
limited to nonpayment of principal,
interest, fees or other amounts when
due;
<PAGE>
12
violation of covenants; inaccuracy of
representations and warranties; cross
default and cross acceleration to
indebtedness of RES or any of its
subsidiaries; bankruptcy events
relating to Holdco and its
subsidiaries; judgments; ERISA; actual
or asserted invalidity of loan
documents or security interests or of
material agreements; and Change in
Control.
Cost and Yield Usual for facilities and transactions of
Protection: this type, including but not limited to
compensation in respect of prepayments
(which will include reimbursement of
the Lenders' redeployment costs in the
case of prepayments of loans bearing
interest based on Adjusted LIBOR other
than at the end of an interest period),
taxes, changes in capital requirements,
guidelines or policies or their
interpretation or application,
illegality, change in circumstances,
reserves and other provisions deemed
necessary by the Administrative Agent
or the other Lenders to provide
customary protection for U.S. and
non-U.S. banks.
Assignments and Lenders will be permitted to assign their
Participations: loans, notes and commitments to other
financial institutions, in aggregate
amounts not less than $5,000,000, or in
lesser amounts if approved by the
Administrative Agent and Holdco, and in
increments of $1,000,000, with the
consent of Holdco (which shall not be
unreasonably withheld) and the
Administrative Agent. The
Administrative Agent will hold
commitments as of the date of execution
of the Credit Agreement in an aggregate
amount greater than the aggregate
commitments of any other Lender. The
Administrative Agent will receive a
processing and recordation fee of
$3,500, payable by the assignor and/or
the assignee, with each assignment.
Assignments will be by novation.
Lenders will be permitted to
participate their loans, notes and
commitments to other financial
institutions without restriction.
Participants will have the same
benefits as the selling Lenders would
have (and will be limited to the amount
of such benefits) with regard to yield
protection and increased costs. Voting
rights of participants will be limited
to proposed (a) increases in
commitments, (b) reductions of
principal, interest rates
<PAGE>
13
or fees, (c) extensions of final
maturity and (d) releases of any
Collateral.
Voting: Amendments and waivers of the Credit
Agreement and the other definitive
credit documentation will require the
approval of Lenders holding more than
50% of the loans and commitments.
Expenses and All reasonable out-of-pocket expenses
Indemnification: (including but not limited to expenses
incurred in connection with due
diligence and the reasonable fees,
disbursements and other charges for no
more than a single local counsel for
the Agents in each applicable
jurisdiction) of the Agents and the
Arranger associated with the
syndication of the Holdco Facility or
with the preparation, execution and
delivery, administration, waiver or
modification and enforcement of the
Credit Agreement and the other
documentation contemplated hereby and
thereby are to be paid by Holdco. In
addition, all reasonable out-of-pocket
expenses of the Lenders for enforcement
costs (including but not limited to the
reasonable fees, disbursements and
other charges for one counsel for each
Lender) and documentary taxes
associated with the Holdco Facility are
to be paid by Holdco.
Holdco will indemnify the Agents, the
Arranger and the Lenders and hold them
harmless from and against all
reasonable out-of-pocket costs,
expenses (including but not limited to
reasonable fees and disbursements of
counsel) and liabilities arising out of
or relating to the Transactions and the
other transactions contemplated hereby,
including but not limited to the Equity
Tender Offer, the Merger, the other
Transactions or any transactions
connected therewith, provided that no
such person will be indemnified for
costs, expenses or liabilities arising
from such person's gross negligence or
wilful misconduct.
Governing Law and New York.
Forum:
Counsel for Cravath, Swaine & Moore.
Administrative Agent
and Arranger:
<PAGE>
14
ANNEX I
TO EXHIBIT A
Interest Rates: At Holdco's option, the interest rates
per annum applicable to the Holdco
Facility shall be Adjusted LIBOR plus
4.00% or ABR plus 3.00%.
Holdco may elect interest periods of 1,
2, 3 or 6 months for Adjusted LIBOR
borrowings.
Calculation of interest shall be on the
basis of actual days elapsed in a year
of 360 days (or 365 or 366 days, as the
case may be, in the case of ABR loans
based on the Prime Rate) and interest
shall be payable at the end of each
interest period and, in any event, at
least every 3 months.
ABR is the Alternate Base Rate, which
is the higher of Chase's Prime Rate and
the Federal Funds Effective Rate plus
1/2 of 1%.
Adjusted LIBOR will at all times
include statutory reserves.
Commitment Fees: 0.50% per annum on the undrawn
portion of the commitments in respect
of the Holdco Facility commencing to
accrue on the date of execution of the
Credit Agreement and payable quarterly
in arrears after such date (commencing
on the date of the initial borrowing
under the Holdco Facility).
<PAGE>
ANNEX II
TO EXHIBIT A
Sources and Uses of Funds on the Closing Date
---------------------------------------------
(in millions of dollars)
For Consolidated Entity
<TABLE>
<CAPTION>
Uses of Funds Sources of Funds
------------- ----------------
<S> <C> <C> <C>
Consideration for Shares 1/ $ 143.5 Holdco Facility 2/ $ 65.0
- -
Net Option Payments 1.0
------
Total Equity Purchase Price $ 144.5 Fund Equity Contribution 70.0
Veritas Equity Contribution 25.5
--------
Total Equity Contribution 95.5
RES Facility Ticking Fee 0.1 Total Sources $ 160.5
=======
RES Facility Commitment Fee 2.0
Holdco Facility Underwriting Fee 0.5
Holdco Facility Ticking Fee 0.1
Prepaid Interest on Holdco Facility 2.9
Retained Cash 10.4
-------
Total Uses $ 160.5
=======
</TABLE>
- --------
1/ Assumes that 100% of the Shares will be acquired by MergerSub on the
Closing Date.
2/ Represents portion of $65,000,000 Holdco Facility that will be funded
on the Closing Date and assumes that 100% of the Shares will be acquired by
MergerSub on the Closing Date.
<PAGE>
1 EXHIBIT B
2 RES Facility (the "Bridge Facility")1
-------------------------------------
3
4 Summary of Principal Terms and Conditions
-----------------------------------------
Bridge Facility: The Bridge Facility will provide
for loans (the "Initial Loans") to the
Borrower (as defined below) on the Debt
Tender Offer Closing Date (as defined
below) in an aggregate principal amount
not to exceed $202,000,000. Chase and
DLJ (together, the "Initial Lenders")
and each assignee of any portion of the
Initial Loans or of an Initial Lender's
commitment to make the Initial Loans
are collectively referred to as the
"Bridge Lenders".
Borrower: RES.
Guarantors: The obligations of the Borrower
in respect of the Initial Loans will be
unconditionally and irrevocably
guaranteed on a senior basis by each
domestic subsidiary of the Borrower.
Arranger: Chase Securities Inc. ("CSI")
(the "Arranger").
Use of Proceeds: The proceeds of the Initial Loans,
together with cash on hand (if needed),
will be used to provide funds for the
purchase of any Notes that are validly
tendered pursuant to the Debt Tender
Offer.
- -----------------------------------
1 All capitalized terms used herein but not defined herein shall have the
meanings provided in the Commitment Letter (and the Holdco Facility
Term Sheet) to which this summary is attached.
<PAGE>
-2-
Availability: The Initial Loans will be
available in a single drawing on the
purchase or expiration date with
respect to the Debt Tender Offer (the
"Debt Tender Offer Closing Date"). Any
commitments of the Bridge Lenders to
make Initial Loans not utilized on any
such date shall terminate.
Maturity/Exchange: All the Initial Loans will mature on the
date that is one year following the
Debt Tender Offer Closing Date (the
"Maturity Date"). If any Initial Loan
has not been previously repaid in full
on or prior to the Maturity Date, the
Initial Lender in respect of such
Initial Loan will have the option at
any time or from time to time to
receive notes (the "Exchange Notes") in
exchange for such Initial Loans having
the terms set forth in the term sheet
attached hereto as Annex I; provided
that a Bridge Lender may not elect to
exchange only a portion of its
outstanding Initial Loans for Exchange
Notes unless such Bridge Lender intends
at the time of such partial exchange of
Initial Loans promptly to sell the
Exchange Notes received in such
exchange. If any Bridge Lender does not
exchange its Initial Loans for Exchange
Notes on the Maturity Date, such Bridge
Lender shall be required to extend the
maturity of such Initial Loans to
another date selected by such Bridge
Lender. If, at such extended maturity,
such Bridge Lender does not exchange
its Initial Loans for Exchange Notes,
such Bridge Lender shall be required
again to extend the maturity of such
Initial Loans to another date selected
by such Bridge Lender (provided that
such Bridge Lender shall not be
required to extend the maturity of such
beyond the tenth anniversary of the
Debt Tender Offer Closing Date (the
"Final Maturity Date")), and this
sentence shall apply to each extended
maturity of such Ini-
<PAGE>
-3-
tial Loans prior to the Final Maturity
Date.
The Initial Loans and the Exchange
Notes shall rank pari passu for all
purposes.
Interest: Prior to the Maturity Date, the Initial
Loans will accrue interest at a rate
per annum equal to 3 month Adjusted
LIBOR plus a spread (the "Spread"). The
Spread will initially be 500 basis
points. If the Initial Loans are not
repaid in whole within three months
following the Debt Tender Offer Closing
Date, the Spread will increase by 50
basis points at the end of such
three-month period and shall increase
by an additional 50 basis points at the
end of each three-month period
thereafter until the Maturity Date.
Notwithstanding the foregoing, the
interest rate in effect at any time
prior to the Maturity Date shall not
exceed 15.5% per annum. In no event
shall the interest rate on the Initial
Loans exceed the highest lawful rate
permitted under applicable law.
Following the Maturity Date, all
outstanding Initial Loans will accrue
interest at the rate provided for in
the Exchange Notes in Annex I hereto,
subject to the absolute and cash caps
applicable to Exchange Notes.
Calculation of interest shall be on the
basis of actual days elapsed in a year
of 360 days (or 365 or 366 days, as the
case may be, in the case of Initial
Loans based on the Alternate Base Rate
(as defined below)).
"Adjusted LIBOR" means LIBOR as
adjusted to include statutory reserves.
In the event that Adjusted LIBOR cannot
be determined, or any Bridge Lender is
unable to maintain a loan accruing
<PAGE>
-4-
interest at Adjusted LIBOR, the
affected Initial Loans will accrue
interest until the Maturity Date at the
"Alternate Base Rate", which will be
the higher of Chase's Prime Rate and
the Federal Funds Effective Rate plus
1/2 of 1%, plus the Spread less 100
basis points.
Interest will be payable in arrears (a)
for Initial Loans accruing interest at
a rate based on Adjusted LIBOR, at the
end of each Adjusted LIBOR period and
on the Maturity Date, (b) for Initial
Loans accruing interest at the
Alternate Base Rate, at the end of each
fiscal quarter of the Borrower
following the Debt Tender Offer Closing
Date, and on the Maturity Date and (c)
for Initial Loans outstanding after the
Maturity Date, at the end of each
fiscal quarter of the Borrower
following the Maturity Date.
Ranking: The Initial Loans will be ranking
senior to all subordinated indebtedness
of the Borrower and pari passu with all
other senior indebtedness of the
Borrower.
Security: To the extent requested by the
Arranger and otherwise permitted by
existing contractual arrangements, the
Initial Loans and the Exchange Notes
shall be secured by all of the material
unencumbered assets and property of the
Borrower and its subsidiaries and shall
be entitled to the benefit of springing
liens on encumbered assets and property
(other than current assets) of the
Borrower and its subsidiaries as
existing encumbrances are removed
(including encumbrances which secure
the Existing Notes), which security
shall be only to the extent sufficient
in the reasonable judgment of the
Arranger to permit the syndication of
the Initial Loans (regardless of
whether or not any such syndication
takes place) and the resale of the
Ex-
<PAGE>
-5-
change Notes, if issued; provided that
there shall remain up to $50.0 million
in value of assets that are
unencumbered.
Mandatory Redemption: The Borrower will be required to prepay
Initial Loans (and, if issued, Exchange
Notes, to the extent required by the
terms of such Exchange Notes) on a pro
rata basis, at par plus accrued and
unpaid interest, from the net proceeds
from the incurrence of any debt (other
than borrowings under the Existing
Credit Agreement) or the issuance of
any equity and from the proceeds of
certain asset sales (subject to
exceptions to be agreed). To the extent
no Initial Loans are outstanding, the
commitments for the Initial Loans under
the Bridge Facility shall be reduced by
the amount of such proceeds.
Optional Prepayment: The Initial Loans may be prepaid, in
whole or in part, at the option of the
Borrower, at any time upon 3 business
days' prior notice, at par plus accrued
and unpaid interest and breakage costs.
Documentation: Usual for facilities and transactions of
this type.
<PAGE>
-6-
Representations and Warranties: Usual for facilities and transactions of
this type.
Conditions Precedent Usual for facilities and transactions
to Initial Loans of this type, including without
limitation, the conditions set forth in
the Commitment Letter to which this
Exhibit B is attached, those specified
below and others to be reasonably
acceptable to you and your counsel and
the Bridge Lenders.
The Equity Tender Offer, the Waiver and
Amendment (or the Replacement Credit
Facility) and the other transactions
contemplated to occur on the Closing
Date shall have been consummated in
accordance with applicable law, the
Merger Agreement and all related
documentation, in each case in the form
previously approved by, and reasonably
acceptable to, the Bridge Lenders and
otherwise on terms reasonably
satisfactory to, the Bridge Lenders.
The conditions to Holdco's and Newco's
obligations set forth in the Merger
Agreement shall have been satisfied
without giving effect to waivers or
amendments not approved by the Bridge
Lenders that are materially adverse to
the Bridge Lenders. There shall have
been no amendment, waiver or
modification following the Closing Date
to any of the other documents
contemplated for effecting the
Transactions or any other material
agreement to which RES or any of its
subsidiaries is a party not approved
by, and reasonably acceptable to, the
Bridge Lenders that would be materially
adverse to the Bridge Lenders.
RES shall have commenced and accepted
for payment any Existing Notes tendered
pursuant to the Debt Tender Offer at a
purchase price of 101% of the principal
amount of the Existing Notes, together
with all accrued and unpaid interest
<PAGE>
-7-
thereon, in accordance with the terms
of the Indenture.
On the Debt Tender Offer Closing Date,
RES and its subsidiaries shall have
outstanding no preferred stock and no
indebtedness other than (i) loans under
the Existing Credit Agreement, (ii)
$53,700,000 aggregate principal amount
of RES's 9% Solid Waste Revenue Bonds,
Series 1996, Due 2021, (iii)
$20,200,000 aggregate principal amount
of RES's 8 1/4% Solid Waste Revenue
Bonds, Series 1994, Due 2014, (iv) a
principal amount of the Existing Notes
equal to $200,000,000 less the
principal amount of Existing Notes
purchased pursuant to the Debt Tender
Offer, (v) other limited indebtedness
reasonably satisfactory to the Initial
Lenders and (vi) if it is not
reasonably practicable for RES to
redeem the Special Preferred Stock on
or prior to the Debt Tender Offer
Closing Date or if the Special
Preferred Stock is to be canceled in
the Merger, the Special Preferred
Stock; provided that if the Special
Preferred Stock is outstanding
following the Closing Date, the holder
of the Special Preferred Stock will not
be entitled to vote with respect to the
Merger.
The Bridge Lenders shall have received
a pro forma consolidated balance sheet
of RES giving effect to the
Transactions and the Debt Tender Offer
and any subsequent events occurring
after the consummation of the Equity
Tender Offer, together with a
certificate of RES to the effect that
such pro forma balance sheet fairly
presents in all material respects the
pro forma financial position of RES and
its subsidiaries consistent with
generally accepted accounting
principles, and the Bridge Lenders
shall be reasonably satisfied that such
balance sheet and the transactions in
connection
<PAGE>
-8-
with the Transactions, the Debt Tender
Offer and the financing arrangements
contemplated hereby are consistent with
the sources and uses shown on Annex II
to Exhibit A hereto in all material
respects and are not materially
inconsistent with the information or
projections and the financial model
delivered to the Bridge Lenders prior
to the date hereof. RES will also have
provided such other financial
information as the Bridge Lenders may
reasonably request in connection with
the Transactions and the Debt Tender
Offer, including, without limitation,
certifications with respect to the
results of the Debt Tender Offer.
All requisite material governmental
authorities shall have approved or
consented to the Transactions and the
Debt Tender Offer and the other
transactions contemplated hereby to the
extent required, all applicable appeal
periods shall have expired and there
shall be no governmental or judicial
action, actual or threatened, that has
or could have a reasonable likelihood
of restraining, preventing or imposing
materially burdensome conditions on the
Transactions and the Debt Tender Offer
or the consummation of the other
transactions contemplated hereby.
The equity reserve arrangements
referred to under "Equity Reserve"
below shall have been established.
The Borrower shall have used its
commercially reasonable efforts to
secure availability of up to $20
million under the Existing Credit
Agreement to fund up to $20 million of
the Debt Tender Offer in lieu of any
funds being drawn under the Bridge
Facility for that purpose.
Covenants: Usual for facilities and transactions
of this type (including materiality
con-
<PAGE>
-9-
cepts and other exceptions to be agreed
upon) and reasonably acceptable to RES
and its counsel and the Initial Lenders
and their counsel, including, without
limitation, restrictions on: the
incurrence of additional indebtedness
(other than borrowings incurred under
the Existing Credit Agreement), paying
dividends, the redemption or purchase
of equity interests and making other
restricted payments and investments
(including restrictions on any
management fees to be agreed upon),
limitations on capital expenditures,
the imposition of restrictions on the
ability of subsidiaries of the Borrower
to upstream funds, creation of liens,
entering into transactions with
affiliates, issuing capital stock of
subsidiaries, entering into
transactions resulting in a change of
control or entering into mergers,
consolidations or transfers of
substantial assets, and paying fees to
the Fund and its affiliates (which
limitations shall permit certain
transactions between RES and BarTech to
be agreed upon). Following the Maturity
Date, the covenants will automatically
be modified so as to be consistent with
the covenants in the Exchange Notes.
Events of Default: Usual for facilities and transactions
of this type (including grace periods
and materiality concepts to be agreed
upon) and reasonably acceptable to the
Borrower and its counsel, and the
Initial Lenders and their counsel,
including but not limited to nonpayment
of principal, interest, fees or other
amounts when due; violation of
covenants; inaccuracy of
representations and warranties; cross
default and cross acceleration to
indebtedness of Holdco, RES or any of
their respective subsidiaries;
bankruptcy events relating to Holdco,
RES and their respective subsidiaries;
judgments; ERISA; actual or asserted
inva-
<PAGE>
-10-
lidity of loan documents or security
interests or of material agreements;
and Change in Control. Following the
Maturity Date, the events of default
will automatically be modified so as to
be consistent with the events of
default relevant to the Exchange Notes.
Equity Reserve: On the Debt Tender Offer Closing Date,
if any Initial Loans are made, you
agree to cause the ultimate holding
company of RES ("Holdings") to place
warrants (the "Warrants") representing
the right to purchase 7% of the fully
diluted common equity of Holdings
(calculated as of the Debt Tender Offer
Closing Date) in an escrow account for
the benefit of holders of Initial Loans
and the Exchange Notes as provided, and
pursuant to the terms described, in
Annex I hereto. The Warrants will have
an exercise price equal to $0.01 per
share of common equity, subject to
adjustment pursuant to customary
antidilution provisions. No adjustments
will be made for any issuance of
capital stock for the combination with
BarTech that is made on arms' length
terms.
Cost and Yield Pro- Usual for facilities and transactions
tection: of this type, including standard
protective provisions for compensation
in respect of prepayments (which will
include reimbursement of the Bridge
Lenders' redeployment costs in the case
of prepayments of loans bearing
interest based on Adjusted LIBOR other
than at the end of an interest period),
taxes, capital adequacy, illegality,
increased costs and for U.S. taxes.
Assignments and The Bridge Lenders will have the
Participations: absolute and unconditional right, to
assign Initial Loans and commitments
without the consent of the Borrower;
provided that the Initial Lenders or
entities engaged to be the underwriters
or initial
<PAGE>
-11-
purchasers of, or placement agents for,
the offering of any refinancing
securities (or their respective
affiliates) shall retain voting control
over a majority in aggregate principal
amount of Initial Loans through the
Maturity Date. Assignments will be by
novation which will release the
obligation of the assigning Bridge
Lender. Notwithstanding the foregoing
it is understood that Chase will remain
as Agent for the Bridge Facility.
The Bridge Lenders will be permitted to
participate their Initial Loans to
other financial institutions without
restriction, other than customary
voting limitations. Participants will
have the same benefits as the selling
Bridge Lenders would have (and will be
limited to the amount of such benefits)
with regard to yield protection and
increased costs.
Voting: Amendments and waivers of the Bridge
Facility and the other definitive
credit documentation will require the
approval of Bridge Lenders holding more
than 50% of the outstanding Initial
Loans, except that the consent of each
affected Bridge Lender will be required
for (a) reductions of principal,
interest rates or Spread, (b) except as
provided under "Maturity/Exchange"
above, extensions of the Maturity Date,
(c) additional restrictions on the
right to exchange Initial Loans for
Exchange Notes or any amendment of the
terms of such exchange, (d) releases of
any material portion of the collateral
or (e) any amendment to the Exchange
Notes that requires (or would, if any
Exchange Notes were outstanding,
require) the approval of all holders of
Exchange Notes.
Expenses and All reasonable out-of-pocket expenses
(including but not limited to expenses
<PAGE>
-12-
Indemnification: incurred in connection with due
diligence and syndication) of the
Bridge Lenders and CSI associated with
the syndication of the Bridge Facility
and with the preparation, execution and
delivery, administration, waiver or
modification and enforcement of the
documentation contemplated hereby and
thereby (including the reasonable fees,
disbursements and other charges of
counsel) are to be paid by the
Borrower. In addition, all
out-of-pocket expenses of the Bridge
Lenders for enforcement costs and
documentary taxes associated with the
Bridge Facility are to be paid by the
Borrower.
In the Bridge Facility, the Borrower
will indemnify the Bridge Lenders and
CSI and their respective affiliates,
and hold them harmless from and against
all reasonable out-of-pocket costs,
expenses (including but not limited to
reasonable fees and out-of-pocket
charges and disbursements of counsel)
and liabilities arising out of or
relating to the proposed transactions;
provided that no such person will be
indemnified for costs, expenses or
liabilities arising from such person's
gross negligence or willful misconduct.
Governing Law and New York.
Forum:
Counsel for CSI and Cahill Gordon & Reindel.
the Bridge Lenders:
<PAGE>
6 ANNEX I
7 to EXHIBIT B
8 Summary of Principal Terms and Conditions
-----------------------------------------
9 of Exchange Notes
-----------------
10 Capitalized terms used but not defined herein have the
11 meanings given (or incorporated by reference) in the Summary of Principal
12 Terms and Conditions of the $202,000,000 Senior Bridge Facility to which this
13 Annex I is attached.
Issuer: The Borrower will issue Exchange
Notes under an indenture which complies
with the Trust Indenture Act (the
"Indenture"). The Borrower in its
capacity as issuer of the Exchange
Notes is referred to as the "Issuer".
Guarantors and Security: Same as the Initial Loans.
Principal Amount: The Exchange Notes will be available
only in exchange for the Initial Loans.
The principal amount of any Exchange Note
will equal 100% of the aggregate
principal amount (including any accrued
interest not required to be paid in cash)
of the Bridge Loan for which it is
exchanged.
Maturity: The Exchange Notes will mature on
the tenth anniversary of the Debt
Tender Offer Closing Date.
Interest Rate: The Exchange Notes will bear interest
at a rate equal to the Initial Rate (as
defined below) plus the Exchange Spread
(as defined below). Notwithstanding the
foregoing, the interest rate in effect
at any time shall not exceed 15.5% per
annum. In no event shall the interest
rate on the Exchange Notes exceed the
<PAGE>
-2-
highest lawful rate permitted under
applicable law. "Exchange Spread" shall
mean 0 basis points during the 3 month
period commencing on the Maturity Date
and shall increase by 50 basis points
at the beginning of each subsequent 3
month period. "Initial Rate" shall be
determined on the Maturity Date and
shall equal the greatest of (a) the
interest rate borne by the Initial
Loans on the date immediately preceding
the Maturity Date plus 50 basis points,
(b) the Treasury Rate (as defined
below) on the Maturity Date, plus 650
basis points and (c) the Chase
Securities Inc. High Yield Index Rate
on the Maturity Date, plus 200 basis
points. "Treasury Rate" means (i) the
rate borne by direct obligations of the
United States maturing on the tenth
anniversary of the Debt Tender Offer
Closing Date and (ii) if there are no
such obligations, the rate determined
by linear interpolation between the
rates borne by the two direct
obligations of the United States
maturing closest to, but straddling,
the tenth anniversary of the Debt
Tender Offer Closing Date. Interest
will be payable in arrears at the end
of each six month period following the
Maturity Date.
Ranking: Same as the Initial Loans.
Mandatory Redemption: The Issuer will be required to
redeem the Exchange Notes (and, if
outstanding, the Initial Loans) on a
pro rata basis, at par plus accrued and
unpaid interest, from the net proceeds
from the incurrence of any debt (other
than borrowings under the Existing
Credit Agreement) or the issuance of
any equity by the Issuer (subject to
exceptions to be agreed).
Optional Redemption: So long as an Exchange Note is held
by a Bridge Lender, such Exchange Note
may be
<PAGE>
-3-
redeemed at the option of the Issuer at
par plus accrued and unpaid interest.
Upon the transfer of Exchange Notes by
a Bridge Lender to a third party, the
redemption of such Exchange Notes, at
the option of the Issuer, will be
subject to restrictions and premiums
typical for high-yield debt securities
at the time the Exchange Notes are
issued (including the condition that
the Exchange Notes will not be
redeemable at the option of the Issuer
(other than pursuant to a customary
equity claw-back provision) during the
four-year period following the Maturity
Date; provided that any Bridge Lender
intending to exercise such
non-redemption condition upon a
transfer to a third party shall be
required to give the Issuer 10 days'
notice before making such transfer).
Registration Rights: The Issuer will file within 30 days after
the Maturity Date and will use its best
efforts to cause to become effective as
soon thereafter as practicable, a shelf
registration statement with respect to
the Exchange Notes (a "Shelf
Registration Statement") and/or a
registration statement relating to a
Registered Exchange Offer (as described
below). If a Shelf Registration
Statement is filed, the Issuer will
keep such registration statement
effective and available (subject to
customary exceptions) until it is no
longer needed to permit unrestricted
resales of Exchange Notes but in no
event longer than two years from the
Maturity Date. If within 120 days from
the Maturity Date, a Shelf Registration
Statement for the Exchange Notes has
not been declared effective or within
150 days form the Maturity Date the
Issuer has not effected an exchange
offer (a "Registered Ex-
<PAGE>
-4-
change Offer") whereby the Issuer has
offered registered notes having terms
identical to the Exchange Notes (the
"Substitute Notes") in exchange for all
outstanding Exchange Notes and Initial
Loans (it being understood that a Shelf
Registration Statement is required to
be made available in respect of
Exchange Notes, the holders of which
could not receive Substitute Notes
through the Registered Exchange Offer
which, in the opinion of counsel, would
be freely salable by such holders
without registration or requirement for
delivery of a current prospectus under
the Securities Act (other than a
prospectus delivery requirement imposed
on a broker-dealer who is exchanging
Exchange Notes acquired for its own
account as a result of a market making
or other trading activities)), then the
Issuer will pay liquidated damages of
$0.192 per week per $1,000 principal
amount of Exchange Notes and Initial
Loans outstanding to holders of such
Exchange Notes and Initial Loans who
are unable freely to transfer Exchange
Notes (or Substitute Notes in
connection with a Registered Exchange
Offer) from and including the 121st day
or the 151st day, as applicable, after
date of the first issuance of the
Exchange Notes to but excluding the
earlier of the effective date of such
Shelf Registration Statement or the
date of consummation of such Registered
Exchange Offer (such damages to be
payable in the form of additional
Exchange Notes if the then interest
rate thereon is greater than 15.5%).
The Issuer will also pay such
liquidated damages for any period of
time (subject to customary exceptions)
following the effectiveness of a Shelf
Registration Statement that such Shelf
Registration Statement is not
<PAGE>
-5-
available for resales thereunder. In
addition, unless and until the Issuer
has consummated the Registered Exchange
Offer and, if required, caused the
Shelf Registration Statement to become
effective, the holders of the Exchange
Notes will have the right to
"piggy-back" the Exchange Notes in the
registration of any debt securities
(subject to customary scale-back
provisions) that are registered by the
Issuer (other than on a Form S-4)
unless all the Exchange Notes and
Initial Loans will be redeemed or
repaid from the proceeds of such
securities.
Exchange Notes The Exchange Notes will be delivered
Escrowed: on the first date on which any Initial
Loans are funded and held, undated, in
escrow by a mutually agreeable
fiduciary.
Right to Transfer The holders of the Exchange Notes shall
Exchange Notes: have the absolute and unconditional
right to transfer such Exchange Notes
in compliance with applicable law to
any third parties.
Equity Amount Escrowed: On the Debt Tender Offer Closing Date, if
any Initial Loans are to be made on
such date, Warrants representing the
right to purchase 7% of the fully
diluted common equity of Holdings
(calculated as of the Debt Tender Offer
Closing Date). The Warrants will have
an exercise price equal to $0.01 per
share of common equity, subject to
adjustment pursuant to customary
antidilution provisions.
Each Warrant will be exercisable for a
period of ten years from the Debt
Tender Offer Closing Date and will have
mutually satisfactory provisions
relating to antidilution from and after
the Debt
<PAGE>
-6-
Tender Offer Closing Date.
Pursuant to a registration rights
agreement to be entered into by
Holdings, the holders of a majority of
the outstanding Warrants shall have the
right upon the occurrence of a
Registration Event (as defined below)
to demand at least one shelf
registration of such Warrants and the
Common Stock underlying such Warrants.
"Registration Event" means the earliest
to occur of the following: (a) the
filing of a registration statement
under the Securities Act (other than on
Form S-8 and other than a registration
statement on any other form to the
extent it covers common equity to be
offered to employees) with respect to a
class of common equity of RES or
Holdings (provided that Holdings shall
not be required to obtain the
effectiveness of such demanded shelf
registration statement prior to the
effectiveness of the registration
statement referred to in this clause
(a)), (b) a class of equity of RES or
Holdings is registered on a national
securities exchange or the NASDAQ
National Market System, (c) a Change of
Control of RES or Holdings or (d) the
fifth anniversary of the Debt Tender
Offer Closing Date. In addition, the
holders of Warrants and the Common
Stock underlying the Warrants will have
the right to "piggy-back" such
securities in the registration of any
common equity securities (subject to
customary scaleback provisions) that
are registered by RES or Holdings
(other than on Form S-8 or Form S-4 and
other than a registration statement on
any other form to the extent it covers
common equity to be offered to
employees).
In the event the Initial Loans shall
not have been paid in full on or prior
to
<PAGE>
-7-
one year after the Debt Tender Offer
Closing Date, the Warrants will be
released from escrow under two
alternative circumstances: release for
resale in connection with a bona fide,
arm's-length sale of Initial Loans or
Exchange Notes and release pursuant to
an "earn-in" formula.
Release of Warrants for Beginning on the Maturity Date, warrants
Resale: will be released from escrow at the
request of a holder of Initial Loans on
the Maturity Date of any Initial Loans
(each such holder, a "Maturity Date
Loan Holder") (but no subsequent holder
of Initial Loans or Exchange Notes) in
an amount not to exceed such Loan
Holder's share of such Warrants (such
share to be equal to such Loan Holder's
pro rata share of the aggregate
principal amount of outstanding Initial
Loans on the Maturity Date in
connection with a transfer by such Loan
Holder of any Exchange Notes or Initial
Loans and such Warrants to a third
party. Warrants shall be released for
resale only upon the representation of
a Loan Holder that such Warrants are
necessary for a resale of Initial Loans
or Exchange Notes, as the case may be,
and only to the extent necessary so
that the sale price (including such
Warrants and any payments on account of
accrued and unpaid interest) does not
exceed the principal amount of, and
accrued and unpaid interest on, the
Initial Loans or Exchange Notes so
sold.
"Earn-In" of Warrants: Each Maturity Date Loan Holder
(but no subsequent holder of Initial
Loans or Exchange Notes) shall be
entitled to receive at the end of each
three-month period (each such date, a
"Release Date") set forth in Column A
below (with the first period beginning
on the Maturity Date a percentage of
the Warrants (less
<PAGE>
-8-
any Warrants previously released to
such Maturity Date Loan Holder under
the terms of the caption "Release of
Warrants for Resale" above or
hereunder), such percentage to equal
the product of (a) the corresponding
cumulative percentage set forth in
Column B below and (b) the ratio of the
aggregate principal amount of Initial
Loans held by such Maturity Date Loan
Holder on the Maturity Date to the
aggregate principal amount of all
outstanding Initial Loans on the
Maturity Date; provided, however, that
no Warrants (except those previously
earned in and not yet released to a
Loan Holder) will be released from
escrow after the date upon which all
Initial Loans and Exchange Notes held
by such Maturity Date Loan Holder as of
the Maturity Date are completely
repaid.
A B
---------- -----------
first 3 months 25.00%
second 3 months 50.00%
third 3 months 75.00%
fourth 3 months 100.00%
Warrants will be released from escrow
pursuant to the "earn-in" provisions to
the extent earned by a Maturity Date
Loan Holder, in accordance with the
foregoing, and requested by such
Maturity Date Loan Holder. Unless
previously released pursuant to the
preceding sentence, all Warrants earned
by a Maturity Date Loan Holder pursuant
to the foregoing "earn-in" provisions
shall be released to such Maturity Loan
Holder upon such Maturity Date Loan
Holder ceasing to own any Initial Loans
or Exchange Notes.
Covenants: Those typical for an indenture governing
<PAGE>
-9-
a high-yield senior note issue.
Events of Default: Those typical for an indenture governing
a high-yield senior note issue.
Governing Law and New York.
Forum:
14
<PAGE>
AGREEMENT AND PLAN OF MERGER
among
RES Holding Corporation
RES Acquisition Corporation
and
Republic Engineered Steels, Inc.
Dated as of July 23, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
THE OFFER
1.1 The Offer.................................................... 1
1.2 Company Actions.............................................. 4
1.3 Stockholder Lists............................................ 5
1.4 Directors.................................................... 6
1.5 Redemption of Special Preferred Stock........................ 7
ARTICLE II
THE MERGER
2.1 The Merger................................................... 7
2.2 Closing; Effective Time of Merger. .......................... 7
2.3 Effects of the Merger........................................ 8
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
3.1 Effect on Capital Stock...................................... 9
3.2 Payment for Shares........................................... 10
3.3 Stock Transfer Books......................................... 12
3.4 Stock Option Plans........................................... 12
3.5 Dissenting Shares............................................ 13
3.6 Withholding Rights........................................... 13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the
Company...................................................... 14
4.2 Representations and Warranties of Parent and
Sub.......................................................... 23
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of the Company..................................... 26
5.2 Covenants of Parent.......................................... 33
i
<PAGE>
Page
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Preparation of a Proxy Statement; Company
Stockholders Meeting; Merger Without a
Company Stockholders Meeting................................ 34
6.2 Access to Information....................................... 35
6.3 Brokers or Finders.......................................... 35
6.4 Indemnification; Directors' and Officers'
Insurance................................................... 36
6.5 Consents, Approvals and Filings............................. 38
6.6 Conduct of Business of Sub.................................. 40
6.7 Publicity................................................... 40
6.8 Continuation of Employee Benefits........................... 40
6.9 Amendment of ESOP........................................... 41
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to
Effect the Merger............................................ 41
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination.................................................. 42
8.2 Fees and Expenses............................................ 44
8.3 Effect of Termination........................................ 45
8.4 Amendment.................................................... 46
8.5 Extension; Waiver............................................ 46
ARTICLE IX
GENERAL PROVISIONS
9.1 Nonsurvival of Representations, Warranties
and Agreements............................................... 46
9.2 Notices...................................................... 47
9.3 Interpretation............................................... 48
9.4 Counterparts................................................. 48
9.5 Entire Agreement; No Third Party
Beneficiaries; Rights of Ownership........................... 48
9.6 Governing Law................................................ 48
9.7 Assignment................................................... 48
ii
<PAGE>
Glossary of Defined Terms
Term: Page:
Acquisition Proposal....................................................29
Agreement................................................................1
Certificate of Merger....................................................8
Certificates............................................................10
Closing Date.............................................................8
Code....................................................................21
Company..................................................................1
Company Common Stock.....................................................1
Company Disclosure Schedule.............................................14
Company SEC Documents...................................................19
Company Voting Debt.....................................................15
Confidentiality Agreement...............................................35
Constituent Corporations.................................................7
Continuing Director......................................................6
Control Date.............................................................6
DGCL.....................................................................4
Dissenting Shares.......................................................13
Effective Time...........................................................8
Environmental Claim.....................................................23
Environmental Laws......................................................23
ERISA...................................................................22
Exchange Act.............................................................2
Financing Commitments...................................................26
GAAP....................................................................19
Gains Taxes.............................................................16
Governmental Entity.....................................................31
HSR Act.................................................................16
Indemnified Liabilities.................................................36
Indemnified Parties.....................................................36
IRS.....................................................................21
Material Adverse Effect.................................................14
Merger...................................................................1
Merger Consideration.....................................................9
Notice of Superior Proposal.............................................30
Offer....................................................................2
Offer Consideration......................................................2
Offer Documents..........................................................3
Option Consideration....................................................13
Options.................................................................12
Order...................................................................39
Paying Agent............................................................10
Payment Fund............................................................10
Proxy Statement.........................................................34
Representatives.........................................................28
Schedule 14D-1...........................................................3
Schedule 14D-9...........................................................5
iii
<PAGE>
Term: Page:
SEC......................................................................3
Securities Act..........................................................18
Shares...................................................................1
Stock Option Plan.......................................................12
Sub......................................................................1
Subsidiary...............................................................9
Superior Proposal.......................................................30
Surviving Corporation....................................................7
Transactions............................................................38
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of July 23, 1998
(the "Agreement"), is made and entered into by and among RES Holding
Corporation, a Delaware corporation ("Parent"), RES Acquisition Corporation, a
Delaware corporation and a wholly-owned subsidiary of Parent ("Sub"), and
Republic Engineered Steels, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub
and the Company have approved the acquisition of the Company by Parent, by
means of the merger (the "Merger") of Sub with and into the Company, upon the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, to effectuate the acquisition, Sub will commence a
cash tender offer to purchase all of the outstanding shares of common stock,
par value $.01 per share, of the Company ("Shares" or "Company Common Stock"),
upon the terms and subject to the conditions set forth in this Agreement and
the Offer Documents (as defined in Section 1.1(b)), and the Board of Directors
of the Company has approved the terms of the Offer (as defined in Section
1.1(a)) to be set forth in the Offer Documents and agreed to recommend to the
stockholders of the Company that they accept the Offer and tender their
Company Common Stock pursuant thereto; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the
consummation thereof.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
THE OFFER
1.1 The Offer.
<PAGE>
(a) Provided this Agreement shall not have been terminated
in accordance with Section 8.1, as promptly as practicable (but in no event
later than five business days following the public announcement of the
execution of this Agreement), Sub will commence (within the meaning of Rule
14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), an offer to purchase (the "Offer") all the outstanding Shares at a
price of $7.25 per Share, net to the seller in cash (the "Offer
Consideration"). The obligation to consummate the Offer and to accept for
payment and to pay for the Shares tendered pursuant to the Offer will be
subject only to those conditions set forth in Exhibit A attached hereto. The
Company agrees that no Shares held by the Company or any of its Subsidiaries
(as defined in Section 3.1) will be tendered to Sub pursuant to the Offer. Sub
expressly reserves the right, in its sole discretion, to waive any condition
set forth in Exhibit A, other than the Minimum Condition and the ESOP
Condition (each as defined in Exhibit A), and to make any other changes in the
terms and conditions of the Offer, provided that Sub will not, without the
prior written consent of the Company, (i) decrease or change the form of the
consideration payable in the Offer, (ii) decrease the number of Shares sought
pursuant to the Offer, (iii) impose additional conditions to the Offer, (iv)
modify the conditions to the Offer as set forth in Exhibit A in a manner
adverse to the holders of the Shares, (v) waive the Minimum Condition or the
ESOP Condition or (vi) make any other change in the terms of the Offer adverse
to the holders of the Shares. The Offer will initially provide that the Offer
will expire 20 business days after (and inclusive of) the date it is
commenced. Sub agrees that, subject to the terms and conditions of the Offer
and this Agreement, it will accept for payment and pay for all Shares validly
tendered and not withdrawn pursuant to the Offer as soon as it is permitted to
do so under applicable law, provided that Sub shall have the right in its sole
discretion to extend the Offer from time to time for up to an aggregate of 15
business days, notwithstanding the prior satisfaction of the conditions set
forth in Exhibit A, in the event that at least 75% of the Company's
outstanding Shares have been validly tendered and not withdrawn pursuant to
the Offer. If, subject to the succeeding sentence, the Minimum Condition or
the ESOP Condition is not satisfied or if the conditions set forth in
paragraphs B, C or E of Exhibit A are not satisfied or, to the extent
permitted by this Agreement, waived by Sub as of the scheduled expiration date,
Sub shall have the right in its sole discretion to extend the Offer from time to
time until the earlier of the consummation of the Offer or the termination of
this Agreement. If the Minimum Condition, the ESOP Condition or the HSR
Condition (as defined in Exhibit A) or the conditions set forth in paragraphs A,
F or G of Exhibit A are not satisfied or, to the extent permitted by this
<PAGE>
Agreement, waived by Sub as of the scheduled expiration date, Sub will, unless
it is manifestly apparent that such condition will not be satisfied prior to the
termination of this Agreement, or Sub and the Company shall otherwise agree in
writing, extend the Offer from time to time until the earlier of the
consummation of the Offer or the termination of this Agreement.
(b) On the date of commencement of the Offer, Parent and Sub
will file or cause to be filed with the Securities and Exchange Commission
(the "SEC") a Tender Offer Statement on Schedule 14D-1 (together with all
amendments, the "Schedule 14D-1") with respect to the Offer, which will
contain the Offer to purchase and related letter of transmittal and other
ancillary documents and agreements pursuant to which the Offer will be made
(collectively, with any supplements or amendments, the "Offer Documents").
Parent and Sub will disseminate the Offer Documents to the holders of the
Shares. Each of Parent, Sub and the Company agrees to correct promptly any
information provided by it for use in the Offer Documents that becomes false
or misleading in any material respect, and Parent and Sub will take all steps
necessary to cause the Offer Documents as so corrected to be filed with the
SEC and to be disseminated to the holders of the Shares, in each case as and
to the extent required by law. The Company and its counsel will have a
reasonable opportunity to review and comment on the Offer Documents prior to
the filing of the Offer Documents with the SEC. Parent and Sub will provide
the Company and its counsel with any comments that may be received from the
SEC or its staff with respect to the Offer Documents promptly after receipt.
Parent and Sub agree that the Offer Documents will comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations under the Exchange Act. Parent and Sub further agree that none of
the information in the Offer Documents or any related schedule required to be
filed with the SEC or in any related amendment will, on the date of filing
with the SEC or on the date first published, sent or given to holders of the
Shares, as the case may be, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein, in light of the
circumstances under which they are made, not misleading (but excluding
statements made in any of the foregoing documents based on information
supplied by the Company specifically for inclusion therein). Parent and Sub
agree that none of the information supplied by Parent or Sub or any of their
affiliates specifically for inclusion in the Schedule 14D-9 (as defined in
Section 1.2(a)) or any related amendment will, at the date of filing with the
SEC, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading.
<PAGE>
1.2 Company Actions. The Company hereby approves of and
consents to the Offer and represents and warrants that, subject to the terms
and conditions set forth in this Agreement, (a) its Board of Directors (at a
meeting duly called and held) has (i) determined that the Offer and Merger (as
defined in Section 2.1) are fair to and in the best interests of the
stockholders of the Company, (ii) resolved to recommend acceptance of the
Offer and approval and adoption of this Agreement by stockholders of the
Company, (iii) taken all necessary steps to render Section 203 of the Delaware
General Corporation Law, as amended (the "DGCL"), inapplicable to the Merger
and (iv) resolved to elect not to be subject, to the extent permitted by law,
to any state takeover law other than Section 203 of the DGCL that may purport
to be applicable to the Offer, the Merger or the transaction contemplated by
this Agreement, (b) Lazard Freres & Co. LLC, the Company's investment banker,
has delivered to the Board of Directors of the Company its written opinion to
the effect that, based upon and subject to the matters set forth therein and
as of the date thereof, the consideration to be paid to the Company's
stockholders in the Offer and Merger is fair, from a financial point of view,
to those stockholders, and such opinion has not been withdrawn or modified and
(c) each of the Administrative Committee (the "Administrative Committee") of
the employee common stock ownership plan of the Company (the "ESOP") and the
Trustee (the "Trustee") of the ESOP Trust (the "ESOP Trust") has advised the
Company that, as of the date hereof, it has conducted such review of the terms
of the Offer and the Merger as it deems appropriate and has determined that,
if the Offer were consummated on the date hereof at the price and on the terms
set forth in this Agreement on the date hereof, and subject to their
satisfaction with the information to be set forth in the Offer Documents, the
Administrative Committee would follow the proper directions of the ESOP
participants, and the Trustee would follow the proper directions of the
Administrative Committee, as the case may be, to tender Shares owned by the
ESOP Trust. The Company has been authorized by Lazard Freres & Co. LLC to
permit the inclusion of such firm's fairness opinion (and, subject to such
firm's approval, a reference thereto) in the Offer Documents and in the
Schedule 14D-9 referred to below and the Proxy Statement, as defined in
Section 6.1(a). Contemporaneously with the commencement of the Offer, the
Company will, subject to the terms and conditions set forth in this Agreement,
file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") containing the recommendations of its Board of
Directors in favor of the Offer and Merger and will permit the inclusion in
the Offer Documents of such recommendations, in each case subject to the
provisions of Section 5.1(e). The Company, Parent and Sub will promptly
correct any information provided by them for use in the
<PAGE>
Schedule 14D-9 that becomes false or misleading in any material respect, and
the Company will take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and to be disseminated to holders of the
Shares, in each case as and to the extent required by law. Parent and its
counsel will have a reasonable opportunity to review and comment on the
Schedule 14D-9 prior to its filing with the SEC. The Company agrees to provide
Parent and its counsel with any comments that may be received from the SEC or
its staff with respect to the Schedule 14D-9 promptly after receipt. The
Company agrees that the Schedule 14D-9 will comply as to form in all material
respects with the applicable requirements of the Exchange Act and the rules
and regulations under the Exchange Act. The Company further agrees that
neither the Schedule 14D-9, nor any related amendments nor any information
supplied by the Company specifically for inclusion in the Offer Documents (but
excluding statements made in any of the foregoing documents based on
information supplied by Parent or Sub or any of their affiliates specifically
for inclusion therein) will, at the respective times the Schedule 14D-9 or
Offer Documents are filed with the SEC or are first published, sent or given
to stockholders, as the case may be, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
1.3 Stockholder Lists. In connection with the Offer, the
Company will promptly furnish Sub with mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of the record holders of the Shares as of a recent date and will
furnish Sub with such information and assistance as Sub or its agents may
reasonably request in communicating the Offer to the record and beneficial
holders of the Shares. Subject to the requirements of applicable law and
except for such steps as are necessary to disseminate the Offer Documents and
any other documents necessary to consummate the Offer and Merger, Parent and
Sub and their affiliates and associates will hold in confidence such listings
and other information, will use such listings and other information only in
connection with the Offer and Merger and, if this Agreement is terminated in
accordance with its terms, will, upon request, deliver to the Company all
copies of all such listings and other information (and extracts or summaries
of such information) then in their or their agents' or advisors' possession.
1.4 Directors.
(a) Upon the purchase by Sub pursuant to the Offer of a
number of Shares that represents a majority of the outstanding Shares on a
fully-diluted basis, and from
<PAGE>
time to time thereafter until the Effective Time (as defined in Section 2.2),
the parties will, subject to the provisions of Section 14(f) of the Exchange
Act and Rule 14f-1 under the Exchange Act, promptly use all reasonable efforts
to cause the persons identified on Exhibit B attached hereto to comprise a
majority of the Board of Directors of the Company.
The date on which such persons first comprise a majority of
the Company's Board of Directors is referred to as the "Control Date."
(b) From and after the Control Date and prior to the
Effective Time, for so long as there is at least one director who is
designated as a "Continuing Director" in the list of directors set forth in
subsection (a) above (each a "Continuing Director" and, collectively, the
"Continuing Directors"), all other directors will abstain from acting upon,
and the approval of a majority of the Continuing Directors will be required to
authorize, any termination of this Agreement by the Company, any amendment of
this Agreement requiring action by the Board of Directors of the Company, any
extension of time for the performance of any obligation or other act of Parent
or Sub under this Agreement and any waiver of compliance with any provision of
this Agreement for the benefit of the Company.
1.5 Redemption of Special Preferred Stock. Immediately
following the consummation of the Offer and satisfaction of the ESOP
Condition, the Company will give due notice that the outstanding share of
Special Preferred Stock will be redeemed at an aggregate redemption price of
$1,500 within 30 days (but not less than 20 days) after the giving of such
notice. Concurrently with the giving of such notice, the Company will (i)
deposit the redemption price for the share of Special Preferred Stock to be
redeemed with a bank or trust company, designated in the notice of such
redemption, having an office in Cleveland, Ohio, in Canton, Ohio, or in
Wilmington, Delaware, having combined capital, surplus and undivided profits
aggregating at least $50,000,000, in trust for payment to the holder of the
share of Special Preferred Stock to be redeemed, and (ii) deliver irrevocable
written instructions authorizing the depositary to apply such deposit solely
to the redemption of the share of Special Preferred Stock to be redeemed.
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, in accordance
<PAGE>
with the DGCL, the Merger will be effected and pursuant thereto Sub will be
merged with and into the Company at the Effective Time. At the Effective Time,
the separate corporate existence of Sub will cease and the Company will
continue as the surviving corporation and as a direct wholly-owned subsidiary
of Parent (Sub and the Company are sometimes hereinafter referred to as
"Constituent Corporations" and, after giving effect to the Merger and as the
context requires, the Company is sometimes hereinafter referred to as the
"Surviving Corporation"). At the election of Parent, any direct or indirect
wholly owned Delaware subsidiary of Parent may be substituted for Sub as a
Constituent Corporation in the Merger. In such event, the parties agree to
execute an appropriate amendment to this Agreement in order to reflect such
substitution.
2.2 Closing; Effective Time of Merger. Unless this Agreement
shall have been terminated and the transaction herein contemplated shall have
been abandoned pursuant to Section 8.1, and subject to the satisfaction or
waiver of the conditions set forth in Article VII, the parties hereto will
cause the Merger to be consummated by filing a certificate of merger, or, if
the provisions of Section 253 of the DGCL are applicable, a certificate of
ownership and merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware, as provided in the DGCL as early as possible on the
Closing Date. The "Closing Date" will mean the second business day after
satisfaction and/or waiver of all of the conditions set forth in Article VII,
at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New
York 10153, unless another date, time or place is agreed to in writing by the
parties hereto. The Merger will become effective upon the filing of the
Certificate of Merger or at such later time as is provided in the Certificate
of Merger as the Company and Sub will agree (the "Effective Time").
2.3 Effects of the Merger.
(a) The Merger will have the effects as set forth in the
applicable provisions of the DGCL.
(b) The directors of Sub and the officers of the Company
immediately prior to the Effective Time will, from and after the Effective
Time, be the directors and officers of the Surviving Corporation until their
successors have been duly elected or appointed and qualified, or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and By-laws.
(c) At the Effective Time, the certificate of incorporation
and by-laws of the Company, as in effect immediately prior to the Effective
Time, will be the
<PAGE>
certificate of incorporation and by-laws, respectively, of the Surviving
Corporation, until thereafter changed or amended as provided therein or by
applicable law; provided, however, that the certificate of incorporation
(other than Article First thereof) and the by-laws of the Surviving
Corporation will be amended at the Effective Time to read in its entirety as
the certificate of incorporation (other than Article First thereof) and
by-laws, respectively, of Sub, as in effect immediately prior to the Effective
Time.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
3.1 Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder of
shares of Company Common Stock, shares of Special Preferred Stock, par value
$.01 per share, of the Company (the "Special Preferred Stock") or any holder
of shares of capital stock of Sub:
(a) Capital Stock of Sub. Each share of the capital stock of
Sub issued and outstanding immediately prior to the Effective Time will be
converted into and become one fully paid and nonassessable share of Common
Stock, par value $.01 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent- Owned Stock.
Each share of Company Common Stock that immediately prior to the Effective
Time is owned by the Company, Parent, Sub or any Subsidiary of Parent will be
canceled and retired and will cease to exist and no consideration will be
delivered or deliverable in exchange therefor.
(c) Conversion of Company Common Stock. Each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time (excluding Shares to be cancelled in accordance with Section 3.1(b) and
Dissenting Shares (as defined in Section 3.5)) will be converted into the
right to receive the per share amount actually paid in the Offer, payable to
the holder thereof in cash, without any interest thereon (such amount is
herein referred to as the "Merger Consideration"), upon surrender and exchange
of the Certificate (as defined in Section 3.2(b)) representing such share of
Company Common Stock.
(d) Holders of Certificates. All such shares of Company
Common Stock, when converted as provided in Section 3.1(c), will no longer be
outstanding and will automatically be cancelled and retired and will cease to
exist, and each
<PAGE>
certificate previously evidencing such shares of Company Common Stock will
thereafter represent only the right to receive the Merger Consideration,
without any interest thereon. The holders of certificates previously
evidencing shares of Company Common Stock outstanding immediately prior to the
Effective Time will cease to have any rights with respect to the Company
Common Stock, except as otherwise provided herein or by law.
(e) Subsidiary Defined. As used in this Agreement, the word
"Subsidiary," with respect to any party, means any corporation, limited
liability company, partnership, joint venture or other organization, whether
incorporated or unincorporated, of which: (i) such party or any other
Subsidiary of such party is a general partner; (ii) voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation, partnership, joint venture or other organization
is held by such party or by any one or more of its Subsidiaries, or by such
party and any one or more of its Subsidiaries; or (iii) at least 25% of the
equity, other securities or other interests is, directly or indirectly, owned
or controlled by such party or by any one or more of its Subsidiaries, or by
such party and any one or more of its Subsidiaries.
3.2 Payment for Shares.
(a) Paying Agent. Prior to the Effective Time, Parent will
appoint a United States bank or trust company reasonably acceptable to the
Company to act as paying agent (the "Paying Agent") for the payment of the
Merger Consideration, and Parent will cause Sub to deposit with the Paying
Agent in a separate fund established for the benefit of the holders of shares
of Company Common Stock, for payment in accordance with this Article III,
through the Paying Agent (the "Payment Fund"), immediately available funds in
an amount necessary to make the payment pursuant to Section 3.1(c) to such
holders. The Paying Agent, pursuant to irrevocable instructions, will pay the
Merger Consideration out of the Payment Fund.
If for any reason (including losses) the Payment Fund is
inadequate to pay the amount to which holders of shares of Company Common
Stock will be entitled under Section 3.1(c), Parent will take all steps
necessary to enable or cause Sub to deposit in trust additional cash with the
Paying Agent sufficient to make all payments required under this Agreement,
and Parent and the Surviving Corporation will in any event be liable for
payment thereof. The Payment Fund will not be used for any purpose except as
expressly provided in this Agreement.
<PAGE>
(b) Payment Procedures. As soon as reasonably practicable
after the Effective Time, the Surviving Corporation will instruct the Paying
Agent to mail to each holder of record (other than Parent or any Subsidiary of
Parent) of a Certificate or Certificates which, immediately prior to the
Effective Time, evidenced outstanding shares of Company Common Stock (the
"Certificates"), (A) a form of letter of transmittal (which will specify that
delivery will be effected, and risk of loss and title to the Certificates will
pass, only upon proper delivery of the Certificates to the Paying Agent, and
will be in such form and have such other provisions as the Surviving
Corporation reasonably may specify) and (B) instructions for use in effecting
the surrender of the Certificates in exchange for payment of the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent together with such letter of transmittal, duly executed, and such other
customary documents as may be required pursuant to such instructions, the
holder of such Certificate will be entitled to receive in respect thereof cash
in an amount equal to the product of (1) the number of shares of Company
Common Stock represented by such Certificate and (2) the Merger Consideration,
and the Certificate so surrendered will forthwith be cancelled. No interest
will be paid or accrued on the Merger Consideration payable upon the surrender
of any Certificate. If payment is to be made to a person other than the person
in whose name the surrendered Certificate is registered, it will be a
condition of payment that the Certificate so surrendered will be properly
endorsed or otherwise in proper form for transfer and that the person
requesting such payment will pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
surrendered Certificate or established to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 3.2(b)(i), each
Certificate (other than Certificates representing Shares owned by Parent or
any Subsidiary of Parent) will be deemed at any time after the Effective Time
to represent for all purposes only the right to receive the Merger
Consideration.
(ii) Upon surrender of the certificate representing
the share of Special Preferred Stock outstanding as of the date of this
Agreement for cancellation to the Surviving Corporation together with such
customary documents as may be required by the Surviving Corporation, the
holder of such will be entitled to receive in respect thereof cash in an
amount equal to $1,500.00, and the certificate so surrendered will forthwith
be cancelled. No interest will be paid or accrued on the consideration payable
upon the surrender of such certificate. Until surrendered in accordance with
the provisions of this Section 3.2(b)(ii), the certificate
<PAGE>
representing the outstanding share of Special Preferred Stock will be deemed
at any time after the Effective Time to represent for all purposes only the
right to receive a cash payment in an amount equal to $1,500.00.
(c) Termination of Payment Fund; Interest. Any portion of
the Payment Fund which remains undistributed to the holders of Company Common
Stock for 270 days after the Effective Time will be delivered to the Surviving
Corporation, and any holders of Company Common Stock who have not theretofore
complied with this Article III and the instructions set forth in the letter of
transmittal mailed to such holder after the Effective Time will thereafter
look only to the Surviving Corporation for payment of the Merger Consideration
to which they are entitled. All interest accrued in respect of the Payment
Fund will inure to the benefit of and be paid to the Surviving Corporation.
(d) No Liability. None of Parent, the Company or the
Surviving Corporation will be liable to any holder of shares of Company Common
Stock for any cash from the Payment Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Company Common Stock shall not have been surrendered prior to seven years
after the Effective Time (or immediately prior to such earlier date on which
any Merger Consideration payable to the holder thereof pursuant to this
Article 3 would otherwise escheat to or become the property of any
governmental entity), any such Merger Consideration shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims or interests of any person previously entitled
thereto.
3.3 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company will be closed and there will be no further
registration of transfers of shares of Company Common Stock thereafter. On or
after the Effective Time, any certificates presented to the Paying Agent or
Parent for any reason, except notation thereon that a stockholder has elected
to exercise his rights to appraisal pursuant to the DGCL, will be converted
into the consideration as provided in this Article III.
3.4 Stock Option Plans. Prior to the Effective Time, Parent
will cause Sub to pay or, to the extent funds for such purpose are provided by
Parent to the Company, the Company will pay each holder of a then outstanding
option to purchase Shares (including under the Company's 1995 Stock Option
Plan (the "Stock Option Plan")), whether or not then exercisable or vested
(collectively, the "Options"), in cancellation and settlement thereof, for
each Share subject to such Option, an amount in cash equal to the excess, if
any, of the Merger Consideration over the per Share exercise
<PAGE>
price therefor (such amount being hereinafter referred to as, the "Option
Consideration"); provided, however, that with respect to any person subject to
Section 16 of the Exchange Act, any such amount will be paid by Sub or the
Surviving Corporation as soon as practicable after the first date payment can
be made without liability to such persons under Section 16(b) of the Exchange
Act. Upon payment of the Option Consideration, the Option will be cancelled.
The payment to the holder entitled thereto of the Option Consideration will be
deemed a release of any and all rights the holder had or may have had in
respect of such Option.
3.5 Dissenting Shares. Notwithstanding any other provisions
of this Agreement to the contrary, shares of Company Common Stock that are
outstanding immediately prior to the Effective Time and that are held by
stockholders who have not voted in favor of the Merger or consented thereto in
writing and who properly demand appraisal for such shares in accordance with
Section 262 of the DGCL (collectively, the "Dissenting Shares") will not be
converted into or represent the right to receive the consideration provided
for in Section 3.1. Such stockholders instead will be entitled to receive
payment of the appraised value of such shares of Company Common Stock held by
them in accordance with the provisions of Section 262 of the DGCL, except that
all Dissenting Shares held by stockholders who will have failed to perfect or
who effectively will have withdrawn or otherwise lost their rights to
appraisal of such shares of Company Common Stock under Section 262 of the DGCL
will thereupon be deemed to have been converted into and to have become
exchangeable, as of the Effective Time, for the right to receive, without any
interest thereon, the consideration provided for in Section 3.1 upon surrender
in the manner provided in Section 3.2, of the certificate or certificates
that, immediately prior to the Effective Time, evidenced such shares of
Company Common Stock.
3.6 Withholding Rights. Parent and Sub will be entitled to
deduct and withhold, or cause to be deducted or withheld, from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock or Options such amounts as are required to be
deducted and withheld with respect to the making of such payment under the
Code (as defined in Section 4.1(i)), or any provision of applicable state,
local or foreign tax law. To the extent that amounts are so withheld, such
withheld amounts will be treated for all purposes of this Agreement as having
been paid to such holders in respect of which such deduction and withholding
was made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
<PAGE>
4.1 Representations and Warranties of the Company. The
Company represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Power. Each of the Company
and its Subsidiaries is a corporation duly incorporated, validly existing and
in good standing under the laws of its respective jurisdiction of
incorporation, has the corporate power to own, lease and operate its
properties and to carry on its business as now being conducted, and is duly
qualified to do business as a foreign corporation and in good standing to
conduct business in each jurisdiction in which the business it is conducting,
or the operation, ownership or leasing of its properties, makes such
qualification necessary, other than in jurisdictions where the failure so to
qualify would not in the aggregate have a Material Adverse Effect (as defined
below) with respect to the Company. The Company has heretofore made available
to Parent complete and correct copies of its and its Subsidiaries' respective
Certificates of Incorporation and By-laws. All Subsidiaries of the Company and
their respective jurisdictions of incorporation or organization are identified
on Schedule 4.1(a) of the disclosure letter dated the date of this Agreement
and delivered by the Company to Parent and Sub prior to the execution of this
Agreement (the "Company Disclosure Schedule"). As used in this Agreement: a
"Material Adverse Effect" means, with respect to any party, any events,
changes or effects which, individually or in the aggregate, would have a
material adverse effect on the business, operations, assets, liabilities,
properties, results of operations or financial condition of such party and its
Subsidiaries, taken as a whole.
(b) Capital Structure. The authorized capital stock of the
Company consists of (i) 27,000,000 shares of Common Stock, $.01 par value, of
which, as of the date hereof, 19,706,578 Shares were issued and outstanding,
all of which were validly issued, fully paid and non-assessable and free of
preemptive rights, and 1,764,000 Shares are reserved for issuance pursuant to
outstanding Options, (ii) 6,000,000 shares of Preferred Stock, $.01 par value,
of which, as of the date hereof, no shares were issued and outstanding and
(iii) 1 share of Special Preferred Stock, of which, as of the date hereof, 1
share was issued and outstanding. Except as set forth on Schedule 4.1(b) of
the Company Disclosure Schedule, as of the date hereof, all outstanding shares
of capital stock of the Company's Subsidiaries are owned by the Company or a
direct or indirect wholly-owned Subsidiary of the Company, free and clear of
all liens, charges, encumbrances, claims and options of any nature. Except as
set forth above and on Schedule 4.1(b) of the Company Disclosure Schedule
(which
<PAGE>
sets forth a true and correct list of the following, including holders thereof
and exercise prices therefor), there are not as of the date hereof any
outstanding or authorized capital stock equivalents or equity equivalents of
the Company or any options, warrants, calls, rights (including preemptive
rights), commitments or any other agreements of any character which the
Company or any of its Subsidiaries is a party to, or may be bound by,
requiring it to issue, transfer, sell, purchase, redeem or acquire any shares
of capital stock or any securities or rights convertible into, exchangeable
for, or evidencing the right to subscribe for, any shares of capital stock or
equity equivalents of the Company or any of its Subsidiaries. There is no
Company Voting Debt outstanding. For purposes of this Agreement, "Company
Voting Debt" means bonds, debentures, notes or other instruments or evidence
of indebtedness having the right to vote (or convertible into, or exercisable
or exchangeable for, securities having the right to vote) on any matters on
which the Company stockholders may vote. The Company does not hold any capital
stock or other equity interest, directly or indirectly, in any person other
than the Subsidiaries.
(c) Authority. The Company has the requisite corporate power
and authority to execute and deliver this Agreement and, subject to the next
sentence, to consummate the transaction contemplated hereby. This Agreement,
the Offer, the Merger and the consummation by the Company of the transaction
contemplated hereby have been duly and validly authorized by the Board of
Directors of the Company and no other corporate proceedings on the part of the
Company or its stockholders are necessary to authorize this Agreement or to
consummate the transaction contemplated hereby, other than the approval of
this Agreement and the Merger by (i) the holders of a majority of the Company
Common Stock if required by the DGCL, and (ii) the holder of the Special
Preferred Stock as long as a "Trigger Event" (as defined in the Company's
Restated Certificate of Incorporation) has not occurred. This Agreement has
been duly and validly executed and delivered by the Company and, assuming this
Agreement constitutes the valid and binding agreement of Parent and Sub,
constitutes the valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except that the enforcement
hereof may be limited by (A) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (B) general principles of equity (regardless
of whether enforceability is considered in a proceeding in equity or at law).
(d) Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement nor the consummation by the Company
of the transaction contemplated hereby will: (i) conflict with or result in
any breach of
<PAGE>
any provision of the respective Certificate of Incorporation or By-Laws of the
Company or any of its Subsidiaries; (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except (A) in connection with the
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (B) the filing of the Certificate of Merger
pursuant to the DGCL and appropriate documents with the relevant authorities
of other states in which the Company or any of its Subsidiaries is authorized
to do business, (C) in connection with any state or local tax which is
attributable to a change in the beneficial ownership of real property owned by
the Company or its Subsidiaries (collectively, the "Gains Taxes"), (D) as may
be required by any applicable state securities or "blue sky" laws or state
takeover laws, (E) such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Offer or the
Merger or the transaction contemplated by this Agreement, or (F) where the
failure to obtain such consent, approval, authorization or permit, or to make
such filing or notification, would not have a Material Adverse Effect on the
Company; (iii) except as set forth in Schedule 4.1(d) of the Company
Disclosure Schedule, result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, consent or acceleration or lien or other
charge or encumbrance) under, or cause any payment to be required to be made
or any securities or rights of the Company to be issued pursuant to, any of
the terms, conditions or provisions of any note, license, agreement, plan or
other instrument or obligation to which the Company or any of its Subsidiaries
or any of their assets may be bound, except for such violations, breaches and
defaults (or rights of termination, cancellation or acceleration or lien or
other charge or encumbrance) as to which requisite, waivers or consents have
been obtained or which, in the aggregate, would not have a Material Adverse
Effect on the Company; or (iv) assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in this
Section 4.1(d) are duly and timely obtained or made and, with respect to the
Merger, the approval of this Agreement by the Company's stockholders has been
obtained to the extent required by the DGCL, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or
any of its Subsidiaries or to any of their respective assets.
(e) Compliance. Neither the Company nor any of its
Subsidiaries is in default or violation of (i) any law, statute, rule,
regulation, order, judgment, decree, governmental approval, permit or
franchise applicable to the Company or any of its Subsidiaries or by which its
or any of
<PAGE>
their respective properties are bound or affected or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, 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 any of its or their respective
properties are bound or affected ("Contracts"), except in the case of both (i)
and (ii) for such defaults and violations which would not, individually or in
the aggregate, have a Material Adverse Effect on the Company or materially
delay consummation of the transaction contemplated hereby. To the Company's
knowledge, the other parties to such Contracts are not in default thereunder
and such Contracts are valid and binding obligations of the other parties
thereto in accordance with their terms, except for such defaults and failures
which would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
(f) Properties. The Company or one of its Subsidiaries has
good, valid, and in the case of Owned Properties (as defined below),
marketable fee title to: (i) all of the real property and interests in real
property owned by the Company or its Subsidiaries indicated in the most recent
financial statements included in the Company SEC Documents as defined in
clause (i) of Section 4.1(h), except for properties sold or otherwise disposed
of in the ordinary course of business (the "Owned Properties"), and (ii)
leasehold estates in all leased real properties indicated in the most recent
financial statements included in the Company SEC documents, 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 free and clear of
all mortgages, liens, security interests, easements, covenants, rights-of-way
and other similar restrictions and encumbrances ("Encumbrances"), except for
(x) Encumbrances which, individually or in the aggregate, would not have a
Material Adverse Effect on the Company, (y) those Encumbrances set forth in
Schedule 4.1(f) of the Company Disclosure Schedule or the Company SEC
Documents and (z) Encumbrances for Taxes (as hereinafter defined) which are
being contested in good faith by appropriate proceedings.
(g) Intellectual Property. Except to the extent the failure
of any of the following would not, in the aggregate, have a Material Adverse
Effect on the Company: (i) the Company and each of its Subsidiaries owns
and/or is licensed to use (in each case, free and clear of any liens, claims
or similar encumbrances) all patents, trademarks, trade names, copyrights,
technology, know-how and processes used in or necessary for the conduct of its
business as currently conducted; (ii) the use of such patents, trademarks,
trade names, service marks, copyrights,
<PAGE>
technology, know-how and processes by the Company and its Subsidiaries and
their agents does not infringe on the rights of any person; (iii) to the
knowledge of the Company, no person is infringing on any right of the Company
or any of its Subsidiaries with respect to any such patents, trademarks,
service marks, trade names, copyrights, technology, know-how or processes; and
(iv) there are no agreements, written or oral, which in any material respect
limit or otherwise relate to any rights of the Company or its Subsidiaries to
use any of their intellectual property.
(h) SEC Reports; Financial Statements. (i) The Company has
filed all forms, reports and documents required to be filed by it with the SEC
since July 1, 1996 pursuant to the federal securities laws and the SEC rules
and regulations thereunder, all of which, except as set forth on Schedule
4.1(h) of the Company Disclosure Schedule, as of their respective dates,
complied in all material respects with all applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the Exchange
Act and the rules and regulations promulgated thereunder (collectively, the
"Company SEC Documents") and, including any financial statements or schedules
included therein, did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(ii) The consolidated balance sheets and the related
consolidated statements of income (loss), shareholders' equity (deficiency)
and cash flows (including the related notes thereto) of the Company included
in the Company SEC Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a basis consistent with prior
periods (except as otherwise noted therein), and present fairly the
consolidated financial position of the Company and its consolidated
Subsidiaries as of their respective dates, and the consolidated results of
their operations and their cash flows for the periods presented therein
(subject, in the case of the unaudited interim financial statements, to normal
year-end adjustments).
(iii) As of March 31, 1998, neither the Company nor any of
its Subsidiaries had any liabilities of any nature, whether accrued, absolute,
contingent or otherwise, whether due or to become due that are required to be
recorded or reflected on a consolidated balance sheet of the Company under
generally accepted accounting principles, except (i) as specifically reflected
or reserved against or disclosed in the financial statements of the Company
<PAGE>
included in the Company SEC Documents filed prior to the date of this
Agreement or (ii) described in Schedule 4.1(h) of the Company Disclosure
Schedule.
(i) Litigation. There are no actions, claims, suits,
proceedings or governmental investigations pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries that would
have a Material Adverse Effect on the Company, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any of its Subsidiaries having any such
effect.
(j) Offer Documents. None of the information supplied by the
Company in writing for inclusion in the Offer Documents or provided by the
Company in the Schedule 14D-9 will, at the respective times that the Offer
Documents and the Schedule 14D-9 or any amendments or supplements thereto are
filed with the SEC and are first published or sent or given to holders of
Shares, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(k) Taxes. The Company and its Subsidiaries have timely
filed all Federal, state, local and foreign Tax Returns that any of them is
required to file ("Tax Returns") other than those Tax Returns the failure of
which to have timely filed or to file would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. The Company and its
Subsidiaries have paid all Taxes (shown due on such filed returns). The
Company has delivered or made available to Parent true and complete copies of
the Company's and its Subsidiaries' Federal, state, local and foreign income
tax returns for each of the three years ended June 30, 1995 through 1997.
Except as set forth in Schedule 4.1(k) of the Company Disclosure Schedule, no
audits or other administrative proceedings or court proceedings are presently
pending with regard to any Taxes or Tax Return of the Company or its
Subsidiaries as to which any taxing authority has asserted in writing claims
which would have a Material Adverse Effect on the Company or, as of the date
of this Agreement, which, if adversely determined, would have a Material
Adverse Effect on the Company. Except as set forth in Schedule 4.1(k) of the
Company Disclosure Schedule, as of the date of this Agreement, the Company and
its Subsidiaries have not received any notice or deficiency or assessment from
any taxing authority with respect to liabilities for income and other material
Taxes which have not been fully paid or finally settled. "Tax Returns" means
any return, declaration, report or similar statement required to be filed with
respect to any Taxes (including any attached schedules), including any
information return, claim or
<PAGE>
refund, amended return and declaration of estimated Tax. "Tax" or "Taxes"
means all Untied States federal, state, local or foreign income, profits,
estimated, gross receipts, windfall profits, sales, use, license, excise,
emergency excise, franchise, capital gains, capital stock, employment,
withholding, transfer, stamp, payroll, goods and services, value added,
alternative or add-on minimum tax, or any other tax, custom, duty or
governmental fee, or other like assessment or charge of any kind whatsoever,
together with any interest, penalties, fines, related liabilities or additions
to tax that may become payable in respect thereof imposed by any taxing
authority.
(l) Employee Benefit Plans; Labor Matters. (i) Schedule
4.1(l) of the Company Disclosure Schedule 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 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 or
deferred compensation plans, agreements, programs, policies or other
arrangements, whether or not subject to ERISA, under which any employee or
former employee of the Company or any of its Subsidiaries has any present or
future right to benefits with respect to which the Company or any of its
Subsidiaries has any present or future liability. All such plans, agreements,
programs, policies and arrangements are collectively referred to herein as the
"Company Plans".
(ii) 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: (A) any related trust agreement or other funding
instrument; (B) the most recent determination letter, if applicable (C) any
summary plan description and other written communication by the Company or any
of its Subsidiaries to their employees concerning the extent of the benefits
provided under a Company Plan; and (D) the most recent (1) Form 5500 and
attached schedules, (2) audited financial statements, (3) actuarial valuation
reports and (4) attorney's response to an auditor's request for information.
(iii) Except as set forth in Schedule 4.1(l) of the Company
Disclosure Schedule (A) each Company Plan intended to be qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
has received a favorable determination letter from the Internal Revenue
Service (the "IRS") that it is so qualified and nothing has occurred since the
date of such letter that could reasonably be expected to affect the qualified
status
<PAGE>
of such Company Plan; (B) each Company Plan has been operated in all material
respects in accordance with its terms and the requirements of applicable law;
(C) neither the Company nor any of its ERISA Affiliates has incurred any
direct or indirect liability under, arising out of or by operation of Title IV
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
in connection with the termination of, or withdrawal from, any Company Plan or
other retirement plan or arrangement, and no fact or event exists that could
reasonably be expected to give rise to any liability. Except as set forth in
Schedule 4.1(l) of the Company Disclosure Schedule or the Company SEC
Documents, the aggregate projected benefit obligations of each Company Plan
subject to Title IV of ERISA (as of the date of the most recent actuarial
valuation prepared for such Company Plan) do not exceed the fair market value
of the assets of such Company Plan (as of the date of such valuation).
(iv) For purposes of this Agreement, "ERISA Affiliate" shall
be any organization which is a member of a controlled group of organizations
within the meaning of Code sections 414(b), (c), (m) or (o).
(v) Other than the Company's Employee Stock Ownership Plan
(the "ESOP"), there is no employee benefit plan or arrangement established by
or jointly with the Company that owns of record any of the issued and
outstanding Shares.
(m) Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Documents filed prior to the date of this
Agreement, as set forth on Schedule 4.1(m) of the Company Disclosure Schedule
or as expressly contemplated by this Agreement, since March 31, 1998, (i) the
business of the Company and its Subsidiaries has been carried on only in the
ordinary and usual course (ii) there has not been any condition, event or
occurrence that individually or in the aggregate, has resulted or would
reasonably be expected to result in a Material Adverse Effect on the Company
and (iii) neither the Company nor any of its Subsidiaries has taken any action
which, had it been taken following the date hereof and prior to the Control
Date, would have required the consent of Parent pursuant to Section 5.1 of
this Agreement.
(n) Opinion of Investment Banker. The Company has received
the written opinion of Lazard Freres & Co. LLC dated the date hereof, to the
effect that, based upon and subject to the matters set forth therein and as of
such date, the consideration to be received by the holders of Company Common
Stock in the Offer and the Merger is fair from a financial point of view to
such holders.
<PAGE>
(o) Environmental Matters. As of the date of this Agreement,
except as disclosed on Schedule 4.1(o) of the Company Disclosure Schedule, (i)
the Company and each of its Subsidiaries is in compliance with all applicable
federal, state and local laws and regulations relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata) (collectively,
"Environmental Laws"), except for non compliance that, in the aggregate, would
not have a Material Adverse Effect on the Company and, to the knowledge of the
Company, there is no condition that would reasonably be expected to prevent or
interfere with such compliance with Environmental Laws in the future and (ii)
neither the Company nor any of its Subsidiaries has received written notice
of, or, to the knowledge of the Company, is the subject of, any action,
proceeding, cause of action, claim, investigation, demand or notice by any
person or entity alleging liability under or non-compliance with any
Environmental Law (an "Environmental Claim"), except for liabilities and
non-compliances that in the aggregate would not have a Material Adverse Effect
on the Company; (iii) except as would not in the aggregate have a Material
Adverse Effect on the Company, materials that are regulated pursuant to
Environmental Laws or that could reasonably be expected to result in liability
under Environmental Laws have not been generated, transported, treated,
stored, disposed of, arranged to be disposed of, released or threatened to be
released at, on, from or under any of the properties or facilities currently
or, to the knowledge of the Company, formerly owned, leased or otherwise used
by the Company or any of its Subsidiaries, in violation of, or in a manner or
to a location that would reasonably be expected to give rise to liability to
the Company or its Subsidiaries under any Environmental Laws; and (iv) neither
the Company nor any of its Subsidiaries has contractually assumed any material
liabilities or obligations under any Environmental Laws that could reasonably
be expected to have a Material Adverse Effect on the Company.
4.2 Representations and Warranties of Parent and Sub. Parent
and Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Power. Each of Parent and Sub
is a corporation, duly organized, validly existing and in good standing under
the laws of its respective jurisdiction of organization, has the power to own,
lease and operate its properties and to carry on its business as now being
conducted, and is duly qualified to do business as a foreign entity and in
good standing to conduct business in each jurisdiction in which the business
it is conducting, or the operation, ownership or leasing of its properties,
makes such qualification necessary, other than in jurisdictions where the
failure so to qualify would not
<PAGE>
in the aggregate have a Material Adverse Effect with respect to Parent. Parent
and Sub have heretofore made available to the Company complete and correct
copies of their respective charter documents. Parent does not own any capital
stock of any person other than the capital stock of Sub.
(b) Authority. Each of Parent and Sub has the requisite
power and authority to execute and deliver this Agreement and to consummate
the transaction contemplated hereby. This Agreement and the consummation by
each of Parent and Sub of the transaction contemplated hereby have been duly
and validly authorized by the respective managers and Board of Directors of
each of Parent and Sub and no other proceedings on the part of either Parent
or Sub are necessary to authorize this Agreement or to consummate the
transaction contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Sub and, assuming this Agreement
constitutes the valid and binding agreement of the Company, constitutes the
valid and binding agreement of each of Parent and Sub, enforceable against
Parent and Sub in accordance with its terms, except that the enforcement
hereof may be limited by (A) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (B) general principles of equity (regardless
of whether enforceability is considered in a proceeding in equity or at law).
(c) Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement nor the consummation by Parent and
Sub of the transaction contemplated hereby will: (i) conflict with or result
in any breach of any provision of the respective charter documents of either
Parent or Sub, (ii) require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
except (A) in connection with the applicable requirements of the HSR Act, (B)
the filing of the Certificate of Merger pursuant to the DGCL and appropriate
documents with the relevant authorities of other states in which Parent and
Sub are authorized to do business, (C) in connection with any Gains Taxes, (D)
as may be required by any applicable state securities or "blue sky" laws or
state takeover laws, (E) such filings and consents as may be required under
any Environmental Law pertaining to any notification, disclosure or required
approval triggered by the Offer or the Merger or the transaction contemplated
by this Agreement, (F) such filings, consents, approvals, orders,
registrations and declarations as may be required under the laws of any
foreign country in which Parent or Sub conducts any business or owns assets,
or (G) where the failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not in the aggregate
have a Material Adverse Effect on Parent; (iii) result in a
<PAGE>
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination,
cancellation or acceleration or lien or other charge or encumbrance) under any
of the terms, conditions or provisions of any note, license, agreement or
other instrument or obligation to which Parent or Sub or any of their assets
may be bound, except for such violations, breaches and defaults (or rights of
termination, cancellation or acceleration or lien or other charge or
encumbrance) as to which requisite, waivers or consents have been obtained or
which, in the aggregate, would not have a Material Adverse Effect on Parent;
or (iv) assuming the consents, approvals, authorizations or permits and
filings or notifications referred to in this Section 4.2(c) are duly and
timely obtained or made, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Parent or Sub or to any of their respective
assets. Neither Parent nor Sub nor any of their respective affiliates or
associates is, at the date hereof, an "interested stockholder" (as such term
is defined in Section 203 of the DGCL) of the Company.
(d) Offer Documents. None of the information supplied or to
be supplied by Parent in writing for inclusion in the Offer Documents or
provided by Parent in the Schedule 14D-9 will, at the respective times that
the Offer Documents and the Schedule 14D-9 or any amendments or supplements
thereto are filed with the SEC and are first published or sent or given to
holders of Shares, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(e) Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transaction contemplated hereby and has not engaged
in any business activities or conducted any operations other than in
connection with the transaction contemplated thereby.
(f) Financing. (i) Parent owns all of the outstanding
capital stock of Sub. At all times prior to the Effective Time, no person
other than Parent has owned, or will own, any of the outstanding capital stock
of Sub. Sub has not incurred, and prior to the Effective Time will not incur,
directly or through any Subsidiary, any liabilities or obligations for
borrowed money or otherwise, except incidental liabilities or obligations not
for borrowed money incurred in connection with its organization and except in
connection with the Merger.
(ii) Parent has received written executed
commitments (collectively, the "Financing Commitments") (true and complete
copies of which have been delivered to
<PAGE>
the Company prior to the execution of this Agreement) from financial
institutions and investors to provide, subject to the terms and conditions of
such commitments, debt and equity financing sufficient, together with other
funds available to Parent, to effect the Offer and the Merger and the
transaction contemplated hereby and to pay all related fees and expenses.
Subject to the terms and conditions of this Agreement and the receipt of funds
pursuant to the Financing Commitments, Parent agrees to contribute to the
equity of Sub to the extent necessary to enable Sub to satisfy its obligations
to purchase the Shares pursuant to the Offer and to effect the Merger.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of the Company. During the period from the
date of this Agreement and continuing until the Control Date, the Company
agrees as to the Company and its Subsidiaries that (except as expressly
contemplated or permitted by this Agreement, or to the extent that Parent
otherwise consents in advance in writing):
(a) Ordinary Course. Each of the Company and its
Subsidiaries will carry on its businesses in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted except that
the Company may continue its efforts to sell the assets of the Stainless and
Specialty Business of the Company, and the Company and each of its
Subsidiaries shall endeavor 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.
(b) Dividends; Changes in Stock. The Company will not, nor
will it permit any of its Subsidiaries to: (i) declare or pay any dividends on
or make other distributions in respect of any of its capital stock, other than
dividends paid to the Company; (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock; or (iii) repurchase, redeem or otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, any shares of its capital stock
or such other securities, except as required by the terms of its securities
outstanding or any employee benefit plan in effect on the date hereof.
<PAGE>
(c) Issuance of Securities. The Company will not, nor will
it permit any of its Subsidiaries to, (i) issue or grant any options, warrants
or rights to purchase shares of Company Common Stock or other equity
securities of the Company or its Subsidiaries, (ii) amend the terms of or
reprice any Option or amend the terms of the Stock Option Plan, or (iii)
issue, deliver or sell, or authorize or propose to issue, deliver or sell, any
shares of its capital stock of any class or series or other equity securities,
any debt securities or any securities convertible into, or any rights,
warrants or options to acquire, any such securities, other than the issuance
of Shares upon the exercise of Options that are outstanding on the date
hereof.
(d) Governing Documents. The Company will not, and will not
permit any of its Subsidiaries to, amend or propose to amend its Restated
Certificate of Incorporation or By-laws or equivalent organizational
documents.
(e) No Solicitation. (i) The Company will not directly or
indirectly initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal (as defined below), or enter
into or maintain or continue discussions or negotiate with any person or
entity in furtherance of such inquiries or for the purpose of obtaining an
Acquisition Proposal, and the Company will not permit any of its Subsidiaries
to take, and will use reasonable efforts to prevent the officers, directors,
employees, advisors, representatives, agents and affiliates of the Company or
any of its Subsidiaries (including any investment bankers, attorney or
accountant retained by the Company or any of its Subsidiaries) (such officers,
directors, employees, representatives, advisors, agents, affiliates,
investment bankers, attorneys and accountants being referred to herein,
collectively as "Representatives") from taking, any such action; provided,
however, that nothing contained in this Section 5.1(e) will prohibit the Board
of Directors of the Company from:
(A) furnishing information to, or entering into
discussions or negotiations with, any person or entity that makes a written,
bona fide Acquisition Proposal that was not solicited after the date of this
Agreement if, and only to the extent that, (i) the Board of Directors of the
Company, after consultation with and based upon the advice of independent
legal counsel (who may be the Company's regularly engaged independent legal
counsel), and after consultation with a nationally recognized investment
banking firm, determines in good faith by majority vote that (A) such
Acquisition Proposal would, if consummated, constitute
<PAGE>
a Superior Proposal, and (B) such action is necessary for the Board of
Directors of the Company to comply with its fiduciary duties to stockholders
under applicable law and (ii) prior to taking such action, the Company (x)
provides prior notice to Parent to the effect that it is taking such action
and (y) receives from such person or entity an executed confidentiality
agreement in reasonably customary form. The Company will promptly notify
Parent and Sub if it is prepared to provide access to the properties, books or
records of the Company or any of its Subsidiaries to any person who has made
an Acquisition Proposal. The Company shall promptly (and in any event within
one business day, and prior to taking any of the foregoing actions) advise
Parent following the receipt by it of any Acquisition Proposal or any inquiry
or request relating thereto and the substance thereof (including the identity
of the person making such Acquisition Proposal, a description of all material
terms thereof and a copy of any written proposal), and, if the Board of
Directors in good faith believes it is consistent with its fiduciary duties,
advise Parent of any developments with respect to such Acquisition Proposal,
inquiry or request promptly upon the occurrence thereof, including the
Company's entering into discussions or negotiations with respect thereto. The
Board of Directors of the Company shall not, in connection with any of the
actions described in this Section 5.1(e), take any action to cause any state
takeover statute or other similar state law to become applicable to the Offer
or the Merger or inapplicable to any Acquisition Proposal (until such time as
this Agreement has been terminated in accordance with the requirements of
Section 8.1). The Company agrees immediately to cease and cause to be
terminated any activities, discussions or negotiations conducted prior to the
date of this Agreement with any parties other than Parent and its affiliates
with respect to any of the foregoing;
(B) failing to make or reaffirm, withdrawing, adversely
modifying or taking a public position materially inconsistent with its
recommendation referred to in Article I hereof (which may include making any
statement required by Rule 14e-2 under the Exchange Act) if there exists an
Acquisition Proposal and the Board of Directors of the Company, after
consultation with and based upon the advice of independent legal counsel (who
may be the Company's regularly engaged independent counsel), and after
consultation with a nationally recognized investment banking firm, determines
in good faith by majority vote that (A) such Acquisition Proposal would, if
consummated, constitute a Superior Proposal, and (B) that such action is
necessary for the Board of Directors of the Company to comply with its
fiduciary duties to stockholders under applicable law; or
<PAGE>
(C) making a "stop-look-and-listen" communication with
respect to an Acquisition Proposal, of the nature contemplated in, and
otherwise in compliance with, Rule 14d-9 under the Exchange Act as a result of
receiving an Acquisition Proposal.
For purposes of this Agreement, "Acquisition Proposal"
means any of the following (other than the transaction among the Company,
Parent and Sub contemplated hereunder) involving the Company or any of its
Subsidiaries: (i) any proposed merger, consolidation, share exchange,
recapitalization, business combination or other similar transaction; (ii) any
proposed sale, lease, exchange, mortgage, pledge, transfer or other
disposition of assets that comprise more than 20% (computed based on the fair
market value of such assets as determined by the Board of Directors of the
Company in good faith) of the assets of the Company and its Subsidiaries, on a
consolidated basis, in a single transaction or series of transactions; (iii)
any proposed tender offer, exchange offer or other equity investment for more
than 20% of the outstanding shares of capital stock of the Company or the
filing of a registration statement under the Securities Act in connection
therewith; or (iv) any public announcement of a proposal, plan or intention to
do any of the foregoing or any agreement to engage in any of the foregoing.
(ii) Except as set forth in this Section 5.1(e)(ii), the
Board of Directors of the Company will not approve or recommend or permit the
Company to enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, if the Board of Directors of the Company, after
consultation with and based upon the advice of independent legal counsel (who
may be the Company's regularly engaged independent legal counsel), determines
in good faith that it is necessary to do so in order to comply with its
fiduciary duties to stockholders under applicable law, the Board of Directors
of the Company may approve or recommend a Superior Proposal (as defined below)
or cause the Company to enter into an agreement with respect to a Superior
Proposal, but in each case only if (i) the Company provides written notice to
Parent (a "Notice of Superior Proposal") three business days prior to the time
it intends to cause the Company to enter into such an agreement advising
Parent that the Board of Directors of the Company has received a Superior
Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal, (ii) at the
end of such three business day period, the Company's Board of Directors
continues to believe that such Acquisition Proposal constitutes a Superior
Proposal, including taking into account any adjustment to the terms and
conditions of the transaction contemplated hereby proposed by Parent in
response to such Acquisition Proposal,
<PAGE>
and (iii) the Company terminates this Agreement in accordance with the
requirements of Section 8.1(g) prior to taking any of the foregoing actions.
For purposes of this Agreement, a "Superior Proposal" means any bona fide
Acquisition Proposal not directly or indirectly initiated, solicited,
encouraged or knowingly facilitated by the Company after the date of the
Agreement which the Board of Directors of the Company determines in good faith
judgment (based on the advice of an investment banker of nationally recognized
reputation), taking into account all legal, financial, regulatory and other
aspects of the proposal and the person making the proposal, (i) would, if
consummated, result in a transaction that is more favorable to the Company's
stockholders (in their capacity as stockholders), from a financial point of
view, than the transaction contemplated by this Agreement and (ii) is
reasonably capable of being completed; provided, that for purposes of this
definition, the term Acquisition Proposal shall have the meaning assigned to
such term in Section 5.1(e)(i) except that each reference to 20% in the
definition of "Acquisition Proposal" shall be deemed to be a reference to 70%
and "Acquisition Proposal" shall only be deemed to refer to a transaction
involving the Company or, with respect to assets (including the shares of any
Subsidiary of the Company), the assets of the Company and its Subsidiaries
taken as a whole (and not any of its Subsidiaries alone).
(f) Acquisitions/Dispositions. Except as set forth on
Schedule 5.1(f) of the Company Disclosure Schedule and other than the
transaction contemplated hereby, the Company will not, nor will it permit any
of its Subsidiaries to, make any acquisition, by means of merger,
consolidation or otherwise, or any disposition (including sale/leaseback
transactions or similar arrangements) of assets or securities, other than
acquisitions of supplies and raw materials and sales of inventory and worn-out
or obsolete equipment and other transactions in the ordinary course of
business.
(g) Governmental Filings. The Company will promptly provide
Parent (or its counsel) with copies of all filings made by the Company with
(i) the SEC and (ii) other state or federal court, administrative agency or
commission or other governmental authority or instrumentality (a "Governmental
Entity") in connection with this Agreement and the transaction contemplated
hereby in the case of this clause (ii).
(h) No Dissolution, Etc. Other than pursuant to this
Agreement, the Company will not authorize, recommend, propose or announce an
intention to adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or reorganization of
the Company or any of its Subsidiaries.
<PAGE>
(i) Other Actions. Except as expressly permitted by the
terms of this Agreement, the Company will not take or agree or commit to take,
nor will it knowingly permit any of its Subsidiaries to take or agree or
commit to take, any action that would reasonably be expected to result in any
of the Company's representations or warranties hereunder being untrue in any
material respect or in any of the Company's covenants hereunder or any of the
conditions to the Offer and the Merger not being satisfied.
(j) Certain Employee Matters. The Company and its
Subsidiaries will not (without the prior written consent of Parent): (i) grant
any material increases in the compensation of any of its directors or officers
or in the payment of any severance due to such directors or officers; (ii) pay
or agree to pay any pension, retirement allowance or other benefit not
required or contemplated to be paid prior to the Effective Time by any of the
Company Plans as in effect on the date hereof to any such director or officer,
whether past or present; (iii) enter into any new, or materially amend any
existing, employment or severance or termination agreement with any such
director or officer; or (iv) except as may be required to comply with
applicable law, become obligated under any new plan which if in effect on the
date hereof would be a Company Plan, or amend or modify any Company Plan.
(k) Indebtedness. Except as set forth on Schedule 5.1(k) of
the Company Disclosure Schedule and other than ordinary course borrowing
pursuant to lines of credit or facilities existing on the date of this
Agreement, the Company will not, nor will the Company permit any of its
Subsidiaries to assume or incur any indebtedness for borrowed money or
guarantee any such indebtedness or guarantee any debt securities of others or,
except for ordinary course leases of computer equipment, enter into any lease
(whether such lease is an operating or capital lease), or create any
mortgages, liens, security interests or other encumbrances on the property of
the Company or any of its Subsidiaries in connection with any indebtedness
thereof.
(l) Accounting. The Company and its Subsidiaries will not
take any action, other than as required by the SEC, GAAP or applicable law,
with respect to accounting policies, procedures and practices.
(m) Certain Changes. The Company will not, and will not
permit any of its Subsidiaries to: (i) except for the ESOP Amendment (as
defined in Section 6.9), enter into or amend any contract, agreement,
commitment or arrangement other than in the ordinary course of business
consistent with past practice; (ii) except as set forth in Schedule 5.1(m) of
the Company Disclosure Schedule, authorize or make any single capital
expenditure (or series of related capital
<PAGE>
expenditures) which is in excess of $5,000,000 or, in the case of the
Company's electric arc furnace project, $10,000,000; (iii) except as set forth
in Schedule 5.1(m) of the Company Disclosure Schedule, make or change any tax
election, file any amended Tax Return, or settle or compromise any material
federal, state, local or foreign Tax liability; (iv) settle or compromise any
pending suit, action or claim for an amount in excess of $300,000 or which
relates to the transaction contemplated hereby; or (v) pay, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction of liabilities in the ordinary course of business and consistent
with past practice.
(n) Cooperation. The Company will cooperate with Parent (i)
in identifying, making and obtaining the filings, consents, approvals,
authorizations and permits referred to in Section 4.1(d) and (ii) as
reasonably requested in any syndication of the financing contemplated by the
Financing Commitments.
5.2 Covenants of Parent.
(a) In connection with the financing necessary to pay for
shares in the Offer and the Merger, Parent will not permit either Sub or the
Surviving Corporation to assume or incur any indebtedness for borrowed money
or guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of such party or guarantee
any debt securities of others or create any mortgages, liens, security
interests or other encumbrances on the property of Sub or Surviving
Corporation in connection with any indebtedness thereof, or enter into any
"keep well" or other agreement or arrangement to maintain the financial
condition of another person; provided, however, that this restriction shall
not apply to any financing that is both (i) completed at the earliest of (A)
three months after the Effective Time, (B) six months after the Control Date
provided that the Effective Time shall theretofore have occurred or (C) the
combination of Parent or the Surviving Corporation and Bar Technologies, Inc.
or one of its Subsidiaries under a common parent company or by merger and (ii)
in respect of which the Board of Directors of the Surviving Corporation, the
Administrative Committee and the Trustee receive a solvency opinion from a
reputable appraiser or investment bank; and provided, further, that this
restriction shall not thereafter apply to any subsequent refinancing.
(b) Parent will, to the extent required by the relevant
documentation, cause the Surviving Corporation to expressly assume the due and
punctual payment under, and the performance of every agreement and covenant of
the Company
<PAGE>
under, (i) the Loan Agreement, dated as of June 1, 1996, between the Ohio
Water Development Authority (the "Authority") and the Company, (ii) the Loan
Agreement, dated as of October 1, 1994, between the Authority and the Company,
(iii) the Indenture, dated as of December 15, 1993, between the Company, as
Issuer, and Bankers Trust Company, as Trustee, pursuant to which the Company's
9-7/8% First Mortgage Notes Due 2001 were issued (as amended or supplemented
from time to time, the "Indenture"), and (iv) the Second Amended and Restated
Revolving Credit Agreement, dated as of April 25, 1997, by and among the
Company, BankBoston, N.A. and the lending institutions listed on Schedule I
thereto and BankBoston, N.A., as Agent with BancBoston Securities, Inc., as
Arranger (the "Revolving Credit Facility").
(c) Parent will cooperate and provide reasonable assistance
to the Company in its endeavors pursuant to Section 5.1(a).
(d) Parent will, or cause Sub to, supply the Administrative
Committee with a sufficient number of copies of the Offer Documents to deliver
to the ESOP participants so that the Administrative Committee may request and
receive instructions from ESOP participants concerning the manner in which the
Administrative Committee should direct the Trustee to respond to the Offer
with respect to Shares owned by the ESOP Trust.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Preparation of a Proxy Statement; Company Stockholders
Meeting; Merger Without a Company Stockholders Meeting.
(a) Subject to Section 6.1(c) below, the Company will,
promptly following the acceptance for payment of and payment for shares of the
Company Common Stock by Sub in the Offer, prepare and file its proxy or
information statement relating to the Merger (the "Proxy Statement") with the
SEC. The Company will use all reasonable best efforts to respond to all SEC
comments with respect to the Proxy Statement and to cause the Proxy Statement
to be mailed to the Company's stockholders at the earliest practicable date.
(b) Subject to Section 6.1(c) below, the Company will,
promptly following the acceptance for payment of and payment for shares of the
Company Common Stock by Sub in the Offer, duly call, give notice of, convene
and hold a meeting of the Company's stockholders for the purpose of approving
this Agreement (or instead take such action by written consent if permitted by
applicable law). At such
<PAGE>
stockholders meeting (or pursuant to such written consent), Parent will cause
all of the shares of Company Common Stock then owned by Parent and Sub to be
voted in favor of the Merger.
(c) Notwithstanding the foregoing subparagraphs (a) and (b),
in the event that Parent and Sub immediately following the purchase of Shares
in the Offer own 90% or more of the outstanding shares of Company Common
Stock, the parties hereto agree that they will take all necessary and
appropriate action to cause the Merger to become effective promptly after the
expiration of the Offer without a meeting of stockholders of the Company in
accordance with Section 253 of the DGCL.
6.2 Access to Information. Upon reasonable notice, each of
the Company or Parent, as the case may be, will (and will cause each of its
Subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of the other party (including, in the case of Parent and
Sub, the persons that have executed Financing Commitments and, in the case of
the Company, the Administrative Committee and the Trustee and their respective
employees, accountants, counsel and other representatives), access, during
normal business hours during the period prior to the Effective Time, to all
its properties, books, contracts, commitments and records and, during such
period, such party will (and will cause each of its Subsidiaries to) furnish
promptly to the other party, (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period
pursuant to SEC requirements and (b) all other information concerning its
business, properties and personnel as such other party may reasonably request.
The Confidentiality Agreement, dated as of April 29, 1998, between Bar
Technologies, Inc., Blackstone Capital Partners II Merchant Banking Fund L.P.,
Birmingham Steel Corporation and the Company (the "Confidentiality Agreement")
will apply with respect to information furnished thereunder or hereunder and
any other activities contemplated thereby.
6.3 Brokers or Finders. The Company represents, as to
itself, its Subsidiaries and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to
any broker's or finders fee or any other commission or similar fee in
connection with the transaction contemplated by this Agreement, except for (i)
Lazard Freres & Co. LLC, whose fees and expenses will be paid by the Company
in accordance with the Company's agreement with such firm (a copy of which has
been made available to Parent prior to the date of this Agreement), (ii)
Salomon Smith Barney, whose fees and expenses incurred in connection with the
proposed sale of
<PAGE>
the Company's specialty business will be paid by the Company in accordance
with the Company's agreement with such firm (a copy of which has been made
available to Parent prior to the date of this Agreement) and (iii) Salomon
Smith Barney in connection with its advice to the Trustee of and the
Administrative Committee for the ESOP in connection with the Offer and the
Merger (a copy of which has been made available to Parent prior to the date of
this Agreement).
6.4 Indemnification; Directors' and Officers' Insurance.
(a) The Company will, and from and after the Effective Time,
the Surviving Corporation will, indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date hereof or who
becomes prior to the Effective Time, an officer, director, employee or agent
of the Company or any of its Subsidiaries (the "Indemnified Parties") against
all losses, claims, damages, costs, expenses (including reasonable attorneys'
fees and expenses), liabilities or judgments or amounts of or in connection
with any threatened or actual claim, action, suit, proceeding or investigation
based on or arising out of the fact that such person is or was (i) serving in
such person's capacity as a director, officer, employee or agent of the
Company or any of its Subsidiaries, or a person serving at the request of the
Company or any of its Subsidiaries as a trustee of a trust or (ii) serving in
such person's capacity as a trustee or member of an administrative committee,
or in any other Company fiduciary capacity with respect to any employee
benefit or stock plan maintained or sponsored by the Company or any of its
Subsidiaries, whether pertaining to any matter existing or occurring at or
prior to the Effective Time or any acts or omissions occurring or existing at
or prior to the Effective Time and whether asserted or claimed prior to, or at
or after, the Effective Time ("Indemnified Liabilities"), including all
Indemnified Liabilities based on, or arising out of, or pertaining to this
Agreement or the transaction contemplated hereby, in each case to the fullest
extent a corporation is permitted under the DGCL to indemnify such persons
(and the Company and the Surviving Corporation, as the case may be, will pay
expenses in advance of the final disposition of any such action or proceeding
to each Indemnified Party to the fullest extent permitted by law, subject to
delivery of the undertaking described below). Without limiting the foregoing,
in the event any such claim, action, suit, proceeding or investigation is
brought against any Indemnified Party (whether arising before or after the
Effective Time), (i) such Indemnified Party may retain the Company's regularly
engaged independent legal counsel or, in the event that a conflict of interest
precludes using such counsel in the reasonable judgment of the Indemnified
Party, counsel satisfactory to it and reasonably satisfactory to
<PAGE>
the Company (and reasonably satisfactory to the Surviving Corporation after
the Effective Time) and the Company (or after the Effective Time, the
Surviving Corporation) will pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received; and (ii) the Company (or after the Effective Time, the Surviving
Corporation) will use all reasonable best efforts to assist in the vigorous
defense of any such matter, provided that neither the Company nor the
Surviving Corporation will be liable for any settlement effected without its
prior written consent which consent will not unreasonably be withheld. Any
Indemnified Party, upon learning of any such claim, action, suit, proceeding
or investigation, will notify the Company (or after the Effective Time, the
Surviving Corporation) promptly (but the failure so to notify will not relieve
a party from any liability which it may have under this Section 6.4 except to
the extent such failure materially prejudices such party's position with
respect to such claims), and will deliver to the Company (or after the
Effective Time, the Surviving Corporation) the undertaking contemplated by
Section 145(e) of the DGCL. The Indemnified Parties as a group may retain only
one law firm (and one local counsel) to represent them with respect to each
such matter unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two
or more Indemnified Parties in which case such additional counsel reasonably
acceptable to the Company as may be required (as will be reasonably determined
by the Indemnified Parties and the Company or the Surviving Corporation, as
the case may be) may be retained by the Indemnified Parties at the cost and
expense of the Company (or Surviving Corporation). Furthermore, the provisions
with respect to indemnification set forth in the certificate of incorporation
of the Surviving Corporation will not be amended following the Effective Time
if such amendment would materially and adversely affect the rights thereunder
of individuals who at any time prior to the Effective Time were directors,
officers, employees or agents of the Company in respect of actions or
omissions occurring at or prior to the Effective Time.
(b) The Surviving Corporation will cause to be maintained in
effect the current policies of directors' and officers' liability insurance
maintained by the Company and its Subsidiaries providing coverage for a period
of six years after the Effective Time with respect to matters arising before
and acts or omissions occurring or existing at or prior to the Effective Time,
including the transaction contemplated by this Agreement; provided that in no
event shall the Surviving Corporation be required to expend an amount prorated
over the number of years covered in excess of 150% of the annual premiums
currently paid by the Company for such insurance; and provided further, that
if the
<PAGE>
premiums of such insurance coverage exceed such amount, the Surviving
Corporation shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount.
(c) The provisions of this Section 6.4 are intended to be
for the benefit of, and will be enforceable by, each Indemnified Party, his
heirs and his personal representatives and will be binding on all successors
and assigns of Parent, Sub, the Company and the Surviving Corporation.
6.5 Consents, Approvals and Filings.
(a) Upon the terms and subject to the conditions hereof,
each of the parties hereto will (i) make promptly its respective filings, and
thereafter make any other required submissions, under the HSR Act, the
Securities Act and the Exchange Act, with respect to the Offer and the Merger
and the transaction contemplated herein (together, the "Transactions") and
(ii) use all reasonable 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 to satisfy the conditions to the Offer and the Merger and to
consummate and make effective the Transactions. 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 will use all reasonable efforts to take all such action.
(b) Parent hereby agrees that it will, and it will cause
each of its affiliates to, use all reasonable efforts to obtain any government
clearances required for completion of the Offer and the Merger (including
through compliance with the HSR Act), to respond to any government requests
for information, and to contest and resist any action, including any
legislative, administrative or judicial action, and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order
(whether temporary, preliminary or permanent) (an "Order") that restricts,
prevents or prohibits the consummation of the Merger, including by vigorously
pursuing all available avenues of administrative and judicial appeal. Parent
also hereby agrees to take, and to use all reasonable efforts to cause each of
its affiliates to take, any and all of the following actions to the extent
necessary to obtain the approval of any governmental entity with jurisdiction
over the enforcement of any applicable laws regarding the Offer and the
Merger: entering into negotiations; providing information; substantially
complying with any second request for information pursuant to the HSR Act;
entering into and performing agreements or submitting to judicial or
administrative orders and selling or otherwise disposing of,
<PAGE>
or holding separate (through the establishment of a trust or otherwise)
particular assets or categories of assets, or businesses of Parent, Company or
any of their affiliates; provided, however, that notwithstanding the foregoing
and anything else contained in this Agreement, neither Parent nor any of its
affiliates is required to take any such action with respect to any assets or
product lines that would have a Material Adverse Effect on the Surviving
Corporation and Bar Technologies, Inc., taken as a whole. 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, memoranda, briefs, arguments, opinions and proposals made or
submitted by or in behalf of any party hereto in connection with proceedings
under or relating to the HSR Act or any other federal, state or foreign
antitrust or fair trade law.
(c) Parent will take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable to
obtain, prior to the expiration date of the Offer, one or more commitment
letters, reasonably satisfactory to the Company, to provide all of the
financing required by the Surviving Corporation to repurchase any of the
Company's 9-7/8% First Mortgage Notes Due 2001, issued, authenticated and
delivered under the Indenture that may be tendered to the Surviving
Corporation as a result of the offer required to be made by the Surviving
Corporation to repurchase such securities as a consequence of the consummation
of the Offer and to refinance any indebtedness existing under the Company's
Revolving Credit Facility or to waive any event of default under such
Revolving Credit Facility resulting from the transaction contemplated hereby.
Prior to the Control Date, the Company shall consult with Parent with respect
to any action taken by the Company in connection with such offer to repurchase
such Mortgage Notes Due 2001, and the Company will not file or otherwise
publicly release any documentation, nor make any public announcement, with
respect thereto without the consent of Parent as to the form and substance
thereof, such consent not to be unreasonably withheld.
6.6 Conduct of Business of Sub. During the period of time
from the date of this Agreement to the Effective Time, Sub will not engage in
any activities of any nature except as provided in or contemplated by this
Agreement.
6.7 Publicity. The parties will consult with each other and
will mutually agree upon any press release or public announcement pertaining
to the Offer and the Merger and will not issue any such press release or make
any such public announcement prior to such consultation and agreement
<PAGE>
(such agreement not to be unreasonably withheld), except as may be required by
applicable law, in which case the party proposing to issue such press release
or make such public announcement will use reasonable best efforts to consult
in good faith with the other party before issuing any such press release or
making any such public announcement.
6.8 Continuation of Employee Benefits.
(a) Until at least the second anniversary of the Effective
Time, (i) Parent will maintain or cause to be maintained employee benefits and
programs for retirees (other than former members of the USWA (as defined in
Exhibit A), officers and salaried employees of the Company and each of its
Subsidiaries that are no less favorable in the aggregate than those existing
on the date hereof and (ii) Parent will cause the Surviving Corporation to
assume the obligations of the Company under the provisions of (x) the Change
of Control Agreements, as set forth on Schedule 6.8 of the Company Disclosure
Schedule (the "Change of Control Agreements"), with Parent, Sub and the
Company agreeing that for purposes of such Change of Control Agreements, at
not later than the consummation of the Offer, (i) a Change of Control shall
have occurred, (ii) Good Reason, as such term is defined therein, shall have
occurred for a period of six months following the consummation of the Offer
and (iii) such Change of Control Agreements will be fully funded in accordance
with the terms thereof, (y) the Severance Agreements, as set forth on Schedule
6.8 of the Company Disclosure Schedule (the "Severance Agreements"), and (z)
the retention policies of the Company, as described on Schedule 6.8 of the
Company Disclosure Schedule (the "Company Retention Policies"). For purposes
of eligibility to participate in and vesting in all benefits provided to
retirees, directors, officers and salaried employees, the retirees, directors,
officers and salaried employees of the Company and its Subsidiaries will be
credited with their years of service with prior employers to the extent
service with prior employers is taken into account under plans of the Company.
(b) This Section 6.8 is intended to be for the benefit of,
and will be enforceable by, each officer and salaried employee, in each of
their capacities as a third party beneficiary hereunder, and will be binding
on all successors and assigns of Parent, Sub, the Company and the Surviving
Corporation.
6.9 Amendment of ESOP. Following the consummation of the
Offer, the Company will promptly adopt, subject to the approval of the USWA,
in accordance with the ESOP's amendment provisions, an amendment to the ESOP
to provide that the ESOP (i) will be converted to a profit-sharing plan that
is not required to invest in or distribute
<PAGE>
employer securities and (ii) will, subject to the requirements of the Code,
permit in-service distributions, in connection with the transactions
contemplated herein, in cash or direct rollovers to eligible retirement plans
(as defined in the Code) (the "ESOP Amendment").
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger will be
subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. Unless the Merger is consummated
pursuant to Section 253 of the DGCL, this Agreement will have been approved
and adopted by the affirmative vote of the stockholders of the Company by the
requisite vote in accordance with applicable law.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act will have been terminated or will
have expired.
(c) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger will be in effect; provided, however, that
prior to invoking this condition, each party will use all reasonable efforts
to have any such order, injunction or other restraint or prohibition vacated.
(d) Statutes. No statute, rule, executive order, injunction,
decree or regulation will have been enacted, entered, enforced, or promulgated
by any Governmental Entity which prohibits or restricts the consummation of
the Merger, or makes such consummation illegal.
(e) Payment for Shares. Sub will have accepted for payment
and paid for the shares of Company Common Stock duly tendered in the Offer;
provided, however, that this condition will be deemed to have been satisfied
if Sub fails to accept for payment and pay for Shares pursuant to the Offer in
violation of this Agreement or the terms and conditions of the Offer.
ARTICLE VIII
TERMINATION AND AMENDMENT
<PAGE>
8.1 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether
before or after approval of this Agreement by the stockholders of the Company:
(a) by mutual written consent of the Boards of Directors of
Parent and the Company, respectively, subject, in the case of the Company, to
Section 1.4(b);
(b) by Parent or the Company, if, without any material
breach by such terminating party of its obligations under this Agreement
causing or resulting in such delay, the purchase of Shares pursuant to the
Offer will not have occurred on or before October 30, 1998; provided, however,
that Parent may extend the October 30, 1998 date for 45 calendar days if
Parent is then actively negotiating with the Department of Justice or the
Federal Trade Commission regarding satisfaction of the HSR Condition and/or
the condition set forth in paragraph A of Exhibit A and certifies to the
Company that, to its knowledge, all other conditions to the Offer are
satisfied or capable of prompt satisfaction as of the date of such
verification; but provided further such certification shall be without
prejudice to the requirement that such condition remain satisfied;
(c) by Parent or the Company, if the Offer expires or is
terminated or withdrawn pursuant to its terms without any Shares being
purchased in accordance with Section 1.1(a); provided, however, that Parent
may not terminate this Agreement pursuant to this Section 8.1(c), if Parent's
termination of, or Sub's failure to accept for payment or pay for any Shares
tendered pursuant to, the Offer is in violation of the terms of the Offer or
this Agreement;
(d) by Parent or the Company, if any Governmental Entity of
competent jurisdiction will have (i) issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the purchase of Shares pursuant to the Offer or the Merger and
such order, decree, ruling or action will have been final and nonappealable or
(ii) failed to issue an order, decree or ruling or to take any other action
which is necessary to fulfill the conditions set forth in Exhibit A and
Section 7.1, as applicable, and such denial of a request to issue such order,
decree or ruling or to take such other action shall have become final and
nonappealable; provided, however, that the party seeking to terminate this
Agreement will have complied with its obligations under this Agreement to
attempt to remove or lift, or to obtain, as applicable, such order, decree or
ruling;
<PAGE>
(e) by the Company, if the Offer has not been timely
commenced in accordance with Section 1.1, unless the failure to commence the
Offer shall be due to the failure of the Company to perform in any material
respect any of its obligations under this Agreement then required to be
performed;
(f) by Parent, if the Board of Directors of the Company
shall have (i) withdrawn, modified or changed its recommendation or approval
in respect of this Agreement or the Offer in a manner adverse to Parent, (ii)
approved or recommended any proposal other than by Parent or Sub in respect of
an Acquisition Proposal, (iii) failed to include in the Proxy Statement the
recommendation referred to in clause (i), or (iv) resolved to do any of the
foregoing;
(g) by the Company prior to consummation of the Offer, if
(i) the Board of Directors of the Company shall have determined that an
Acquisition Proposal constitutes a Superior Proposal in accordance with the
requirements of Section 5.1 (e), (ii) the Company shall have delivered to
Parent a written notice of the determination by the Company's Board of
Directors to terminate this Agreement pursuant to this Section 8.1(g) and
(iii) simultaneously with such termination the Company shall enter into a
definitive acquisition, merger or similar agreement to effect such Acquisition
Proposal and shall make payment of the full amount required by Section 8.2(a);
or
(h) prior to the consummation of the Offer, by the Company
or Parent (provided that the terminating party is not then in material breach
of any representation, warranty, covenant or other agreement contained
herein), if there shall have been a material breach of any of the covenants or
agreements or any of the representations or warranties set forth in this
Agreement on the part of the other party, which breach is not cured within ten
business days following written notice given by the terminating party to the
party committing such breach, or which breach, by its nature, cannot be cured
prior to the date on which the Offer expires.
8.2 Fees and Expenses.
(a) (i) If Parent terminates this Agreement pursuant to
Section 8.1(f), (ii) if the Company terminates this Agreement pursuant to
Section 8.1(g), or (iii) if (A) Parent or the Company terminates this
Agreement pursuant to Section 8.1(b) or Section 8.1(c) as a result of failure
to meet the Minimum Condition or the ESOP Condition or Parent terminates this
Agreement pursuant to Section 8.1(h), and (B) at any time prior to such
termination an Acquisition Proposal (except that the reference to 20% in the
definition of Acquisition Proposal shall for the purpose of this
<PAGE>
Section 8.2(a) be 50%) shall have been publicly disclosed, in the case of a
termination pursuant to Section 8.1(b) or Section 8.1(c), or communicated to
the Company in the case of a termination pursuant to Section 8.1(h), and (C)
within 12 months after such termination the Company enters into an agreement
with respect to, or consummates, a transaction contemplated by such
Acquisition Proposal, then in each case the Company will pay to Blackstone
Management Partners L.P., simultaneously with such termination in the case of
clause (ii) above, within two business days following such termination in the
case of clause (i) above, and simultaneously with the earlier of entry into
any agreement for or the consummation of such transaction in the case of
clause (iii) above, a fee, in cash of $4,250,000; provided, however, that the
Company in no event shall be obligated to pay more than one such fee with
respect to all such terminations and transactions.
(b) Upon payment of any fee pursuant to subparagraph (a)
above, the party paying such fee will be fully released and discharged from
any liability or obligation resulting from or under this Agreement, except
that the obligations under Confidentiality Agreement shall survive such
payment.
(c) The Surviving Corporation will be responsible for any
transfer, sales, or similar taxes resulting from the Merger, except as
expressly provided herein.
(d) Whether or not the Offer or Merger is consummated and
except as otherwise provided in this Section 8.2, all costs and expenses
incurred in connection with this Agreement will be paid by the party incurring
the expense.
8.3 Effect of Termination. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 8.1,
this Agreement will forthwith become void and there will be no liability or
obligation on the part of Parent, Sub or the Company or their respective
affiliates, officers, directors or stockholders except (i) with respect to
Section 8.2 and this Section 8.3 and (ii) that no such termination will
relieve any party from liability for a willful breach hereof. In addition, in
the event that this Agreement is validly terminated, Parent and Sub agree
that, immediately following such termination Parent and Sub will terminate the
Offer and not purchase any Shares pursuant to the Offer or otherwise, and
Parent further agrees that following such termination, it will continue to be
bound by all of the terms and conditions contained in the Confidentiality
Agreement.
8.4 Amendment. Subject to applicable law, this Agreement may
be amended, modified or supplemented only by written agreement of Parent, Sub
and the Company at any time
<PAGE>
prior to the Effective Time with respect to any of the terms contained herein;
provided, however, that, after the consummation of the Offer, no term or
condition contained in this Agreement will be amended or modified if such
change will have an adverse effect on the holders of the Company Common Stock
(including by reducing the amount of or changing the form of the Merger
Consideration).
8.5 Extension; Waiver. Subject to the provisions of Article
I hereof, at any time prior to the Effective Time, the parties hereto, by
action taken or authorized by their respective Boards of Directors, may, to
the extent legally allowed: (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto; (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto; and (iii) waive compliance with any of the
agreements or conditions contained herein; provided, however, that, after the
consummation of the Offer, no term or condition contained in this Agreement
will be amended, modified or waived if such change will have an adverse effect
on the holders of the Company Common Stock. Any agreement on the part of a
party hereto to any such extension or waiver will be valid only if set forth
in a written instrument signed on behalf of such party. The failure of any
party hereto to assert any of its rights hereunder will not constitute a
waiver of such rights.
ARTICLE IX
GENERAL PROVISIONS
9.1 Nonsurvival of Representations, Warranties and
Agreements. None of the representations and warranties in this Agreement or in
any instrument delivered pursuant to this Agreement will survive the
acceptance for payment of, and the payment for, the Shares by Sub in the Offer
or the expiration of the Offer. None of the covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement will
survive the Effective Time, except for the covenants and agreements contained
in Article III, Section 6.4 and Section 6.8 hereof and any other covenant or
agreement herein that expressly contemplates performance after the Effective
Date. The Confidentiality Agreement will survive the execution and delivery of
this Agreement, and the provisions of the Confidentiality Agreement will apply
to all information and material delivered by any party hereunder.
9.2 Notices. Any notice or communication required or
permitted hereunder will be in writing and either delivered personally or
telecopied or sent by certified or registered mail, postage prepaid, and will
be
<PAGE>
deemed to be given, dated and received when so delivered personally or
telecopied or, if mailed, five business days after the date of mailing to the
following address or telecopy number, or to such other address or addresses as
such person may subsequently designate by notice given hereunder:
(a) if to Parent or Sub, to:
c/o The Blackstone Group
345 Park Avenue, 31st Floor
New York, New York 10154
Attn: David Stockman
Telephone: (212) 935-2626
Telecopy: (212) 754-8720
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Robert L. Friedman, Esq.
Telephone: (212) 455-2780
Telecopy: (212) 455-2502
(b) if to the Company, to:
Republic Engineered Steels, Inc.
410 Oberlin Road SW
P.O. Box 579
Massillon, OH 44648-0579
Attn: Chief Legal Officer
Telephone: (330) 837-6340
Telecopy: (330) 837-6170
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attn: Ronald F. Daitz, Esq.
Telephone: (212) 310-8337
Telecopy: (212) 310-8007
9.3 Interpretation. When a reference is made in this
Agreement to Articles, Sections or Exhibits, such reference will be to an
Article or Section of this Agreement unless otherwise indicated. The table of
contents, glossary of defined terms and headings contained in this Agreement
are for reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement. Whenever the word "include", "includes" or
"including" are used in this Agreement, they will be deemed to be followed by
the words "without limitation". The phrase "made
<PAGE>
available" in this Agreement will mean that the information referred to has
been made available if requested by the party to whom such information is to
be made available. The meaning of defined terms apply to the plural as well as
the singular form and vice versa.
9.4 Counterparts. This Agreement may be executed in two or
more counterparts, all of which will be considered one and the same agreement
and will become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
9.5 Entire Agreement; No Third Party Beneficiaries; Rights
of Ownership. This Agreement, the Confidentiality Agreement and any other
documents and instruments referred to herein constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof and, except as
provided in Sections 5.2(d), 6.4, 6.8 and 8.2, is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
9.6 Governing Law. This Agreement will be governed and
construed in accordance with the law of the State of Delaware.
9.7 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder will be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except as provided in Section 2.1.
Subject to the preceding sentence, this Agreement will be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
RES HOLDING CORPORATION
By: /s/ Anthony Grillo
--------------------------------
Name: Anthony Grillo
Title: Vice President
RES ACQUISITION CORPORATION
By: /s/ Anthony Grillo
--------------------------------
Name: Anthony Grillo
Title: Vice President
REPUBLIC ENGINEERED STEELS, INC.
By: /s/ Russell W. Maier
--------------------------------
Name: Russell W. Maier
Title: President and Chief
Executive Officer
<PAGE>
EXHIBIT A
The capitalized terms used in this Exhibit A will have the
respective meanings given to such terms in the Agreement and Plan of Merger,
dated as of July 23, 1998 (the "Merger Agreement"), by and among RES Holding
Corporation, a Delaware corporation ("Parent"), RES Acquisition Corporation, a
Delaware corporation and wholly owned subsidiary of Parent ("Sub"), and
Republic Engineered Steels, Inc., a Delaware corporation (the "Company"), to
which this Exhibit A is attached.
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Sub will
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 Sub's obligation to pay for or return tendered Shares promptly
after expiration or termination of the Offer), to pay for any Shares tendered,
and may postpone the acceptance for payment or, subject to the restriction
referred to above, payment for any Shares tendered, and, subject to the
provisions of the Merger Agreement, may amend or terminate the Offer (whether
or not any Shares have theretofore been purchased or paid for), if (i) there
have not been validly tendered and not withdrawn prior to the time the Offer
will otherwise expire a number of Shares which constitutes a majority 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 (without giving effect to any voting rights of the
Special Preferred Stock) (the "Minimum Condition"); (ii) the employee common
stock ownership plan of the Company (the "ESOP") has not validly tendered and
not withdrawn prior to the time the Offer will otherwise expire a number of
Shares such that immediately following the purchase of Shares pursuant to the
Offer the ESOP would hold less than 25% of the Shares then outstanding (or
such fewer number of Shares as is necessary to eliminate the voting rights of
the Special Preferred Stock and cause such Special Preferred Stock to be
immediately redeemable at the Company's option) (the "ESOP Condition"); (iii)
any waiting periods under the HSR Act applicable to the purchase of Shares in
the Offer and the Merger will not have expired or been terminated prior to the
expiration of the Offer (the "HSR Condition"); or (iv) at any time on or after
the date of the Merger Agreement and before acceptance for payment
A-1
<PAGE>
of, or payment for, such Shares any of the following events will have
occurred:
(A) any Governmental Entity will have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, interpretation, judgement, injunction or other order which (i)
is in effect and which materially restricts, prevents or prohibits
consummation of the Offer, the Merger or any transaction contemplated by the
Agreement; provided, however, that such effect has not resulted from Parent or
Sub breaching its obligations in the Merger Agreement to cause any such
decree, judgment, injunction or other order to be vacated or lifted or to
oppose any such action or proceeding; or which (ii) notwithstanding that
Parent has complied fully its obligations in the Merger Agreement, makes
materially more costly the making of the Offer, the acceptance for payment of,
payment for, or ownership, directly or indirectly, of some or all of the
Shares or of the Company (including by reason of imposing a material liability
on the Company, Parent or Sub or materially encumbering any of their
respective assets), the consummation of the transaction contemplated by the
Merger Agreement or materially delays the Merger, or which (iii)
notwithstanding that Parent has complied fully with Section 6.5 of the Merger
Agreement, materially limits the ownership or operation by the Company, any of
its Subsidiaries, Parent or any of its affiliates of all or any material
portion of the business or assets of the Company or any of its Subsidiaries,
or compels Parent or any of its affiliates to sell, dispose of or hold
separate (through the establishment of a trust or otherwise) all or any
material portion of the business or assets of the Company, its Subsidiaries or
any other such person, as a result of the transaction contemplated by the
Merger Agreement; or which (iv) notwithstanding that Parent has complied fully
with Section 6.5 of the Merger Agreement, imposes or confirms limitations on
the ability of Sub, Parent or any of its affiliates effectively to acquire or
hold or to exercise full rights of ownership of the Shares, including without
limitation the right to vote any Shares acquired or owned by Sub, Parent or
any of its affiliates on all matters properly presented to the shareholders of
the Company, including without limitation, the adoption and approval of the
Merger Agreement and the Merger or the right to vote any shares of capital
stock of any subsidiary directly or indirectly owned by the Company; or (v)
any Governmental Entity shall have instituted or threatened in writing to
institute any action or proceeding which could reasonably be expected to have
or result in any of the foregoing effects.
A-2
<PAGE>
(B) the representations and warranties of the Company
contained in the Merger Agreement (without giving effect to any "Material
Adverse Effect", "materiality" or similar qualifications contained therein)
will not be true and correct in all respects as of the date of consummation of
the Offer as though made on and as of such date except (1) for changes
specifically permitted by the Merger Agreement, (2) that those representations
and warranties which address matters only as of a particular date will remain
true and correct as of such date, and (3) for breaches or inaccuracies which,
individually or in the aggregate, would not (a) have a Material Adverse Effect
on the Company or (b) materially adversely affect the ability of the parties
to the Merger Agreement to consummate the transaction contemplated thereby;
(C) the obligations of the Company contained in the Merger
Agreement to be performed at or prior to the consummation of the Offer will
not have been performed or complied with in all material respects by the
Company prior to the consummation of the Offer;
(D) the Merger Agreement will have been terminated in
accordance with its terms or the Offer shall have been terminated with the
consent of the Company;
(E) (i) it shall have been publicly disclosed or Parent
shall have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated under the
Exchange Act) of more than 20% of the outstanding Shares has been acquired by
any corporation (including the Company or any of its Subsidiaries or
affiliates), partnership, person or other entity or group (as defined in
Section 13(d)(3) of the Exchange Act), other than Parent or any of its
affiliates or the ESOP, or (ii) (A) the Board of Directors of the Company
shall have withdrawn or modified in a manner adverse to Sub the approval or
recommendation of the Offer, the Merger or the Merger Agreement, or approved
or recommended any Acquisition Proposal or any other acquisition of Shares
other than the Offer and the Merger or (B) any such corporation, partnership,
person or other entity or group shall have entered into a definitive agreement
or an agreement in principle with the Company with respect to an Acquisition
Proposal;
(F) Parent fails to receive funds pursuant to the Financing
Commitments; or
A-3
<PAGE>
(G) members of the United Steelworkers of America ("USWA")
have not ratified the Settlement Agreement and new Collective Bargaining
Agreement submitted for their ratification by the USWA in connection with the
transaction contemplated by the Merger Agreement in the manner determined to
be appropriate by the USWA for such ratification.
A-4
<PAGE>
EXHIBIT B
David Blitzer
Thomas Campbell
Marshall Cohen
Anthony Grillo
Glenn Hutchins
Robert McKeon
David Stockman
B-1
