-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DEunbXnXvnY3sM/PZrygzyEH0HDMSL16OIPGANRVedJTPu0reJKqta7NDwO2dwH0 DR3j2RrVmP7oA7rKrzYQjg== 0001036050-98-001999.txt : 19981118 0001036050-98-001999.hdr.sgml : 19981118 ACCESSION NUMBER: 0001036050-98-001999 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 19981117 GROUP MEMBERS: ROANOKE ELECTRIC STEEL CORPORATION GROUP MEMBERS: SWVA ACQUISITION INC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: STEEL OF WEST VIRGINIA INC CENTRAL INDEX KEY: 0000820960 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 550684304 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-39109 FILM NUMBER: 98753810 BUSINESS ADDRESS: STREET 1: 17TH ST & 2ND AVE CITY: HUNTINGTON STATE: WV ZIP: 25703 BUSINESS PHONE: 3046968200 MAIL ADDRESS: STREET 1: 17TH STREET & 2ND AVENUE CITY: HUNTINGTON STATE: WV ZIP: 25703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SWVA ACQUISITION INC CENTRAL INDEX KEY: 0001071040 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 102 WESTSIDE BLVD N W CITY: ROANOKE STATE: VA ZIP: 24017 BUSINESS PHONE: 5403421831 SC 14D1 1 SCHEDULE 14D-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14D-1 ---------------------------------------------- Tender Offer Statement Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934 STEEL OF WEST VIRGINIA, INC. (Name of Subject Company) SWVA ACQUISITION, INC. AND ROANOKE ELECTRIC STEEL CORPORATION (Bidders) ---------------------------------------------- COMMON STOCK, $.01 PAR VALUE (Title of Class of Securities) 858154107 (CUSIP Number of Class of Securities) ---------------------------------------------- JOHN E. MORRIS VICE PRESIDENT - FINANCE AND ASSISTANT TREASURER ROANOKE ELECTRIC STEEL CORPORATION P.O. BOX 13948 ROANOKE, VIRGINIA 24038-3948 (540) 342-1831 (Name, Address, and Telephone Numbers of Person Authorized to Receive Notices and Communications on Behalf of Bidder) ---------------------------------------------- COPIES TO: HEMAN A. MARSHALL, III WOODS, ROGERS & HAZLEGROVE, PLC FIRST UNION TOWER 10 S. JEFFERSON ST., SUITE 1400 ROANOKE, VIRGINIA 24011 ---------------------------------------------- CALCULATION OF FILING FEE: -------------------------------------------------------------------------- Transaction valuation* Amount of filing fee $64,752,296.25 $12,950.46 -------------------------------------------------------------------------- * Estimated for purposes of calculating the amount of the filing fee only. The amount assumes the purchase of 6,010,795 shares of Common Stock, $.01 par value ("Shares") of Steel of West Virginia, Inc. (the "Company") (representing all the Shares outstanding as of September 30, 1998), at a price per share of $10.75, plus payment of an aggregate of $136,250 with respect to the 153,500 Shares issuable upon the exercise of outstanding stock options as of September 30, 1998. The amount of the filing fee, calculated in accordance with Section 14(g)(3) and Rule 0-11(d) under the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of the aggregate of the cash offered by the bidders. [_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: None Form or Registration No.: N/A Filing Party: N/A Date File: N/A CUSIP No. (none; corporation formed for acquisition purposes only) ----------------------------------------------------------------------------- 1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons SWVA Acquisition, Inc. (no I.R.S. Identification No.; corporation formed for acquisition purposes only) ----------------------------------------------------------------------------- 2) Check the Appropriate Box if a Member of a Group (See Instructions) [ ] (a)................................................................. [ ] (b)................................................................. ----------------------------------------------------------------------------- 3) SEC Use Only............................................................ ----------------------------------------------------------------------------- 4) Sources of Funds (See Instructions) - AF ----------------------------------------------------------------------------- 5) [ ] Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f)............................................................. ----------------------------------------------------------------------------- 6) Citizenship or Place of Organization - Virginia ----------------------------------------------------------------------------- 7) Aggregate Amount Beneficially Owned by Each Reporting Person - 1,290,054 (Common Stock)* ----------------------------------------------------------------------------- 8) [ ] Check if the Aggregate Amount in Row (7) Excludes Certain Shares (See Instructions)........................................................... ----------------------------------------------------------------------------- 9) Percent of Class Represented by Amount in Row (7) - 17.8%* ----------------------------------------------------------------------------- 10) Type of Reporting Person - CO ----------------------------------------------------------------------------- * See footnote on following page. CUSIP No. 769841107 - ------------------------------------------------------------------------------- 1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons Roanoke Electric Steel Corporation (54-0585263) - ------------------------------------------------------------------------------- 2) Check the Appropriate Box if a Member of a Group (See Instructions) [ ] (a).................................................................... [ ] (b).................................................................... - ------------------------------------------------------------------------------- 3) SEC Use Only.............................................................. - ------------------------------------------------------------------------------- 4) Sources of Funds (See Instructions) - BK, WC - ------------------------------------------------------------------------------- 5) [ ] Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f).............................................................. - ------------------------------------------------------------------------------- 6) Citizenship or Place of Organization - Virginia - ------------------------------------------------------------------------------- 7) Aggregate Amount Beneficially Owned by Each Reporting Person - 1,290,054 (Common Stock)* - ------------------------------------------------------------------------------- 8) [ ] Check if the Aggregate Amount in Row (7) Excludes Certain Shares (See Instructions)............................................................. - ------------------------------------------------------------------------------- 9) Percent of Class Represented by Amount in Row (7) - 17.8%* - ------------------------------------------------------------------------------ 10) Type of Reporting Person - CO - ------------------------------------------------------------------------------ * On November 10, 1998, in connection with the Merger Agreement (as defined below), Roanoke Electric Steel Corporation (the "Parent") and SWVA Acquisition, Inc., a wholly owned subsidiary of the Parent (the "Purchaser"), entered into a Stock Option Agreement with the Company pursuant to which the Company granted the Purchaser an irrevocable option to purchase up to 1,196,148 Shares, or approximately 19.9% of the then outstanding Shares, at a price of $10.375 per Share payable in cash, upon the occurrence of certain conditions specified therein. The Stock Option Agreement is described more fully in Section 11 ("The Merger Agreement and Other Agreements; the Rights; Employee Arrangements") of the Offer to Purchase dated November 17, 1998. In addition, on November 10, 1998, the Parent and the Purchaser entered into certain Stock Tender and Voting Agreements with all of the Company's directors, who, in the aggregate, beneficially own 93,906 Shares (36,406 of which Shares they own directly, and 57,500 of which are issuable upon the exercise of options held by them) that represent approximately 1.5% of the issued and outstanding Shares on a fully-diluted basis, in which the directors agreed, among other things, to tender their Shares in the Offer (as defined below) and vote their Shares in favor of the Merger (as defined below). The Stock Tender and Voting Agreements are more fully described in Section 11 ("The Merger Agreement and Other Agreements; the Rights; Employee Arrangements") of the Offer to Purchase. This Tender Offer Statement on Schedule 14D-1 relates to the offer by SWVA Acquisition, Inc., a Virginia corporation (the "Purchaser"), a wholly owned subsidiary of Roanoke Electric Steel Corporation, a Virginia corporation (the "Parent"), to purchase all of the outstanding shares of Common Stock, $.01 par value per share ("Shares"), of Steel of West Virginia, Inc., a Delaware corporation (the "Company"), and the associated rights to purchase Common Stock of the Company (the "Rights") issued pursuant to the Rights Agreement dated as of March 19, 1997, between the Company and Continental Stock Transfer and Trust Company, as Rights Agent, as amended on November 10, 1998, at a purchase price of $10.75 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated November 17, 1998 (the "Offer to Purchase"), a copy of which is attached hereto as Exhibit (a)(1), and in the related Letter of Transmittal (which together, as amended and supplemented from time to time, constitute the "Offer"), a copy of which Letter of Transmittal is attached hereto as Exhibit (a)(2). Unless the context otherwise requires, all references herein to Shares include the associated Rights. ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Steel of West Virginia, Inc. The information set forth in Section 7 ("Certain Information Concerning the Company") of the Offer to Purchase is incorporated herein by reference. (b) The exact title of the class of equity securities being sought in the Offer is Common Stock, par value $.01 per share, of the Company. The information set forth in the Introduction of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d) and (g) This Statement is filed by the Purchaser and the Parent. The information set forth in Section 8 ("Certain Information Concerning the Purchaser and the Parent") of the Offer to Purchase and in Schedule I thereto is incorporated herein by reference. (e) and (f) During the last five years, neither the Purchaser nor the Parent nor, to the best knowledge of the Purchaser or the Parent, any of the persons listed in Schedule I to the Offer to Purchase (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a) The information set forth in Section 8 ("Certain Information Concerning the Purchaser and the Parent") and Section 11 ("The Merger Agreement and Other Agreements; the Rights; Employee Arrangements") of the Offer to Purchase and in Exhibit (c)(1) of this Schedule 14D-1 is incorporated herein by reference. 2 (b) The information set forth in Section 10 ("Background of the Offer; Contacts with the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) and (b) The information set forth in Section 9 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(e) The information set forth in the Introduction, Section 10 ("Background of the Offer; Contacts with the Company"), Section 11 ("The Merger Agreement and Other Agreements; the Rights; Employee Arrangements"), Section 12 ("Purpose of the Offer; the Merger; Plans for the Company") and Section 13 ("Dividends and Distributions") of the Offer to Purchase is incorporated herein by reference. (f)-(g) The information set forth in Section 14 ("Effect of the Offer on the Market for the Shares; Nasdaq National Market Listing; Margin Regulations; Exchange Act Registration") of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) and (b) The information set forth in the Introduction and Section 8 ("Certain Information Concerning the Purchaser and the Parent") of the Offer to Purchase and Schedule I to the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the Introduction, Section 8 ("Certain Information Concerning the Purchaser and the Parent"), Section 10 ("Background of the Offer; Contacts with the Company"), Section 11 ("The Merger Agreement and Other Agreements; the Rights; Employee Arrangements") and Section 12 ("Purpose of the Offer; the Merger; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the Introduction and Section 17 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth in Section 8 ("Certain Information Concerning the Purchaser and the Parent") of the Offer to Purchase is incorporated herein by reference. 3 ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in the Introduction, Section 8 ("Certain Information Concerning the Purchaser and the Parent"), in Section 10 ("Background of the Offer; Contacts with the Company") and in Section 11 ("The Merger Agreement and Other Agreements; the Rights; Employee Arrangements") of the Offer to Purchase is incorporated herein by reference. (b) and (c) The information set forth in Section 16 ("Certain Legal Matters and Regulatory Approvals") of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in Section 14 ("Effect of the Offer on the Market for the Shares; Nasdaq National Market Listing; Margin Regulations; Exchange Act Registration") and Section 16 ("Certain Legal Matters and Regulatory Approvals") of the Offer to Purchase is incorporated herein by reference. (e) None. (f) The information set forth in the Offer to Purchase and the Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively, is incorporated herein by reference. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase dated November 17, 1998. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Form of Summary Advertisement as published on November 17, 1998. (a)(8) Form of Press Release issued jointly by the Parent and the Company on November 10, 1998 (incorporated by reference to the Parent's Form 8-K filed on November 16, 1998). 4 (b)(1) Commitment Letter, dated November 5, 1998, from First Union National Bank to Roanoke Electric Steel Corporation. (b)(2) Commitment Letter, dated November 6, 1998, from Crestar Bank to Roanoke Electric Steel Corporation. (b)(3) Commitment Letter, dated November 6, 1998, from NationsBank, N.A., to Roanoke Electric Steel Corporation. (b)(4) Commitment Letter, dated November 9, 1998, from Wachovia Bank, N.A., to Roanoke Electric Steel Corporation. (c)(1) Agreement and Plan of Merger, dated as of November 10, 1998, among Roanoke Electric Steel Corporation, SWVA Acquisition, Inc., and Steel of West Virginia, Inc. (c)(2) Stock Option Agreement, dated as of November 10, 1998, between Steel of West Virginia, Inc., and SWVA Acquisition, Inc. (c)(3) Form of Stock Tender and Voting Agreement, dated as of November 10, 1998, by and among Roanoke Electric Steel Corporation, SWVA Acquisition, Inc., and certain stockholders of the Company. (c)(4) Employment Agreement, dated November 10, 1998, by and between Steel of West Virginia, Inc., and Timothy R. Duke. (c)(5) Confidentiality Letter Agreement dated July 20, 1998, between Roanoke Electric Steel Corporation and Janney Montgomery Scott, Inc. (d) Not applicable. (e) Not applicable. (f) Not applicable. 5 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct. ROANOKE ELECTRIC STEEL CORPORATION By: /s/ JOHN E. MORRIS ---------------------------------------- Name: John E. Morris Title: Vice President - Finance and Assistant Treasurer SWVA ACQUISITION, INC. By: /s/ JOHN E. MORRIS ---------------------------------------- Name: John E. Morris Title: Vice President - Finance and Assistant Treasurer Date: November 17, 1998 6 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION ------------------------------------------------------------------------------ (a)(1) Offer to Purchase dated November 17, 1998. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Form of Summary Advertisement as published on November 17, 1998. (a)(8) Form of Press Release issued jointly by the Parent and the Company on November 10, 1998 (incorporated by reference to the Parent's Form 8-K filed on November 16, 1998). (b)(1) Commitment Letter, dated November 5, 1998, from First Union National Bank to Roanoke Electric Steel Corporation. (b)(2) Commitment Letter, dated November 6, 1998, from Crestar Bank to Roanoke Electric Steel Corporation. (b)(3) Commitment Letter, dated November 6, 1998, from NationsBank, N.A. to Roanoke Electric Steel Corporation. (b)(4) Commitment Letter, dated November 9, 1998, from Wachovia Bank, N.A., to Roanoke Electric Steel Corporation. (c)(1) Agreement and Plan of Merger, dated as of November 10, 1998, among Roanoke Electric Steel Corporation, SWVA Acquisition, Inc., and Steel of West Virginia, Inc. (c)(2) Stock Option Agreement, dated as of November 10, 1998, between Steel of West Virginia, Inc., and SWVA Acquisition, Inc. (c)(3) Form of Stock Tender and Voting Agreement, dated as of November 10, 1998, by and among Roanoke Electric Steel Corporation, SWVA Acquisition, Inc., and certain stockholders of the Company. (c)(4) Employment Agreement, dated November 10, 1998, by and between Steel of West Virginia, Inc., and Timothy R. Duke. (c)(5) Confidentiality Letter Agreement dated July 20, 1998, between Roanoke Electric Steel Corporation and Janney Montgomery Scott, Inc. 7 EX-99.A1 2 OFFER TO PURCHASE DATED 11/17/98 Exhibit (a)(1) Offer to Purchase dated November 17, 1998 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) OF STEEL OF WEST VIRGINIA, INC. AT $10.75 NET PER SHARE BY SWVA ACQUISITION, INC. A WHOLLY OWNED SUBSIDIARY OF ROANOKE ELECTRIC STEEL CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN STANDARD TIME, ON TUESDAY, DECEMBER 15, 1998, UNLESS THE OFFER IS EXTENDED. THIS OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SHARES REPRESENTING MORE THAN 50% OF THE VOTING POWER (DETERMINED ON A FULLY-DILUTED BASIS) OF ALL SECURITIES OF STEEL OF WEST VIRGINIA, INC., ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS OR IN A MERGER BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER. SEE SECTIONS 1 AND 15 BELOW FOR ADDITIONAL TERMS AND CONDITIONS OF THE OFFER. THE BOARD OF DIRECTORS OF STEEL OF WEST VIRGINIA, INC., HAS UNANIMOUSLY DETERMINED THAT EACH OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE OFFER AND THE MERGER, ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF STEEL OF WEST VIRGINIA, INC., AND UNANIMOUSLY RECOMMENDS THAT YOU ACCEPT THE OFFER AND TENDER YOUR SHARES TO SWVA ACQUISITION, INC., PURSUANT TO THE OFFER. IMPORTANT IF YOU DESIRE TO TENDER ALL OR ANY PORTION OF YOUR SHARES IN THIS OFFER AND YOUR SHARES ARE REGISTERED IN YOUR NAME, YOU SHOULD COMPLETE AND SIGN THE LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF) IN ACCORDANCE WITH ITS INSTRUCTIONS AND MAIL OR DELIVER IT (OR ITS FACSIMILE) AND ANY OTHER REQUIRED DOCUMENTS TO THE DEPOSITARY, AND THEN EITHER (I) DELIVER YOUR STOCK CERTIFICATES AND ANY OTHER REQUIRED DOCUMENTS TO THE DEPOSITARY OR (II) FOLLOW THE PROCEDURES FOR BOOK-ENTRY TRANSFER SET FORTH IN SECTION 3 BELOW. IF YOUR SHARES ARE REGISTERED IN "STREET NAME," YOU MUST REQUEST YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO TENDER YOUR SHARES FOR YOU. IF YOU DESIRE TO TENDER YOUR SHARES BUT YOUR STOCK CERTIFICATES ARE NOT IMMEDIATELY AVAILABLE, OR IF YOU CANNOT COMPLY WITH THE PROCEDURES FOR BOOK- ENTRY TRANSFER IN A TIMELY MANNER, YOU MAY TENDER YOUR SHARES BY FOLLOWING THE PROCEDURES FOR GUARANTEED DELIVERY SET FORTH IN SECTION 3 BELOW. QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE INFORMATION AGENT AT ITS ADDRESS AND TELEPHONE NUMBERS SET FORTH ON THE BACK COVER OF THIS OFFER TO PURCHASE. ADDITIONAL COPIES OF THIS OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL, THE NOTICE OF GUARANTEED DELIVERY AND OTHER RELATED MATERIALS MAY BE OBTAINED FROM THE INFORMATION AGENT OR FROM BROKERS, DEALERS, COMMERCIAL BANKS AND TRUST COMPANIES. THE INFORMATION AGENT FOR THE OFFER IS: [LOGO OF GEORGESON & COMPANY INC. APPEARS HERE] November 17, 1998 TABLE OF CONTENTS INTRODUCTION.............................................................. 1 THE TENDER OFFER.......................................................... 3 1. Term of the Offer; Expiration Date................................ 3 2. Acceptance for Payment and Payment for Shares..................... 4 3. Procedure for Tendering Shares.................................... 5 4. Withdrawal Rights................................................. 7 5. Certain Federal Income Tax Consequences........................... 8 6. Price Range of Shares; Dividends.................................. 8 7. Certain Information Concerning the Company........................ 9 8. Certain Information Concerning the Purchaser and the Parent....... 11 9. Source and Amount of Funds........................................ 12 10. Background of the Offer; Contacts with the Company................ 13 11. The Merger Agreement and Other Agreements; the Rights; Employee Arrangements...................................................... 17 12. Purpose of the Offer; the Merger; Plans for the Company........... 27 13. Dividends and Distributions....................................... 29 14. Effect of the Offer on the Market for the Shares; Nasdaq National Market Listing; Margin Regulations; Exchange Act Registration..... 30 15. Offer Conditions.................................................. 31 16. Certain Legal Matters and Regulatory Approvals.................... 32 17. Fees and Expenses................................................. 34 18. Miscellaneous..................................................... 34 SCHEDULE I................................................................ 37
TO THE STOCKHOLDERS OF STEEL OF WEST VIRGINIA, INC.: INTRODUCTION SWVA Acquisition, Inc., a Virginia corporation (the "PURCHASER") and a wholly owned subsidiary of Roanoke Electric Steel Corporation, a Virginia corporation (the "PARENT"), hereby offers to purchase all of the outstanding shares of Common Stock, par value $0.01 per share ("SHARES"), of Steel of West Virginia, Inc., a Delaware corporation (the "COMPANY"), and the associated rights to purchase Common Stock of the Company (the "RIGHTS") issued pursuant to the Rights Agreement dated as of March 19, 1997, between the Company and Continental Stock Transfer and Trust Company, as Rights Agent, as amended on November 10, 1998 (the "RIGHTS AGREEMENT"), at a purchase price of $10.75 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which together, as amended or supplemented from time to time, constitute the "OFFER"). Unless the context otherwise requires, all references herein to Shares include the associated Rights. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, subject to Instruction 6 of the Letter of Transmittal, stock transfer taxes on the transfer and sale of Shares pursuant to the Offer. The Purchaser will pay all fees and expenses of First Union National Bank (the "DEPOSITARY") and Georgeson & Company Inc. (the "INFORMATION AGENT") incurred in connection with the Offer. See Section 17. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT EACH OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT (AS DEFINED BELOW), INCLUDING THE OFFER AND THE MERGER (AS DEFINED BELOW), ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF THE SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES TO THE PURCHASER. Janney Montgomery Scott Inc. ("JANNEY"), financial advisor to the Company, has delivered to the Board of Directors of the Company a written opinion dated November 10, 1998 to the effect that, as of such date, the cash consideration to be received by the holders of the Shares pursuant to the Merger and the Offer is fair from a financial point of view to such holders. A copy of the Janney opinion is attached to the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "SCHEDULE 14D-9"), which is being distributed to the stockholders of the Company herewith, and stockholders are urged to read the opinion in its entirety for a description of the assumptions made, matters considered and limitations of the review undertaken by Janney. THIS OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SHARES REPRESENTING MORE THAN 50% OF THE VOTING POWER (DETERMINED ON A FULLY-DILUTED BASIS) OF ALL SECURITIES OF THE COMPANY ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS OR IN A MERGER BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER (THE "MINIMUM CONDITION"). SEE SECTIONS 1 AND 15 BELOW FOR ADDITIONAL TERMS AND CONDITIONS OF THE OFFER. IF THE PURCHASER PURCHASES A NUMBER OF SHARES SATISFYING THE MINIMUM CONDITION, IT WILL BE ABLE TO EFFECT THE MERGER WITHOUT THE AFFIRMATIVE VOTE OF ANY OTHER STOCKHOLDER OF THE COMPANY. SEE SECTIONS 11 AND 12 BELOW. The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of November 10, 1998 (as amended or supplemented from time to time, the "MERGER AGREEMENT"), among the Company, the Purchaser and the Parent pursuant to which, following the consummation of the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company (the "MERGER"), with the Company continuing as the surviving corporation (the "SURVIVING CORPORATION"). At the Effective Time of the Merger (the "EFFECTIVE TIME"), each Share (other than Shares held by the Parent, the Purchaser or any wholly owned subsidiary of the Parent or the Purchaser or held in the treasury of the Company, which will be canceled with no payment being made with respect thereto, and other than Shares, if any, held by stockholders who object to the Merger and demand a right to receive payment of the fair value of such stockholders' Shares in accordance with Section 262 of the Delaware General Corporation law (the "DGCL"), unless such right has been withdrawn or otherwise lost ("DISSENTING SHARES")) then issued and outstanding will, by virtue of the Merger and without any action by the holder thereof, be converted into the right to receive $10.75 in cash or any higher price that may be paid pursuant to the Offer (the "MERGER CONSIDERATION"), payable to the holder thereof, without interest thereon, upon the surrender of the certificate formerly representing such Share in the manner described in the Merger Agreement, less any required withholding taxes. The consummation of the Merger may be subject to the approval and adoption of the Merger Agreement by a vote of the Company's stockholders. The DGCL requires, except as otherwise described below, the affirmative vote of the holders of a majority of the outstanding Shares to approve and adopt the Merger Agreement and the Merger. If the Purchaser acquires (pursuant to the Offer or otherwise) at least a majority of the then-outstanding Shares, calculated on a fully-diluted basis, the Purchaser will have sufficient voting power to approve and adopt the Merger Agreement and the Merger without the vote of any other stockholder. Under the DGCL, however, if the Purchaser acquires at least 90% of the then-outstanding Shares, the Purchaser will be able to approve and adopt the Merger Agreement and the transactions contemplated thereby without a vote of the Company's stockholders. In this event, the Parent and the Purchaser intend, and the Company agrees in the Merger Agreement upon the request of the Purchaser, to take all necessary and appropriate action to cause the Merger to become effective as soon as reasonably practicable after such acquisition without a meeting of the Company's stockholders. If the Purchaser does not acquire at least 90% of the then-outstanding Shares, a vote of the Company's stockholders will be required and a significantly longer period of time will be needed to effect the Merger. See Sections 11 and 12. In connection with the execution of the Merger Agreement, the Parent, the Purchaser and the Company have entered into a Stock Option Agreement, dated as of November 10, 1998 (the "STOCK OPTION AGREEMENT"), pursuant to which the Company has granted to the Purchaser an option to purchase from the Company up to 1,196,148 authorized but unissued Shares (approximately 19.9% of the Company's outstanding Shares as of November 10, 1998) (the "OPTION SHARES") for a price per share of $10.375 (the "STOCK OPTION"), exercisable only upon the occurrence of certain events; provided, however, that the number of Option Shares cannot exceed 19.9% of issued and outstanding Shares (not counting the Option Shares) and is subject to adjustment in accordance with the terms of the Stock Option Agreement. See Section 11 for further discussion of the terms of the Stock Option. All of the Company's directors, who, in the aggregate, beneficially own 93,906 Shares (36,406 of which Shares they own directly, and 57,500 of which are issuable upon the exercise of options held by them) that represent approximately 1.5% of the issued and outstanding Shares on a fully-diluted basis, have entered into certain Stock Tender and Voting Agreements, dated November 10, 1998, with the Parent (the "STOCK TENDER AND VOTING AGREEMENTS") in which they have agreed, among other things, to tender their Shares in the Offer and vote their Shares in favor of the Merger. See Section 11 for a discussion of the Stock Tender and Voting Agreements. The Company has represented to the Parent that as of November 10, 1998, there were 6,010,795 Shares issued and outstanding and 153,500 Shares reserved for issuance upon the exercise of outstanding options to acquire Shares granted to employees and non-employee directors of the Company ("EMPLOYEE OPTIONS"). Therefore, the Purchaser believes that approximately 3,082,148 Shares constitute a majority of the outstanding Shares on a fully-diluted basis. For the purposes of the Offer, "fully-diluted basis" assumes that the Employee Options outstanding as of November 10, 1998, are exercised for Shares and that no Shares are issued upon the exercise of the Stock Option. The Merger Agreement is more fully described in Section 11. Certain federal income tax consequences of the sale of the Shares pursuant to the Offer and the exchange of Shares for the Merger Consideration pursuant to the Merger are described in Section 5. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 2 THE TENDER OFFER 1. TERM OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), the Purchaser will accept for payment and pay for all Shares validly tendered on or prior to the Expiration Date and not properly withdrawn as permitted by Section 4. "EXPIRATION DATE" means 12:00 Midnight, Eastern Standard Time ("EST"), on Tuesday, December 15, 1998, or, if the Purchaser extends the period during which the Offer is open, such later time and date at which the Offer expires. If, on the Expiration Date, the conditions to the Offer have not been satisfied or waived, the Purchaser will have the right, in its sole discretion, to extend the Offer for one or more periods not to exceed an aggregate of thirty business days, and, if all of the Offer Conditions have been satisfied or waived and less than 90% of the outstanding Shares have been tendered in the Offer and not withdrawn, then the Purchaser will have the additional right, in its sole discretion, so long as the Purchaser and the Parent each waive in writing the satisfaction of each of the Offer Conditions, to extend the Offer for one or more periods not to exceed an aggregate of twenty business days. Notwithstanding the foregoing, however, the Purchaser may not extend the Expiration Date beyond February 28, 1999 (the "OUTSIDE DATE"), without the consent of the Company. THE OFFER IS SUBJECT TO THE CONDITIONS TO THE OFFER SET FORTH IN SECTION 15 (THE "OFFER CONDITIONS"), INCLUDING SATISFACTION OF THE MINIMUM CONDITION. IF, AT ANY EXPIRATION DATE, THE OFFER CONDITIONS HAVE NOT BEEN SATISFIED OR WAIVED, THE PURCHASER RESERVES THE RIGHT (BUT WILL NOT BE OBLIGATED) TO EXTEND THE OFFER FROM TIME TO TIME BY GIVING ORAL OR WRITTEN NOTICE TO THE DEPOSITARY. DURING ANY SUCH EXTENSION, ALL SHARES PREVIOUSLY TENDERED AND NOT WITHDRAWN WILL REMAIN SUBJECT TO THE OFFER AND SUBJECT TO THE RIGHT OF A TENDERING STOCKHOLDER TO WITHDRAW SUCH STOCKHOLDER'S SHARES. Subject to the provisions of the Merger Agreement and the applicable rules and regulations of the Securities and Exchange Commission (the "COMMISSION"), the Purchaser also reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the Offer Conditions have been satisfied, to (i) terminate the Offer and return tendered Shares to tendering stockholders; (ii) waive unsatisfied Offer Conditions and purchase all Shares validly tendered; or (iii) amend the Offer in any respect by giving oral or written notice of such amendment to the Depositary. Under the terms of the Merger Agreement, however, without the written consent of the Company, the Purchaser cannot (a) decrease the price per Share to be paid in the Offer; change the form of consideration payable in the Offer (other than by adding consideration) or decrease the number of Shares sought in the Offer; (b) change or amend the Offer Conditions (other than to waive any Offer Condition, except that the Minimum Condition may not be waived without the consent of the Company); (c) impose additional conditions to the Offer; or (d) amend any other term of the Offer in any manner adverse to the holders of Shares (other than insignificant changes or amendments). The Purchaser has no obligation to pay interest on the purchase price of tendered Shares, including in the event the Purchaser exercises its right to extend the period of time during which the Offer is open. The rights reserved by the Purchaser in this paragraph are in addition to the Purchaser's rights to terminate the Offer pursuant to Section 15. Any extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof, and such announcement, in the case of an extension, will be made in accordance with Rule 14e-1(d) under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), no later than 9:00 a.m., EST, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which the Purchaser may choose to make any public announcement, except as provided by applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that material changes be promptly disseminated to holders of Shares), the Purchaser will have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to the Dow Jones News Service. If the Purchaser makes a material change in the terms of the Offer or if it waives a material condition of the Offer, the Purchaser will extend the Offer and disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period 3 during which an offer must remain open following material changes in the terms of the offer, other than a change in price or a change in the percentage of securities sought, will depend upon the facts and circumstances, including the materiality, of the changes. With respect to a change in price or, subject to certain limitations, a change in the percentage of securities sought, a minimum ten business day period from the day of such change is generally required to allow for adequate dissemination to stockholders. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday, or a U.S. federal holiday and consists of the time period from 12:01 a.m. through 12:00 Midnight, EST. The Company has provided the Purchaser with the Company's stockholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. As of the date of this Offer to Purchase, the Rights are evidenced by the certificates representing Shares ("SHARE CERTIFICATES") and do not trade separately. Accordingly, by tendering a Share Certificate, a stockholder is automatically tendering the associated Rights. If, however, pursuant to the Rights Agreement or for any other reason, the Rights detach and separate certificates representing Rights are issued, stockholders will be required to tender one Right for each Share tendered in order to effect a valid tender of such Share. This Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed by the Purchaser to record holders of Shares and furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will purchase, by accepting for payment, and will pay for, all Shares validly tendered and not properly withdrawn (in accordance with Section 4) on or prior to the Expiration Date as soon as practicable after the Expiration Date. In addition, subject to applicable rules of the Commission, the Purchaser expressly reserves the right to delay acceptance for payment of, or payment for, Shares in order to comply with applicable law, including the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and the rules and regulations thereunder (the "HSR ACT"). See Section 16. Any such delays will be effected in compliance with Rule 14e-1(c) under the Exchange Act. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) Share Certificates or timely confirmation of a book-entry transfer of such Shares (a "BOOK-ENTRY CONFIRMATION") into the Depositary's account at The Depository Trust Company (the "BOOK-ENTRY TRANSFER FACILITY") pursuant to the procedures set forth in Section 3; (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined below) in connection with a book-entry transfer; and (iii) any other documents required by the Letter of Transmittal. The term "AGENT'S MESSAGE" means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares subject to such Book-Entry Confirmation that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against such participant. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for 4 tendering stockholders for the purpose of receiving payments from the Purchaser and transmitting such payments to stockholders whose Shares have been accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. If, for any reason whatsoever, acceptance for payment of or payment for any Shares tendered pursuant to the Offer is delayed or the Purchaser is unable to accept for payment or pay for Shares tendered pursuant to the Offer, then without prejudice to the Purchaser's rights set forth herein, the Depositary may nevertheless, on behalf of the Purchaser and subject to applicable law, retain tendered Shares and such Shares may not be withdrawn except to the extent that the tendering stockholder is entitled to and duly exercises withdrawal rights as described in Section 4. If any tendered Shares are not accepted for payment for any reason, or if Share Certificates are submitted for more Shares than are tendered, Share Certificates evidencing unpurchased or untendered Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at the Book- Entry Transfer Facility pursuant to the procedures set forth in Section 3, such Shares will be credited to an account maintained at the Book-Entry Transfer Facility), as promptly as practicable following the expiration, termination or withdrawal of the Offer. 3. PROCEDURE FOR TENDERING SHARES. VALID TENDERS. Except as set forth below, in order for Shares to be validly tendered pursuant to the Offer, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares, and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date and either (i) Share Certificates evidencing tendered Shares must be received by the Depositary at such address or such Shares must be tendered pursuant to the procedure for book-entry transfer described below and a Book-Entry Confirmation must be received by the Depositary, in each case on or prior to the Expiration Date, or (ii) the guaranteed delivery procedures described below must be complied with. BOOK-ENTRY TRANSFER. The Depositary will make a request to establish an account with respect to the Shares at the Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of the Book-Entry Transfer Facility may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures for such transfer. Although delivery of Shares may be effected through book-entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other documents required by the Letter of Transmittal, must in any case be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date, or the guaranteed delivery procedures described below must be complied with. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED TO BE MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. SIGNATURE GUARANTEES. Signatures on Letters of Transmittal must be guaranteed by a firm that is a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities 5 Transfer Agents Medallion Program (an "ELIGIBLE INSTITUTION"), except in cases where Shares are tendered (i) by a registered holder of Shares who has not completed either the box labeled "Special Payment Instructions" or the box labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal. If the Share Certificates are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or Share Certificates not accepted for payment or not tendered are to be returned, to a person other than the registered holder, the Share Certificates must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name of the registered holder appears on such certificates, with the signatures on such certificates or stock powers guaranteed as aforesaid. See Instructions 1 and 5 of the Letter of Transmittal. If Share Certificates are forwarded separately to the Depositary, a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) must accompany each such delivery. GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's Share Certificates are not immediately available, or such stockholder cannot deliver the Share Certificates and all other required documents to reach the Depositary on or prior to the Expiration Date, or such stockholder cannot complete the procedure for delivery by book- entry transfer on a timely basis, such Shares may nevertheless be tendered, provided that all of the following conditions are satisfied: (a) such tender is made by or through an Eligible Institution; (b) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form made available by the Purchaser is received by the Depositary as provided below on or prior to the Expiration Date; and (c) the Share Certificates (or a Book-Entry Confirmation), representing all tendered Shares in proper form for transfer, together with the Letter of Transmittal (or a facsimile thereof) properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and any other documents required by the Letter of Transmittal are received by the Depositary within three (3) trading days on the Nasdaq National Market of The Nasdaq Stock Market (the "NASDAQ NATIONAL MARKET") after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or mail or transmitted by telegram, telex or facsimile transmission to the Depositary and must include a guarantee by an Eligible Institution and a representation that the stockholder owns the Shares tendered within the meaning of, and that the tender of the Shares effected thereby complies with, Rule 14e-4 under the Exchange Act, each in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of Share Certificates for, or of Book-Entry Confirmation with respect to, such Shares, a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message), and any other documents required by the Letter of Transmittal. Accordingly, payment might not be made to all tendering stockholders at the same time and will depend upon when Share Certificates or Book-Entry Confirmations of such Shares are received into the Depositary's account at the Book-Entry Transfer Facility. BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9. Under the "backup withholding" provisions of the U.S. federal income tax law, the Depositary may be required to withhold 31% of the amount of any payments of cash pursuant to the Offer. In order to avoid backup withholding, each stockholder surrendering Shares in the Offer must, unless an exemption applies, provide the payor of such cash with such stockholder's correct taxpayer identification number ("TIN") on a Substitute Form W-9 and certify, under penalties of perjury, that such TIN is correct and that such stockholder is not subject to backup 6 withholding. If a stockholder does not provide its correct TIN or fails to provide the certifications described above, the Internal Revenue Service may impose a penalty on such stockholder and payment of cash to such stockholder pursuant to the Offer may be subject to backup withholding of 31%. All stockholders surrendering Shares pursuant to the Offer should complete and sign the Substitute Form W-9 included in the Letter of Transmittal to provide the information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to the Depositary). Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign stockholders should complete and sign a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 9 of the Letter of Transmittal. APPOINTMENT AS PROXY. By executing the Letter of Transmittal, a tendering stockholder irrevocably appoints designees of the Purchaser, and each of them, as such stockholder's attorneys-in-fact and proxies, with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by the Purchaser (and with respect to any and all other Shares, other securities or rights issued or issuable in respect of such Shares on or after the date hereof). All such powers of attorney and proxies will be considered irrevocable and coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior powers of attorney and proxies given by such stockholder with respect to such Shares (and such other Shares and securities) will be revoked without further action, and no subsequent powers of attorney and proxies may be given nor any subsequent written consents executed (and, if given or executed, will not be deemed effective). The designees of the Purchaser will, with respect to the Shares (and such other Shares and securities) for which such appointment is effective, be empowered to exercise all voting and other rights of such stockholder as they, in their sole discretion, may deem proper at any annual or special meeting of the Company's stockholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's payment for such Shares, the Purchaser must be able to exercise full voting rights with respect to such Shares and other securities, including voting at any meeting of stockholders. DETERMINATION OF VALIDITY. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Purchaser in its sole discretion, which determination will be final and binding on all parties. The Purchaser reserves the absolute right to reject any tender that it determines is not in proper form or of which the acceptance for payment might, in the opinion of its counsel, be unlawful. The Purchaser also reserves the absolute right to waive any of the Offer Conditions or any defect or irregularity in any tender of Shares of any particular stockholder, whether or not similar defects or irregularities are waived in the case of other stockholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. None of the Purchaser, the Parent, any of their affiliates or assigns, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. OTHER REQUIREMENTS. The Purchaser's acceptance for payment of Shares tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer, including the tendering stockholder's representation and warranty that the stockholder is the holder of the Shares within the meaning of, and that the tender of the Shares complies with, Rule 14e-4 under the Exchange Act. 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4, tenders of Shares made pursuant to the Offer are irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time after the Outside Date. If the Purchaser extends the Offer, is delayed 7 in its acceptance for payment of Shares or is unable to purchase Shares validly tendered pursuant to the Offer for any reason, then without prejudice to the Purchaser's rights under the Offer, the Depositary may nevertheless, on behalf of the Purchaser, retain tendered Shares and such Shares may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights as described in this Section 4. Any such delay in acceptance for payment will be accompanied by an extension of the Offer to the extent required by law. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If Share Certificates to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution unless such Shares have been tendered for the account of any Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer set forth in Section 3, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which case a notice of withdrawal will be effective if delivered to the Depositary by any method of delivery described in the first sentence of this paragraph. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination will be final and binding. None of the Purchaser, the Parent, any of their affiliates or assigns, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. Withdrawn Shares, however, may be re-tendered at any time prior to the Expiration Date by following one of the procedures described in Section 3. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The summary of tax consequences set forth below is for general information only and is based on the law as currently in effect. The tax treatment of each stockholder will depend in part upon such stockholder's particular situation. Special tax consequences not described herein may be applicable to particular classes of taxpayers, such as financial institutions, tax-exempt organizations, broker-dealers, persons who are not citizens or residents of the United States, stockholders who acquired their Shares through the exercise of an employee stock option or otherwise as compensation, and persons who received payments in respect of options to acquire Shares. ALL STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS AND CHANGES IN SUCH TAX LAWS. The receipt of cash pursuant to the Offer or the Merger will be a taxable transaction for U.S. federal income tax purposes under the Internal Revenue Code of 1986, as amended, and may also be a taxable transaction under applicable state, local, foreign income or other tax laws. Generally, for U.S. federal income tax purposes, a stockholder will recognize gain or loss in an amount equal to the difference between the cash received by the stockholder pursuant to the Offer or the Merger and the stockholder's adjusted tax basis in the Shares purchased pursuant to the Offer or converted into cash in the Merger. For U.S. federal income tax purposes, such gain or loss will be a capital gain or loss if the Shares are a capital asset in the hands of the stockholder, and a long-term capital gain or loss if the stockholder's holding period is more than one year as of the date the Purchaser accepts such Shares for payment pursuant to the Offer or the Merger, as the case may be. 6. PRICE RANGE OF SHARES; DIVIDENDS. According to the Company's Annual Report on Form 10-K for the year ended December 31, 1997 (the "COMPANY FORM 10-K"), the Shares are listed and traded principally on the Nasdaq National Market. The following table sets forth, for the quarters indicated and according to 8 published sources, the high and low sales prices per Share on the Nasdaq National Market. The Company has paid no cash dividends in the last five years.
PRICE ------------- FISCAL YEAR HIGH LOW - ----------- ---- --- 1996: First Quarter................................................. $11 $8 3/4 Second Quarter................................................ 9 3/4 8 1/2 Third Quarter................................................. 9 5 1/2 Fourth Quarter................................................ 7 1/2 5 1/4 1997: First Quarter................................................. $ 7 3/4 $6 1/4 Second Quarter................................................ 10 3/4 7 1/2 Third Quarter................................................. 11 9 5/8 Fourth Quarter................................................ 12 8 1998: First Quarter................................................. $10 5/8 $7 7/8 Second Quarter................................................ 11 1/2 8 1/2 Third Quarter................................................. 9 11/16 5 7/8 Fourth Quarter (through November 16, 1998).................... 10 3/8 5 1/4
On November 10, 1998, the last full trading day prior to announcement of the execution of the Merger Agreement, the closing sale price per Share reported on the Nasdaq National Market was $6.375. On November 16, 1998, the last full trading day before commencement of the Offer, the closing sale price per Share reported on the Nasdaq National Market was $10.375. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR SHARES. 7. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning the Company has been taken from or based upon other public reports on file with the Commission and other public sources. The summary information set forth below is qualified in its entirety by reference to such public reports (available as described below) and the more comprehensive financial and other information included therein. Although the Purchaser and the Parent do not have any knowledge that would indicate that any statements contained in this Offer to Purchase based upon such reports are untrue, neither do the Purchaser or the Parent assume any responsibility for the accuracy or completeness of the information contained in such reports or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information but that are unknown to the Purchaser and the Parent. GENERAL. The Company was incorporated under the laws of the State of Delaware on November 20, 1986. The Company owns and operates a steel mini-mill in Huntington, West Virginia, and steel fabrication facilities in Huntington and in Memphis, Tennessee. The Company customs designs and manufactures special steel products principally for use in the construction of truck trailers, industrial lift trucks, off-highway construction equipment (such as bulldozers and graders), manufactured housing, guard rail post, and mining equipment. The Company's principal executive offices are located at 17th Street and 2nd Avenue, Huntington, West Virginia, 25703, and its telephone number is (304) 696-8200. FINANCIAL INFORMATION. Set forth below are certain selected consolidated financial data with respect to the Company and its subsidiaries derived from the Company Form 10-K and the Company's Quarterly Report on Forms 10-Q for the quarter ended September 30, 1998. More comprehensive financial information is included in such reports (including Management's Discussion and Analysis of Financial Condition and Results of Operations) and other documents filed by the Company with the Commission, and the following financial data is qualified in its entirety by reference to such reports and other documents including the financial information and related notes contained therein. Such reports and other documents may be examined and copies thereof may be 9 obtained from the offices of the Commission and The Nasdaq Stock Market ("NASDAQ") in the manner set forth below. STEEL OF WEST VIRGINIA, INC. SELECTED CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NINE MONTHS YEAR ENDED ENDED DECEMBER 31 SEPTEMBER 30, ------------------------- 1998 1997 1996 ------------- ------------ ------------ (UNAUDITED) STATEMENT OF OPERATIONS DATA: Net sales............................. $ 99,371 $112,776 $95,334 Cost of sales......................... 88,247 98,538 85,339 -------- -------- ------- Gross profit........................ 11,124 14,238 9,995 Selling and administrative expenses... 4,569 5,699 4,463 Interest expense...................... 2,296 847 1,273 (Gain) loss on disposal of assets..... (275) (733) 8,936 Other (income)........................ (786) (532) (365) -------- -------- ------- Income (loss) before income taxes... 5,320 8,957 (4,312) Income tax expense (benefit).......... 2,287 3,698 (1,374) -------- -------- ------- Net income (loss)................... $ 3,033 $ 5,259 $(2,938) ======== ======== ======= Earnings (loss) per common share: Basic and diluted................... $ .50 $ .88 $ (.49) ======== ======== ======= Weighted average number of common shares outstanding: Basic............................... 6,001 5,994 6,024 Diluted............................. 6,015 6,009 6,024 ======== ======== ======= SEPTEMBER 30, DECEMBER 31, DECEMBER 31, 1998 1997 1996 ------------- ------------ ------------ (UNAUDITED) BALANCE SHEET DATA Total Assets.......................... $131,613 $113,715 $79,299 Total Liabilities..................... $ 74,156 $ 59,413 $30,292 Total Stockholders' Equity............ $ 57,457 $ 54,302 $49,007
AVAILABLE INFORMATION. The Company is subject to the information filing requirements of the Exchange Act and in accordance therewith is obligated to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in such proxy statements and distributed to the Company's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the Commission located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and should also be available for inspection and copying at prescribed rates at the regional offices of the Commission located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New York, New York 10048. Such reports, proxy statements and other information may also be obtained at the Website that the Commission maintains at http://www.sec.gov. Copies of this material may also be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Reports, proxy statements and other information concerning the Company should also be available for inspection at the offices of Nasdaq, Reports Section at 1953 K Street, Washington, D.C. 20006. Except as otherwise noted in this Offer to Purchase, 10 all of the information with respect to the Company set forth in this Offer to Purchase has been derived from publicly available information. 8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND THE PARENT. GENERAL. The Purchaser, a Virginia corporation and a wholly-owned subsidiary of Parent, was organized in connection with the Offer and has not carried on any activities to date other than those incident to its formation and commencement of the Offer. The Parent, a Virginia corporation, manufactures, fabricates and markets merchant steel products, billets, open web steel joists and reinforcing bars. The Parent's main plant is a mini-mill in Roanoke, Virginia. Shares of the Parent's Common Stock are listed for trading on the Nasdaq National Market under the symbol "RESC." The Parent and the Purchaser have their principal executive offices at 102 Westside Blvd., N.W., Roanoke, Virginia 24017, and their telephone number is (540) 342-1831. The name, citizenship, residence or business address, principal occupation or employment and five-year employment history of each of the directors and executive officers of the Purchaser and the Parent and certain other information are set forth in Schedule I hereto. Except as set forth on Schedule I hereto, none of the Purchaser, the Parent nor, to the best knowledge of the Purchaser and the Parent, any of the persons listed on Schedule I hereto or any associate or majority-owned subsidiary of the Purchaser, the Parent or any of the persons so listed, beneficially owns or has a right to acquire directly or indirectly any Shares, and none of the Purchaser, the Parent nor, to the best knowledge of the Purchaser and the Parent, any of the persons or entities referred to above, or any of the respective executive officers, directors or subsidiaries of any of the foregoing, has effected any transactions in the Shares during the past 60 days. Except as described in this Offer to Purchase, none of the Parent or the Purchaser or, to the best knowledge of the Parent or the Purchaser, any of the persons listed in Schedule I hereto has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, without limitation, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies. Except as described in this Offer to Purchase, none of the Parent, or the Purchaser or, to the best knowledge of the Parent or the Purchaser, any of the persons listed in Schedule I hereto has had any transactions with the Company or any of its executive officers, directors or affiliates that would require reporting under the rules of the Commission. Except with respect to the transactions contemplated by the Merger Agreement, the Stock Option Agreement and the Stock Tender and Voting Agreements and as described in this Offer to Purchase, there have been no contacts, negotiations or transactions between the Parent or the Purchaser, or their respective subsidiaries, or to the best knowledge of the Parent or the Purchaser, any of the persons listed in Schedule I hereto, on the one hand, and the Company or its executive officers, directors or affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors or a sale or other transfer of a material amount of assets. FINANCIAL INFORMATION. Set forth below are certain selected consolidated financial data relating to the Parent and its subsidiaries for the Parent's last two fiscal years and nine months ended July 31, 1998, that have been derived from the financial statements contained in the Parent's Annual Report on Form 10-K for the fiscal year ended October 31, 1997 (the "PARENT FORM 10- K"), and the Parent's Form 10-Qs for the fiscal year through July 1998, filed by the Parent with the Commission. More comprehensive financial information is included in the reports (including Management's Discussion and Analysis of Financial Condition and Results of Operations) and other documents filed by the Parent with the Commission, and the following financial data is qualified in its entirety by reference to such reports and other documents, including the financial information and related notes contained therein. Such reports and other documents may be examined and copies thereof may be obtained from the offices of the Commission and Nasdaq in the manner set forth below. 11 ROANOKE ELECTRIC STEEL CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NINE MONTHS YEAR ENDED ENDED OCTOBER 31 JULY 31, ----------------------- 1998 1997 1996 ----------- ----------- ----------- (UNAUDITED) STATEMENT OF OPERATIONS DATA: Net sales................................. $218,502 $265,109 $246,287 Cost of sales............................. $178,017 $213,380 $198,372 Income (loss) before income taxes......... $ 21,316 $ 27,089 $ 24,721 Income tax expense (benefit) ............. $ 8,517 $ 10,206 $ 9,306 Net income (loss)......................... $ 12,799 $ 16,883 $ 15,415 Earnings (loss) per common share: Basic................................... $ 1.15 $ 1.50 $ 1.30 Diluted................................. $ 1.14 $ 1.49 $ 1.30 Weighted average number of common shares outstanding(1): Basic................................... 11,148 11,231 11,815 Diluted................................. 11,276 11,301 11,871 JULY 31, OCTOBER 31, OCTOBER 31, 1998 1997 1996 ----------- ----------- ----------- (UNAUDITED) BALANCE SHEET DATA: Total Assets.............................. $182,825 $176,860 $167,016 Total Liabilities......................... $ 68,684 $ 70,424 $ 72,583 Stockholders' Equity...................... $114,141 $106,436 $ 94,433
- -------- (1) Per share information has been adjusted for a three-for-two stock split effective March 25, 1998. AVAILABLE INFORMATION. The Parent is subject to the information filing requirements of the Exchange Act and in accordance therewith is obligated to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning the Parent's directors and officers, their remuneration, options granted to them, the principal holders of the Parent's securities and any material interest of such persons in transactions with the Parent is required to be disclosed in such proxy statements and distributed to the Parent's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the Commission located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and should also be available for inspection and copying at prescribed rates at the regional offices of the Commission located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New York, New York 10048. Such reports, proxy statements and other information may also be obtained at the Website that the Commission maintains at http://www.sec.gov. Copies of this material may also be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Reports, proxy statements and other information concerning the Company should also be available for inspection at the offices of Nasdaq, Reports Section at 1953 K Street, Washington, D.C. 20006. 9. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the Purchaser to acquire the tendered Shares pursuant to the Offer, and to consummate the Merger, is approximately $65 million, plus estimated fees and expenses related to the Offer and the Merger of approximately $4.2 million, and approximately another $52.1 million will be required to repay the existing indebtedness of the Company and its subsidiaries. The Purchaser expects to obtain all funds needed to consummate the Offer and the Merger through capital contributions or advances made by the Parent. The Parent expects to obtain funds for such capital contributions pursuant to a Credit Agreement to be entered into pursuant to financing commitment letters (collectively, the "COMMITMENT LETTER") dated November 5, 1998, from First Union National Bank, dated November 6, 1998, from each of NationsBank, N.A., and Crestar Bank and dated November 9, 1998, from Wachiovia Bank, N.A. (collectively, the "LENDERS"). 12 Pursuant to the Commitment Letter, the Lenders have committed to provide to the Parent (i) a term loan facility of up to $150 million (the "NEW TERM LOAN FACILITY") to finance the acquisition of Shares, pursuant to the Offer and the Merger, to refinance certain existing indebtedness of the Parent and its subsidiaries, (including, without limitation, the Company and its subsidiaries), and to pay related fees and expenses, and (ii) a revolving credit facility of up to $30 million (the "NEW REVOLVING CREDIT FACILITY" and, together with the New Term Loan Facility, the "FACILITIES"), to provide working capital to, and for other general corporate purposes of, the Parent and its subsidiaries (including, without limitation, the Company and its subsidiaries). The Commitment Letter provides for an upfront fee equal to 25 basis points on the aggregate amount of the Facilities, plus a facility fee with respect to the New Revolving Credit Facility based on the Net Funded Debt to EBITDA ratio (as those terms are defined in the Commitment Letter) of the Parent and its subsidiaries (including, without limitation, the Company and its subsidiaries). The Commitment Letter is subject to certain customary conditions. Obligations under the Facilities will be jointly and severally guaranteed by all operating subsidiaries of the Parent, (including, without limitation, the Company and its subsidiaries), and will be secured, until at least the third anniversary of the closing of the Facilities, by a first priority, perfected security interest in the accounts, inventory and equipment (and other assets required by the Lenders) of the Parent and its subsidiaries (including, without limitation, the Company and its subsidiaries). The New Term Loan Facility would be due and payable in twenty-eight consecutive quarterly installments, but based upon a ten-year amortization schedule (with a balloon payment), and the new Revolving Loan Facility would be due and payable five years after the date of the closing of the Facilities. The Facilities would bear interest, at the Parent's option, at (i) the Base Rate plus the Applicable Margin (as such terms are defined in the Commitment Letter) or (ii) Adjusted LIBOR plus the Applicable Margin. In connection with the Commitment Letter, the Parent agreed to indemnify the Lenders against certain liabilities. The foregoing summary of the Commitment Letter is qualified in its entirety by references to the text of the Commitment Letter, which is filed with the Commission as an exhibit to the Tender Offer Statement on Schedule 14D-1 by the Parent and the Purchaser (the "TENDER OFFER STATEMENT"). It is currently anticipated that the indebtedness incurred by the Parent in connection with the Offer and the Merger will be repaid from current funds, additional funds generated internally by the Parent and its subsidiaries (including, after the Merger, if consummated, funds generated by the Surviving Corporation and its subsidiaries) and through other sources that may be available from time to time. 10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. Set forth below is a chronology of events and a description of contacts between representatives of the Company and the Parent. The description of certain meetings of the Company's Board of Directors has been supplied by the Company. The Parent has followed the business activities of the Company for a period of time. Beginning in January, 1997, representatives of the Parent and the Company have engaged in discussions, from time to time, concerning a possible business combination involving the Company. The Parent understands that, in early January, 1997, CPT Holdings, Inc. ("CPT"), advised Robert L. Bunting, Jr., then Chief Executive Officer and Chairman of the Company, that it was making an unsolicited offer to acquire the Company for a price of $9.00 per Share. After a full review and consideration of the proposal, the Company's Board determined that the offer was inadequate, and that it was not in the best interests of the Company or its stockholders to proceed with discussions concerning an acquisition of the Company by CPT. On January 14, 1997, Mr. Bunting and Timothy R. Duke, then the President and Chief Operating Officer of the Company (and currently its Chief Executive Officer and President), met with Donald G. Smith, the President, Chief Executive Officer and Chairman of the Parent, at the offices of the Parent. The purpose of the meeting was to discuss the possibility of the Parent being a "white knight" in the event that CPT proceeded to attempt a hostile takeover of the Company. The Parent retained the services of Ewing Monroe Bemiss & Co. ("Ewing Monroe") to evaluate the possibility of the Parent acquiring the Company and to advise the Board of Directors of the Parent in this regard. 13 After consideration of the factors affecting the Company and the Parent at that time, and in light of the advice of Ewing Monroe, the Board of Directors of the Parent determined to pursue discussions with the Company for the possible acquisition of the Company. At the meeting of the Company's Board held on March 5, 1997, Mr. Duke advised the Company's Board that the Parent had advised him that it might have an interest in acquiring the Company at a price to be negotiated, but in no event greater than $11.00 per Share. In April 1997, based on information from the Parent, Mr. Duke understood that due to the possible entry of new competitors into the Company's markets, the Parent's revised valuation was in the neighborhood of $10.00 per Share. Later in April 1997, Mr. Duke informed Mr. Smith that the Company's Board had concluded that it was not in the best interests of the Company's stockholders to enter into a transaction with the Parent given the Parent's suggested valuation. There were no further contacts between the Company and the Parent until June 1998, other than with regard to the Company's purchasing of billets from the Parent. At a meeting of the Company's Board held on June 5, 1998, the Company's Board reviewed the operations of the Huntington facility, including the progress of the Company's modernization program, industry trends, potential competitors, various possible strategic alliances and, in light of the Company's stock trading price at the time, the possibility of the Company receiving an unsolicited, inadequate offer to stockholders that could also disrupt the Company's operations and employment levels, and leave the Company unable to serve its customers. The Company's Board authorized Mr. Duke to contact Mr. Smith to ascertain whether the Parent might have an interest in a strategic alliance. On June 11, 1998, Mr. Duke and Mr. Smith discussed the possible advantages of a strategic alliance between the Company and the Parent, including that the combined entity would have greater financial strength, that the Company's Huntington facility would have a ready source of billets from the Parent's facility and that the Parent would have a "built-in" customer for its billets. At the same time, Mr. Smith expressed a concern regarding any strategic alliance with the Company due to the possible entry of new competitors into the Company's markets. The Parent again consulted Ewing Monroe to evaluate a possible transaction with the Company and to advise the Parent's Board of Directors in this regard. On July 20, 1998, the Parent and the Company entered into the Parent Confidentiality Agreement (defined in Section 11) preceding the Parent's review of certain information concerning the Company. Following the execution of this agreement, Mr. Duke and Daniel N. Pickens, a director of the Company and a First Vice President of Janney, kept the Company's directors informed regularly regarding discussions with the Parent's representatives. On July 28, 1998, Mr. Duke and Mr. Pickens met with Mr. Smith, Mr. A. Hugh Ewing III, President of Ewing Monroe, Ms. Mary Adams Bacon, a Managing Director of Ewing Monroe, and other representatives of the Parent. At the meeting, the parties discussed the Company's business, the Parent's business, industry trends, potential competitors and general parameters and concerns regarding possible terms and conditions of any transaction between the Company and the Parent. At a meeting of the Parent's Board of Directors on August 14, 1998, Mr. Ewing and Ms. Bacon made a detailed presentation regarding a possible transaction between the Company and the Parent. After considerable discussion, the Parent's Board of Directors determined to consider the issue further at its regularly scheduled meeting on August 18, 1998. At the meeting on August 18, the Parent's Board of Directors again met with Mr. Ewing and Ms. Bacon and again discussed the transaction under consideration. After a further detailed presentation by management and discussion, including consideration of the possible benefits to the Parent of a combination of the business of the Company and the Parent, the Parent's Board of Directors authorized management to negotiate the terms and conditions for a possible acquisition of the Company. At a meeting on August 19, 1998, the Company's Board reviewed and analyzed the discussion of July 28, 1998, together with the updated information on the operations of the Huntington facility, including the progress 14 of the Company's modernization program, competitive trends in the industry and the Company's stock price and performance. At the meeting, the Company's Board further discussed the identity and key characteristics of other potential strategic partners. After considerable discussion, the Company's Board authorized Mr. Duke and Mr. Pickens to continue discussions with the Parent. On August 24, 1998, Mr. Duke and Mr. Pickens met again with Mr. Smith, Mr. Ewing and Ms. Bacon to review historical and projected performance of the Company and the Parent, strategic opportunities, valuation parameters and terms and conditions of a possible transaction. On September 9, 1998, the Company's Board met to discuss a possible transaction with the Parent. The Company's Board reviewed materials prepared by management and by Janney regarding the Company's historical performance, projected financial results, industry trends, stock price history, stock market data and potential competition. The Company's Board also reviewed the meeting held with the Parent's representatives on August 24, 1998, and authorized further discussion with the Parent. On September 11, 1998, Mr. Duke and Mr. Pickens met with Mr. Smith, Mr. Ewing and Ms. Bacon to discuss a possible transaction. At this meeting, Mr. Smith indicated that the Parent was only prepared to proceed with a transaction in which it acquired 100% of the Shares for $11.00 cash. After considerable discussion, Mr. Smith agreed to recommend to the Parent's Board of Directors that the Parent pay a price of $11.50 per Share in cash to acquire the Company. Mr. Smith's willingness to recommend that price to the Parent's Board of Directors was conditioned upon various other issues, including protective devices such as break-up fees, an option to purchase Shares and stockholder lock-ups, completion of due diligence and the negotiation of definitive agreements. At a recess in the meeting, Mr. Duke, Mr. Pickens, Albert W. Eastburn, the Chairman of the Company and Stephen A. Albert, a director of the Company and a member of Sierchio & Albert, P.C., general counsel to the Company, discussed the proposed sale of the Company via a conference call and concluded that Mr. Duke and Mr. Pickens should continue further discussions with the Parent. Negotiations between the Company and the Parent continued through the day. On September 14, 1998, via a conference call, counsel to the Company and counsel to the Parent discussed a possible transaction, including structure, due diligence and the preparation of documents. The Parent's Board of Directors met again on September 15, 1998, and discussed the September 11, 1998, meeting described above. The Parent's Board of Directors authorized the commencement of extensive due diligence activities by the Parent's counsel and consultants and, subject to the results thereof and satisfaction of further conditions of management, the continued negotiation of a possible agreement. On September 17, 1998, the Company's Board held a telephonic meeting at which it reviewed the Company's historical and projected results, industry trends, stock market trends and competitive factors. The Company's Board also analyzed and discussed the proposed purchase price in light of these factors, the Company's stock price, performance and trading volume and other possible strategic alternatives. The Company's Board approved the Company's retention of Janney as the Company's investment banker with regard to the transaction and the Company's retention of legal counsel with regard to the transaction. Legal counsel then advised the Company's Board with respect to certain legal matters, including its fiduciary obligations in connection with any possible sale of the Company. The Company's Board authorized the Company to continue negotiations with the Parent. On September 29, 1998, the Company's Board held a meeting at which Mr. Duke, Janney and legal counsel reviewed the status of negotiations with the Parent. Legal counsel again advised the Company's Board with respect to certain legal matters and reviewed the principal aspects of the Merger Agreement, including protective devices such as break-up fees, an option to purchase Shares and stockholder lock-ups. Representatives of Janney delivered its oral opinion to the Company's Board as to the fairness of the $11.50 cash consideration to be paid to the holders of the outstanding Shares. The Company's Board then analyzed and discussed the offer, the Merger Agreement and the transactions contemplated thereby in light of the Company's historical performance, projected 15 financial results, industry trends, potential competitors, stock price history and data, other strategic alternatives and various other matters that it considered relevant. Thereafter, the Company's Board unanimously resolved to recommend acceptance of the offer and approval and adoption of the Merger Agreement by the Company's stockholders. On October 6, 1998, the Parent's Board of Directors met again with representatives of Ewing Monroe to consider the proposed transaction. Based upon the Parent's due diligence investigation, as well as current competitive conditions in the industry and the decline in the Company's stock price, all of which were reviewed and addressed by Mr. Ewing and Ms. Bacon, the Parent's Board of Directors determined not to proceed with consideration of a final written agreement at that time, but did authorize Mr. Smith and other representatives of the Parent to continue due diligence investigations, as well as discussions and negotiations with representatives of the Company, and determined to meet and consider the matter further after additional due diligence and consideration of the financial aspects of the transaction. During the following three weeks, discussions continued between the parties and the Parent proceeded with its continuing due diligence investigation. The Parent's Board of Directors met again on October 20, 1998, and considered the status of the ongoing due diligence review and the differential between the trading price of the Company's stock and $11.50. The Parent's Board determined to reconvene to make a final decision on whether or not to proceed after management had further discussions with the Company's representatives and concluded other outstanding issues to management's satisfaction. On October 26, 1998, Mr. Duke and Mr. Pickens met with Mr. Smith, Mr. Ewing and Ms. Bacon. During that meeting, Mr. Smith reviewed the results of certain of the Parent's due diligence investigation, industry trends and increased competition, and proposed a revised offer price of $10.00 per share. After discussion, although no agreement was reached regarding the possible terms and conditions of a revised transaction, the parties narrowed their discussion of price to a range of $10.50 to $11.00 per Share. Following the meeting, Mr. Duke reported the results of the meeting to the other members of the Company's Board, and a meeting of the Company's Board was scheduled for November 2, 1998. On November 2, 1998, the Company's Board met to review the proposed transaction in light of all relevant data, including, in particular, industry trends, potential new competition, the operations of the Huntington facility, including the progress of the Company's modernization program, historical and projected results, the Company's stock price history and performance, together with other stock market data and trends, other strategic alternatives available to the Company and the due diligence performed by the Parent. The Company's Board then discussed and analyzed the data, and concluded that a sale of the Company to the Parent at a price of $10.75 per share would achieve for stockholders a value that they would not likely be able to realize in the foreseeable future and, accordingly, would be in the best interests of stockholders. Janney delivered its oral opinion to the Company's Board as to the fairness of a $10.75 price per Share to the stockholders of the Company from a financial point of view. The Company's Board then unanimously resolved to recommend acceptance of an offer of $10.75 per share, should the Parent make such an offer, and directed Mr. Pickens to approach Mr. Ewing regarding the Parent's willingness to enter into such a revised transaction who, in turn, talked to Mr. Smith. Later that day, Mr. Smith indicated that he was prepared to recommend an offer price of $10.75 per share to the Parent's Board of Directors. On November 9, 1998, the Board of Directors of the Parent met and considered the offer price of $10.75, and the report of management on further investigations and negotiations with the Company. Ewing Monroe delivered its fairness opinion to the Parent's Board of Directors that stated that the Offer Price was fair to the Parent from a financial point of view. The Parent's Board of Directors reviewed the fairness opinion and financing commitment letters. Following further discussion, the Parent's Board of Directors unanimously approved the proposed transaction and directed the officers to conclude the negotiations concerning various relevant documents and, upon finalizing such documents, to execute the Merger Agreement. On November 10, 1998, after finalization of the various open issues, including completion of the Commitment Letter, the Merger Agreement, the Stock Option Agreement, the Amendment to the Rights Agreement, the Stock Tender 16 Agreements and related agreements were executed and delivered, and the transaction was announced publicly after the closing of trading on the Nasdaq National Market on November 10, 1998. 11. THE MERGER AGREEMENT AND OTHER AGREEMENTS; THE RIGHTS; EMPLOYEE ARRANGEMENTS. The following summaries or descriptions of the Merger Agreement, the Stock Option Agreement, the Stock Tender and Voting Agreements, the Rights, certain employment arrangements and other agreements are each qualified in its entirety by reference to such agreement or arrangement as filed with the Commission as an exhibit to the Tender Offer Statement. THE OFFER. The Merger Agreement provides, among other things, for the commencement of the Offer as soon as reasonably practicable, and in any event within five business days from the date of public announcement of the execution thereof. The obligation of the Purchaser to accept for payment Shares tendered pursuant to the Offer is subject to (i) the Minimum Condition, and (ii) the satisfaction or waiver of the other Offer Conditions. Under the Merger Agreement, the Purchaser expressly reserves the right, in its sole discretion, to waive any of the Offer Conditions (other than the Minimum Condition) and make any other changes in the terms or conditions of the Offer. Notwithstanding the foregoing, under the terms of the Merger Agreement, without the written consent of the Company, the Purchaser cannot (a) decrease the price per Share to be paid in the Offer, change the form of consideration payable in the Offer (other than by adding consideration) or decrease the number of Shares sought in the Offer, (b) change or amend the Offer Conditions (other than to waive any Offer Condition, except that the Minimum Condition may not be waived without the consent of the Company), (c) impose additional conditions to the Offer or (d) amend any other term of the Offer in any manner adverse to the holders of Shares (other than insignificant changes or amendments). The Purchaser has no obligation to pay interest on the purchase price of tendered Shares, including in the event the Purchaser exercises its right to extend the period of time during which the Offer is open. The rights reserved by the Purchaser in this paragraph are in addition to the Purchaser's rights to terminate the Offer pursuant to Section 15. The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, including but not limited to the Offer Conditions, Parent will accept for payment and pay for Shares as soon as it is permitted to do so under applicable law. If, on the Expiration Date, the Offer Conditions have not been satisfied or waived, the Purchaser will have the right, in its sole discretion, to extend the Offer for one or more periods not to exceed an aggregate of thirty business days, and, if all of the Offer Conditions have been satisfied or waived and less than 90% of the outstanding Shares have been tendered in the Offer and not withdrawn, then the Purchaser will have the additional right, in its sole discretion, so long as the Purchaser and the Parent each waive in writing the satisfaction of each of the Offer Conditions, to extend the Offer for one or more periods not to exceed an aggregate of twenty business days. Notwithstanding the foregoing, however, the Purchaser may not extend the Expiration Date beyond the Outside Date, without the consent of the Company. THE MERGER. The Merger Agreement provides, that upon the terms and subject to the conditions thereof (and including those described in Section 15) and in accordance with the DGCL and the Virginia Stock Corporation Act, at the Effective Time of the Merger, the Purchaser will be merged with and into the Company. As a result of the Merger, the separate corporate existence of the Purchaser will cease, and the Company will continue as the Surviving Corporation. At the Parent's election, any direct or indirect subsidiary of the Parent other than the Purchaser may be merged with and into the Company instead of the Purchaser. Pursuant to the Merger Agreement, each Share issued and outstanding immediately prior to the Effective Time (unless otherwise provided for) will be canceled, extinguished and converted into the right to receive the Merger Consideration, which equals $10.75 in cash, or any higher price that may be paid pursuant to the Offer, payable to the holder thereof, without interest, upon surrender of the certificate formerly representing such Share in the manner described in the Merger Agreement, less any required withholding taxes. The Merger Agreement provides that, immediately prior to the Effective Time, each outstanding Employee Option, whether or not then exercisable, will be canceled by the Company, and the holder thereof will be entitled 17 to receive at the Effective Time or as soon as practicable thereafter from the Company in consideration for such cancellation an amount in cash equal to the product of (a) the number of Shares previously subject to such Employee Option and (b) the excess, if any, of the Merger Consideration over the exercise price per Share of the Employee Option, less any withholding taxes. The Merger Agreement provides that, unless otherwise stipulated, Shares that are issued and outstanding immediately prior to the Effective Time and that are held by stockholders who have not voted in favor of or consented to the Merger and have delivered a written demand for appraisal of such Shares in the time and manner provided in Section 262 of the DGCL and have not failed to perfect or have not effectively withdrawn or lost their rights to appraisal and payment under the DGCL will not be converted into the right to receive the Merger Consideration, but instead will be entitled to receive the consideration determined pursuant to Section 262 of the DGCL; provided, however, that, if such holder fails to perfect or has effectively withdrawn or lost the holder's right to appraisal and payment under the DGCL, such holder's Shares will thereupon be deemed to have been converted, at the Effective Time, into the right to receive the Merger Consideration as described above without any interest thereon. The Merger Agreement also provides that, at the Effective Time and without any further action on the part of the Company and the Purchaser, the Company's Certificate of Incorporation, as amended and in effect immediately prior to the Effective Time, will be the certificate of incorporation of the Surviving Corporation. At the Effective Time and without any further action on the part of the Company and the Purchaser, the Bylaws of the Company will become the Bylaws of the Surviving Corporation. The Merger Agreement provides that the directors of the Purchaser immediately prior to the Effective Time will be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation, and the officers of the Surviving Corporation will be Timothy R. Duke, President; Mark G. Meikle, Vice President and Treasurer; W. Bruce Groff, Jr., Vice President of Human Resources and Secretary; and Donald G. Smith, Chairman of the Board; in each case until their respective successors are duly elected or appointed (as the case may be) and qualified. STOCKHOLDERS MEETING. The Merger Agreement provides that, if required, the Company, acting through its Board of Directors, must, in accordance with and subject to applicable law and its Certificate of Incorporation, as amended, and its Bylaws, (i) duly call, give notice of, convene and hold a meeting of its stockholders as soon as practicable following consummation of the Offer for the purpose of adopting the Merger Agreement and the transactions contemplated thereby (the "STOCKHOLDERS MEETING") and (ii) except if the Board of Directors by a majority vote determines in good faith, based upon the advice of outside legal counsel to the Company that to do so would reasonably likely constitute a breach of fiduciary duty under applicable law, (A) include in the proxy statement relating to the Stockholders' Meeting (the "PROXY STATEMENT"), the unanimous recommendation of the Board of Directors that the stockholders of the Company vote in favor of the adoption of the Merger Agreement and the transactions contemplated thereby and the written opinion of Janney that the consideration to be received by the stockholders of the Company pursuant to the Offer and the Merger is fair to such stockholders from a financial point of view and (B) use its reasonable best efforts to obtain the necessary adoption of the Merger Agreement. At the Stockholders Meeting, the Parent and the Purchaser will cause all Shares then owned by them and their subsidiaries to be voted in favor of adoption of the Merger Agreement and the transactions contemplated thereby. The Merger Agreement provides that, notwithstanding the foregoing, in the event that the Purchaser acquires at least 90% of the outstanding Shares, the Company agrees, at the request of the Purchaser, subject to the respective provisions of the Merger Agreement, to take all necessary and appropriate action to cause the Merger to become effective as soon as reasonably practicable after such acquisition, without a meeting of the Company's stockholders, in accordance with Section 253 of the DGCL (a "SHORT-FORM MERGER"). PROXY STATEMENT. The Merger Agreement provides that, if required by applicable law, as soon as practicable following the Parent's request, the Company will prepare and file a preliminary proxy statement with respect to the Stockholders' Meeting with the Commission under the Exchange Act and the rules and regulations 18 promulgated thereunder, and will use its reasonable best efforts to have such proxy statement approved by the Commission. The parties will cooperate with one another in this endeavor. DESIGNATION OF DIRECTORS. Promptly upon the purchase by the Purchaser of Shares pursuant to the Offer, and from time to time thereafter, the Purchaser may designate up to such number of directors, rounded up to the next whole number, on the Board of Directors of the Company as will give the Purchaser representation on the Board of Directors equal to the product of the total number of directors on such Board (giving effect to the directors elected pursuant to this sentence and including any vacancies or unfilled newly- created directorships) multiplied by the percentage that the aggregate number of Shares beneficially owned by the Purchaser or any affiliate of the Purchaser bears to the total number of Shares then outstanding, and the Company will amend its Bylaws to provide for each of the matters set forth in the Merger Agreement with respect to the designation of directors and will, at such time, promptly take all action necessary to cause the Purchaser's designees to be so elected, including either increasing the size of the Board of Directors or securing the resignations of incumbent directors or both. At such times, the Company will use its reasonable best efforts to cause persons designated by the Purchaser to constitute the same percentage as is on the board of (i) each committee of the Board of Directors, (ii) each board of directors of each subsidiary of the Company and (iii) each committee of each such board, in each case only to the extent permitted by law. Until the Purchaser acquires a majority of the outstanding Shares on a fully-diluted basis, the Company will use its reasonable best efforts to ensure that all the members of the Board of Directors of the Company and such boards and committees as of the date of the Merger Agreement who are not employees of the Company will remain members of the Board of Directors and such boards and committees. The Company will promptly take all actions required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its obligations with respect to the designation of directors and will include in the Schedule 14D-9 or a separate Rule 14f-1 information statement provided to stockholders such information with respect to the Company and its officers and directors as is required under Section 14(f) and Rule 14f-1 to fulfill its obligations with respect to the designation of directors. The Parent or the Purchaser will supply to the Company and be solely responsible for the accuracy and completeness of any information with respect to either of them and their nominees, officers, directors and affiliates required by Section 14(f) and Rule 14f-1. In addition to any vote of the Board of Directors required by law, the Certificate of Incorporation, as amended, or the Bylaws of the Company, or by the Merger Agreement, following the election or appointment of the Purchaser's designees pursuant to the terms of the Merger Agreement and prior to the Effective Time, the concurrence of a majority of the directors of the Company then in office who are neither designated by the Purchaser nor are employees of the Company (the "DISINTERESTED DIRECTORS") will be required to authorize any amendment, or waiver of any term or condition, of the Merger Agreement or the Certificate of Incorporation, as amended, or Bylaws of the Company, any termination of the Merger Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of the Purchaser or waiver or assertion of any of the Company's rights hereunder. The number of Disinterested Directors will be not less than two; provided, however, that, if the number of Disinterested Directors is reduced below two for any reason, the remaining Disinterested Director will be entitled to designate persons to fill such vacancies who will be deemed to be Disinterested Directors for purposes of the Merger Agreement, or if no Disinterested Directors then remain, the other directors who were directors prior to the date hereof will designate two persons to fill such vacancies who cannot be officers, stockholders or affiliates of the Company, the Parent or the Purchaser, and such persons will be deemed to be Disinterested Directors for purposes of the Merger Agreement. ACCESS TO INFORMATION; CONFIDENTIALITY. Pursuant to the Merger Agreement, from the date thereof to the Effective Time, upon reasonable prior notice, the Company will, and will cause its subsidiaries, officers, directors, employees, auditors and other agents to, afford the officers and employees and will use its reasonable best efforts to cause its auditors and other agents of the Parent, and financing sources who will agree to be bound by such provisions of the Merger Agreement as though a party thereto, complete access, consistent with applicable law, at all reasonable times to its officers, employees, agents, properties, offices, plants and other facilities and to all books and records, and will furnish the Parent and such financing sources with all financial, 19 operating and other data and information as the Parent, through its officers, employees or agents, or such financing sources may from time to time reasonably request. The Merger Agreement further provides that all information obtained by the Parent and the Purchaser pursuant to the above paragraph will be kept confidential in accordance with that certain letter agreement Confidentiality Agreement, dated July 20, 1998 (the "PARENT CONFIDENTIALITY AGREEMENT"), between Parent and Janney, as agent for the Company, which is filed with the Commission as an exhibit to the Tender Offer Statement. NO SOLICITATION OF TRANSACTIONS. The Company, its affiliates and their respective officers, directors, employees, representatives and agents were obligated to immediately cease any existing discussions or negotiations, if any, with any parties conducted prior to the date of the Merger Agreement with respect to any acquisition or exchange of all or any material portion of the assets of, or any equity interest in, the Company or any of its subsidiaries or any business combination with or involving the Company or any of its subsidiaries. At any time prior to consummation of the Offer, the Company may, directly or indirectly, furnish information and access, in each case only in response to a request for such information or access to any person made after the date hereof that was not solicited, initiated or knowingly encouraged by the Company or any of its affiliates or any of its or their respective officers, directors, employees, representatives or agents after the date hereof, pursuant to appropriate confidentiality agreements containing terms and conditions (including standstill provisions) that are no less favorable than the terms and conditions contained in the Parent Confidentiality Agreement. Additionally, the Company, its affiliates, officers, directors employees or representatives, may participate in discussions and negotiate with such person concerning any merger, sale of assets, sale of shares of capital stock or similar transaction (including an exchange of stock or assets) involving the Company or any subsidiary or division of the Company, only if such person has submitted a proposal to the Board of Directors of the Company relating to any such transaction and the Board by a majority vote determines in good faith, based upon the advice of outside counsel to the Company, that failing to take such action is reasonably likely to constitute a breach of the Board's fiduciary duties under applicable law. The Board of Directors must provide a copy of any such written proposal to the Parent immediately after receipt thereof (except such written proposal must be provided to the Parent by 10:30 a.m. on the next business day in cases where such written proposal is not received during normal business hours) and must notify the Parent immediately if any proposal (oral or written) is made (except the Parent must be notified by 10:30 a.m. on the next business day in cases where such proposal is not received during normal business hours) and will in such notice, indicate in reasonable detail the identity of the offeror and the terms and conditions of any proposal and will keep the Parent promptly advised of all developments which could reasonably be expected to culminate in the Board of Directors withdrawing, modifying or amending its recommendation of the Offer, the Merger and the other transactions contemplated by the Merger Agreement. Except as set forth herein, neither the Company or any of its affiliates, nor any of its or their respective officers, directors, employees, representatives or agents, may, directly or indirectly, solicit, initiate or knowingly encourage discussions or negotiations with, any corporation, partnership, person or other entity or group (other than the Parent and the Purchaser, any affiliate or associate of the Parent and the Purchaser or any designees of the Parent or the Purchaser) concerning any merger, sale of any material portion or assets, sale of any shares of capital stock or similar transactions (including an exchange of stock or assets) involving the Company or any subsidiary or division of the Company. None of the foregoing, however, will prevent the Board of Directors from taking, and disclosing to the Company's stockholders, a position contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to any tender offer; furthermore, the Board of Directors of the Company may not recommend that the stockholders of the Company tender their Shares in connection with any such tender offer unless the Board by majority vote determines in good faith, based upon the advice of outside counsel to the Company, that failing to take such action is reasonably likely to constitute a breach of the Board's fiduciary duties under applicable law. The Company agreed not to release any third party from, or waive any provisions of, any confidentiality or standstill agreement to which the Company is a party, unless the Board of Directors determines, based upon the advice of outside counsel, that the failure to make such release or 20 waiver is reasonably likely to constitute a breach of the Board of Director's fiduciary duties under applicable law. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that the Certificate of Incorporation and Bylaws of the Surviving Corporation must contain provisions no less favorable with respect to indemnification than are set forth in the Certificate of Incorporation and Bylaws of the Company and these provisions may not to be materially amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would adversely affect the rights thereunder of individuals who, at or prior to the Effective Time, were directors, officers or employees of the Company. The Merger Agreement also provides that for six years after the Effective Time, the Surviving Corporation will indemnify and hold harmless each present and former director and officer of the Company (the "INDEMNIFIED PARTIES"), against any costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages or liabilities (collectively, the "COSTS") (but only to the extent such Costs are not otherwise covered by insurance and paid) incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative (a "CLAIM" or, collectively, "CLAIMS") arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent permitted under applicable law (and the Surviving Corporation will also advance expenses as incurred to the fullest extent permitted under applicable law provided the person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification). Any of such Indemnified Parties must promptly notify the Parent of any Claim. For at least six years after the Effective Time, the Parent will or will cause the Surviving Corporation to maintain the Company's existing directors' and officers' liability insurance ("D & O INSURANCE") so long as the annual premium for such insurance is not in excess of twice the premium on the date of the Merger Agreement (the "MAXIMUM PREMIUM"); provided, however, that if the existing D & O Insurance expires, or is terminated or canceled by the insurance carrier during such period, the Surviving Corporation will use its reasonable best efforts to obtain as much D & O Insurance and, to the extent possible, covering substantially the same matters that were covered under the D & O Insurance as in effect in the date thereof, as can be obtained for the remainder of such period for a premium not in excess (on an annualized basis) of the Maximum Premium. The Merger Agreement requires that any successor corporation or assignee of the Surviving Corporation or the Parent assume these insurance and indemnification obligations. FURTHER ACTION; REASONABLE BEST EFFORTS. The Merger Agreement provides that, upon the terms and subject to the conditions thereof, each of the parties thereto will use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by the Merger Agreement as soon as practicable, including but not limited to (i) cooperation in the preparation and filing of the Offer Documents (as defined therein), the Schedule 14D-9, the Proxy Statement, any required filings under the HSR Act and any amendments to any thereof, (ii) cooperation with respect to consummating the financing of the Offer and the Merger and (iii) using its reasonable best efforts to promptly make all required regulatory filings and applications including, without limitation, responding promptly to requests for further information and to obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with the Company and its subsidiaries as are necessary for the consummation of the transactions contemplated by the Merger Agreement and to fulfill the Offer Conditions. CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the Merger Agreement, the Company has agreed (and has agreed to cause its subsidiaries) to operate their respective businesses in the ordinary course and in a manner consistent with past practice. The Company and its subsidiaries will also use reasonable best efforts to seek to preserve intact their current business organizations, keep available the service of its current officers, employees and consultants, and preserve its relationships with customers, suppliers and other persons with which the Company has significant business relations. 21 Pending consummation of the Merger, the Company and its subsidiaries have also agreed not to take any of the following actions without the Parent's consent: (i) change the Company's governing documents; (ii) issue, deliver, sell, pledge, dispose of or encumber, or authorize or commit to the issuance, sale, pledge, disposition or encumbrance of any shares of capital stock of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of capital stock or any other ownership interest of the Company or any of its subsidiaries or any material assets of the Company or any of its subsidiaries, except for sales of inventory in the ordinary course of business and in a manner consistent with past practice; (iii) declare or pay a dividend or other distribution, either in cash, stock property or otherwise; (iv) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of the Company's capital stock; (v)(A) acquire another entity, (B) incur additional debt or assume, guarantee or endorse the obligations of another person, (C) enter into any agreement other than in the ordinary course of business consistent with past practice, or (D) authorize capital expenditures that are not in the Company's budget on the date of the Merger Agreement and are above specified dollar thresholds; (vi) increase the compensation of, or grant any severance to, directors, officers and employees (except to the extent required under existing plans); (vii) change accounting practices; (viii) make any material tax election or settle or compromise any material U.S. federal, state, local or foreign tax liability; (ix) adopt a plan of complete or partial dissolution; (x) pay or discharge any claims, liabilities or obligations; or (xi) settle any pending litigation. EMPLOYEE BENEFITS MATTERS. The Merger Agreement provides that, on and after the Effective Time, the Parent will cause the Surviving Corporation and its subsidiaries to promptly pay or provide when due all compensation and benefits earned through or prior to the Effective Time as provided pursuant to the terms of any compensation arrangements, employment agreements and employee or director benefit plans, programs and policies in existence as of the date thereof for all employees (and former employees) and directors (and former directors) of the Company and its subsidiaries (including all compensation and benefits earned through the Effective Time pursuant to the Company Plans disclosed in the Company Disclosure Letter, which is a part of and incorporated by reference to, the Merger Agreement (the "COMPANY DISCLOSURE LETTER")). The Parent and the Company have agreed that the Surviving Corporation and its subsidiaries will pay promptly or provide when due all compensation and benefits required to be paid pursuant to the terms of any individual agreement with any employee, former employee, director or former director in effect as of the date thereof and disclosed in the Company Disclosure Letter. The Merger Agreement further provides that if employees of the Surviving Corporation and its subsidiaries become eligible to participate in a medical, dental or health plan of the Parent or its subsidiaries, the Parent shall cause such plan to (i) waive any preexisting condition limitations for conditions covered under the applicable medical, health or dental plans of the Company and its subsidiaries and (ii) honor any deductible and out of pocket expenses incurred by the employees and their beneficiaries under such plans during the portion of the calendar year prior to such participation. The Merger Agreement further provides that the Surviving Corporation will perform all of the Company's obligations under and pursuant to the Company's collective bargaining agreement with union employees. The Surviving Corporation will also pay management bonuses of up to an aggregate of $600,000 for the fiscal year 1998, in accordance with past practices, to the extent that such bonuses have been accrued in the Company's unaudited interim financial statements for the nine month period ended September 30, 1998. Under the terms of the Merger Agreement, the Surviving Corporation is not required to continue the employment of any person or, with respect to any union obligations, to take any action or refrain from taking any action that the Company and its subsidiaries, prior to the Effective Time, could have taken or refrained from taking. DISPOSITION OF LITIGATION. The Merger Agreement provides that the Company agrees that it will not settle any litigation currently pending, or commenced after the date thereof, against the Company or any of its directors by any stockholder of the Company relating to the Offer or the Merger Agreement, without the prior written consent of the Parent (which will not be unreasonably withheld). The Merger Agreement further provides that 22 the Company will not voluntarily cooperate with any third party which has sought or may hereafter seek to restrain or prohibit or otherwise oppose the Offer or the Merger and cooperate with the Parent and the Purchaser to resist any such effort to restrain or prohibit or otherwise oppose the Offer or the Merger. ADVISE OF CHANGES. The Merger Agreement provides that the Company must promptly advise the Parent, and the Parent must promptly advise the Company, of the occurrence or non-occurrence of (i) any event the occurrence or non- occurrence of which would be likely to cause any representation or warranty contained in the Merger Agreement to be untrue or inaccurate in any material respect and (ii) any failure of the Company, the Parent or the Purchaser, as the case may be, to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under the Merger Agreement. NOMINATION OF TIMOTHY R. DUKE. Upon acceptance and payment for the Shares in the Offer, the Parent, acting through its Board of Directors, will cause its Board of Directors to be expanded and shall appoint Mr. Duke to fill the vacancy created by such expansion. Thereafter, the Parent shall cause Mr. Duke to be nominated for such position at the next annual meeting of stockholders of the Parent. OPERATION OF THE PARENT'S BUSINESS. Under the Merger Agreement, the Parent has agreed that until the Effective Time, unless the Company otherwise agrees in writing, it will operate its business, and cause each of its subsidiaries and affiliates, including the Purchaser, to operate their respective businesses, in a manner so as not to materially impact its ability to borrow the monies contemplated to be loaned to it or them. By way of example, and not of limitation, the Parent has agreed therein that neither it, nor any of its subsidiaries or affiliates (including the Purchaser) will (i) enter into any financing transaction (other than the sale of common equity for cash consideration resulting in gross proceeds per share equal to the fair market value of such common equity) or any merger, consolidation, or purchase or sale of a substantial portion of the equity or assets, with or of any other person or entity, or (ii) enter into any recapitalization, reorganization, liquidation or dissolution, to the extent that any such action under clauses (i) or (ii) above would materially and adversely impact the Parent's ability to borrow funds pursuant to the Commitment Letter. From and after the date hereof and continuing until completion of the Merger, or the earlier termination of the Merger Agreement in accordance with its terms, the Parent and the Purchaser have agreed to use the funds currently available under the Revolving Credit Facility, solely to fund the purchase of Shares pursuant to the Offer and the payment of the Merger Consideration. In the Merger Agreement, the Parent and the Purchaser jointly and severally represented and warranted to the Company that, as of November 10, 1998, (x) at least $30,000,000 was available under the Revolving Credit Facility and (y) the Parent had unrestricted cash on its balance sheet of at least $20,000,000, which $20,000,000 was agreed to only be used to fund the purchase of Shares pursuant to the Offer and the payment of the Merger Consideration. REPRESENTATION AND WARRANTIES. The Merger Agreement contains various customary representations and warranties of the parties thereto including representations and warranties by the Company concerning the Company's capitalization, required filings and consents, the Board of Directors' approval of the Merger Agreement and the transactions contemplated thereby (including approvals so as to render inapplicable thereto the limitation on business combinations contained in Section 203 of the DGCL), Commission filings and financial statements, absence of certain changes or events, compliance with law, absence of litigation, employee benefit plans, environmental matters, tax matters, real estate matters, contracts and the engagement of brokers in the Offer, intellectual property, contracts, potential conflicts of interest and Year 2000 compliance. Some of the representations are qualified to cover only those matters that would have a Material Adverse Effect on the Company or its subsidiaries taken as a whole. "MATERIAL ADVERSE EFFECT" means any change or effect that would be materially adverse to the results of operations, financial condition or business of the Company and its subsidiaries taken as a whole. CONDITIONS OF THE MERGER. Under the Merger Agreement, the respective obligations of the Parent, the Purchaser and the Company to effect the Merger are subject to the satisfaction at or prior to the Effective Time of the following conditions: (i) if required by the DGCL, the Merger Agreement has been approved by the affirmative vote of the stockholders of the Company by the requisite vote in accordance with the Company's 23 Certificate of Incorporation, as amended, and the DGCL (which requisite vote the Company has represented to be solely the affirmative vote of a majority of the outstanding Shares); (ii) no statute, rule, regulation, executive order, decree, ruling, injunction or other order (whether temporary, preliminary or permanent) has been enacted, entered, promulgated or enforced by any United States, foreign, federal or state court or governmental authority that prohibits, restrains, enjoins or restricts the consummation of the Merger; provided, however, that each of the parties has used reasonable best efforts to prevent entry of any such restraints and to appeal promptly any such restraints that may be entered; (iii) the Purchaser has purchased Shares pursuant to the Offer; and (iv) any waiting period applicable to the Merger under the HSR Act has been terminated or expired. TERMINATION EVENTS. The Merger Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time (notwithstanding approval thereof by the stockholders of the Company): (a) by mutual written consent of the Parent, the Purchaser and the Company; (b) by the Purchaser, the Parent or the Company if, by the Outside Date, any of the Offer Conditions has not been satisfied or (except with respect to the Minimum Condition) has not been waived by the Purchaser; (c) by the Company prior to the purchase of Shares pursuant to the Offer, if (i) there has been a material breach of any representation, warranty, covenant or agreement on the part of the Parent or the Purchaser contained in the Merger Agreement that materially adversely affects the Parent's or the Purchaser's ability to consummate (or materially delays commencement or consummation of) the Offer and that has not been cured prior to the earlier of (A) 10 business days following notice of such breach by the Company to the Parent and the Purchaser and (B) two business days prior to the Expiration Date or (ii) the Purchaser has (x) terminated the Offer or (y) failed to pay for Shares pursuant to the Offer; (d) by the Company if, prior to the purchase of Shares pursuant to the Offer, any person has made a bona fide offer to acquire the Company (i) that the Board of Directors of the Company determines in its good faith judgment is more favorable to the Company's stockholders than the Offer and the Merger and (ii) as a result of which the Board of Directors determines in good faith, based upon the advice of outside counsel, that the failure to terminate the Merger Agreement is reasonably likely to constitute a breach of the Board's fiduciary obligations under applicable law, provided that termination under this paragraph would not be effective until the Company made payment of the Termination Fee (as defined below); (e) by the Parent prior to the purchase of Shares pursuant to the Offer, if (1) there has been a breach of any representation, warranty, covenant or agreement on the part of the Company contained in the Merger Agreement that is likely to have a Material Adverse Effect and that has not been cured prior to the earlier of (A) 10 business days following notice of such breach and (B) two business days prior to the date on which the Offer expires; (2) the Board of Directors of the Company has (x) modified (including by amendment of the Schedule 14D-9) in a manner adverse to the Purchaser or withdrawn its approval or recommendation of the Offer, the Merger Agreement or the Merger, (y) approved or recommended another offer or transaction pursuant to, or otherwise knowingly and intentionally breached in a material manner the provisions of, Section 6.5 of the Merger Agreement (which relates to the solicitation of other offers), or (z) amended the Rights Agreement to facilitate an offer by any other person to acquire the Company, or has resolved to effect any of the foregoing; (3) there has been, solely as a result of the operation of the Rights Agreement, a material breach of any representation, warranty, covenant or agreement contained in Section 3.3 or 3.4 of the Merger Agreement, which material breach has not been cured by the earlier of (X) the Outside Date or (Y) 20 days after receipt by the Company of notice of such breach from the Parent or the Purchaser; or (4) there has been a material breach of any representation, warranty, covenant or agreement contained in Section 3.5(c) or 5.2 of the Merger Agreement (each of which sections relate to the Rights Agreement); or (f) by the Parent or the Company, upon the entry or issuance of any order, preliminary or permanent injunction, decree, judgment or ruling in any action or proceeding before any court or governmental, administrative or regulatory authority or agency, or any statute, rule or regulation enacted, entered, enforced, promulgated, amended or issued that is applicable to the Parent, the Purchaser, the Company or any subsidiary or affiliate of the Purchaser or the Company or the Offer or the Merger, by any legislative body, 24 court, government or governmental, administrative or regulatory authority or agency that is likely to have the effect of (i) making illegal or otherwise directly or indirectly restraining or prohibiting the making of the Offer in accordance with the terms of the Merger Agreement, the acceptance for payment of, or payment for, some of or all the Shares by the Purchaser or any of its affiliates or the consummation of the Merger; (ii) prohibiting the ownership or operation of the Company and its subsidiaries by the Parent or any of the Parent's subsidiaries; (iii) imposing material limitations on the ability of the Parent, the Purchaser or any of the Parent's affiliates effectively to acquire or hold or to exercise in all material respects full rights of ownership of the Shares, including without limitation the right to vote any Shares acquired or owned by the Parent or the Purchaser or any of its affiliates on all matters properly presented to the stockholders of the Company, including, without limitation, the adoption of the Merger Agreement or the right to vote any shares of capital stock of any subsidiary directly or indirectly owned by the Company; or (iv) requiring divestiture by the Parent or the Purchaser or any of their affiliates of any Shares. EFFECT OF TERMINATION. In the event of the termination of the Merger Agreement pursuant to the foregoing, the Merger Agreement will then become void and there will be no liability on the part of any party thereto except as to certain provisions thereof; provided, however, that the payment of the Termination Fee pursuant to certain provisions thereof would be considered with respect to the calculation of any damages resulting from any such willful breach by the Company. This, however, will not relieve any party from liability for fraud or breach of any covenant, agreement or any other term in the Merger Agreement. If the Merger Agreement is terminated by the Company and a Termination Fee is paid pursuant to Sections 8.3(a)(i)(B) or 8.3(a)(ii) of the Merger Agreement, the Termination Fee will be deemed to be liquidated damages rather than a penalty, and will constitute the total damages and sole remedy of the Parent and the Purchaser upon any such termination. TERMINATION FEE AND EXPENSES. If (i) the Company terminates the Merger Agreement (A) pursuant to paragraph (d) under the heading "Termination" above or (B) in a manner or for a reason not expressly permitted thereby or (ii) the Parent terminates the Merger Agreement pursuant to paragraphs (e)(2), (e)(3) or (e)(4) under the heading "Termination" above, then the Company will pay to the Parent, within three business days following termination a fee, in cash, of $5,000,000 (the "TERMINATION FEE"). If, from and after July 20, 1998, and prior to the purchase of Shares pursuant to the Offer, (i) any other person has made a bona-fide offer to acquire at least 50% of the Shares or substantially all of the assets of the Company, or otherwise to acquire the Company (the "THIRD-PARTY OFFER"), at a price per Share (or the equivalent price per Share, in the case of an asset purchase) (x) that is higher on its face than the price per Share to be paid in the Offer or (y) that the Company determines, based upon the advice of Janney, is higher than the price per Share to be paid in the Offer, (ii) the Offer remains outstanding until the Outside Date but is not consummated solely as a result of the failure of the Minimum Condition and (iii) the Third-Party Offer is consummated within 180 days of the termination of the Merger Agreement, then the Company must pay to the Parent, within three business days following the consummation of the Third Party Offer, the Termination Fee. The Company in no event will be obligated to pay more than one such fee with respect to all such agreements and occurrences. Each party will bear its own expenses in connection with the Merger Agreement and the transactions contemplated thereby. STOCK OPTION AGREEMENT. Pursuant to the Stock Option Agreement, the Purchaser has the irrevocable right (i.e., the Stock Option), under certain circumstances, to acquire the Option Shares at a price of $10.375 per Share (the "EXERCISE PRICE"). The Exercise Price is payable in cash. The Stock Option Agreement could have the effect of making an acquisition of the Company by a third party more costly because of the need to acquire in any such transaction the Option Shares issued under the Stock Option Agreement. The Stock Option may be exercised by the Purchaser, in whole or in part, at any time or from time to time, for 180 days following the termination of the Merger Agreement, upon the occurrence of a Triggering Event. Under the Stock Option Agreement, the term "TRIGGERING EVENT" means any occurrence of (A) the termination of the Merger Agreement under circumstances causing a Termination Fee; (B)(i) a Third-Party Offer with a price per Share (or the equivalent price per Share, in the case of an asset purchase) (x) that is higher on its face than the price per Share to be paid in the Offer or (y) that the Company determines, based upon the advice of Janney, 25 is higher than the price per Share to be paid in the Offer and (ii) the Offer remaining outstanding until the Outside Date but not being consummated solely as a result of the failure of the Minimum Condition and (iii) the Third-Party Offer being consummated within 180 days of the termination of the Merger Agreement; or (C) the purchase by the Purchaser of Shares pursuant to the Offer following satisfaction of the Minimum Condition. As a condition to the exercise of the Stock Option, the Company must promptly notify the Purchaser and the Parent in writing of the occurrence of any Triggering Event. The Company's obligation to issue Option Shares upon exercise of the Stock Option is subject to the conditions that (a) all waiting periods under the HSR Act required for the purchase of the Option Shares upon such exercise have expired or been waived and (b) there has not been in effect any preliminary injunction or other order issued prohibiting the exercise of the Stock Option pursuant to the Stock Option Agreement. If, at any time during the period after the occurrence of a Triggering Event and before termination of the Stock Option, any third party (a) acquires beneficial ownership of more than 50% of the then outstanding Shares or (b) enters into an agreement with the Company to acquire the Company, by merger, consolidation or the purchase of all or substantially all of its assets or other similar business combination, reorganization or recapitalization, then the Purchaser may, in lieu of exercising the Stock Option, surrender the Stock Option to the Company. Upon surrender of the Stock Option to the Company, the Company will pay to the Purchaser upon the Purchaser's written demand, an amount in cash for each of the Option Shares equal to the excess of (a) the highest price per Share paid or to be paid by such third party pursuant to such transaction (or such consideration paid to the Company, in the case of an asset acquisition or similar transaction, divided by the number of Shares outstanding on a fully-diluted basis (after taking into consideration the exercise of all outstanding options, warrants, rights (other than the rights issued pursuant to that Rights Agreement), convertible securities or exchangeable securities issued by the Company), excluding Shares issuable pursuant to the Stock Option Agreement) over (b) the Exercise Price. In the event any additional Shares (other than the Option Shares) are either (i) issued and become outstanding, or (ii) redeemed, repurchased, retired or otherwise cease to be outstanding, the number of Option Shares will be increased or decreased, as appropriate, so that, after such issuance, the Option Shares represent 19.9% of the number of Shares then issued and outstanding (not counting the Option Shares). The Stock Option Agreement further provides that at any time and from time to time after exercise of the Stock Option, if the Shares or any other securities to be acquired upon exercise of the Stock Option are then listed on the Nasdaq National Market (or any other national securities quotation system or national securities exchange), then upon the request of the Purchaser, the Company will promptly file an application to list the Shares or other securities to be acquired upon exercise of the Stock Option on the Nasdaq National Market (or any other national securities quotation system or national securities exchange) and will use commercially reasonable efforts to obtain approval of such listing as promptly as practicable. The Purchaser has agreed to pay all fees and expenses in connection with such listing. STOCK TENDER AND VOTING AGREEMENTS. Each of the Company's directors has contractually agreed in a Stock Tender and Voting Agreement to tender his Shares in the Offer and vote his Shares in favor of the Merger and against any action or agreement that would impede the Merger or the Offer. THE RIGHTS. On March 19, 1997, pursuant to the Rights Agreement, the Board of Directors of the Company declared a distribution of (i) one Right for each outstanding Share to stockholders of record at the close of business on March 28, 1997, and (ii) for each Share issued (including Shares distributed from treasury) by the Company thereafter and prior to the Distribution Date (as defined below). Each Right entitles the registered holder, subject to the terms of the Rights Agreement to purchase from the Company one-half of a share of Company Common Stock at a purchase price of $26.00 per Share, equivalent to $13.00 for each one-half of a Share (the "PURCHASE PRICE"), subject to adjustment. On November 2, 1998, a majority of the Independent Directors (as defined in the Rights Agreement) voted to amend the terms of the Rights to permit the Offer and the Merger and to provide for the termination of the Rights upon acceptance for payment of Shares validly tendered and not withdrawn in the Offer. A copy of the Rights Agreement, as amended, is available free of charge from the Company. 26 Stockholders are required to tender one Right for each Share tendered in order to effect a valid tender of such Share. If the Distribution Date does not occur prior to the Expiration Date, a tender of Shares will automatically constitute a tender of the associated Rights. See Section 1. SEVERANCE ARRANGEMENTS. The Company entered into Change of Control Severance Agreements with Timothy R. Duke and Mark G. Meikle, dated July 9, 1997, and July 7, 1997, respectively, that provide that, upon a "change of control," Mr. Duke or Mr. Meikle will be entitled to receive an amount equal to the greater of (i) 125% of his annual base salary for the year in which such severance of employment occurs and (ii) 125% of his annual base salary for the year preceding the year in which such severance of employment occurs, payable at Mr. Duke's or Mr. Meikle's option in a lump sum or bi-monthly during the 12 months following such severance. The purchase of the Shares in the Offer and consummation of the Merger will be deemed a change of control under these agreements, requiring the payments set forth in the agreements to be paid by the Surviving Corporation. TIMOTHY R. DUKE EMPLOYMENT AGREEMENT. Timothy R. Duke, Chief Executive Officer and President of the Company, and the Company have entered into an Employment Agreement, dated November 10, 1998 (the "EMPLOYMENT AGREEMENT"), which is filed with the Commission as an exhibit to the Tender Offer Statement. The Employment Agreement becomes effective upon the acceptance and payment for the Shares in the Offer and continuing for three years thereafter (except that, if the Effective Time does not occur within 120 days of the Outside Date, the Company or the Parent may declare the Employment Agreement null and void). The Employment Agreement provides that, among other things, Mr. Duke will be employed as the President and Chief Executive Officer of the Company, will be appointed to the Board of Directors of the Parent and thereafter nominated for such position at the next annual meeting of stockholders of the Parent, and will be nominated and elected as a director of the Company for such terms as he will serve as a director of the Parent. Mr. Duke's annual base salary will remain at $225,000, and he will be entitled to any incentive compensation that would be paid pursuant to an incentive formula contained therein or, after September 30, 1999, that may be paid in the sole discretion of the Board of the Company. Mr. Duke has agreed not to compete with the Company during the term of the Employment Agreement. The Employment Agreement terminates upon the death or disability of Mr. Duke or the expiration of the term of such agreement. The Employment Agreement may also be terminated by the Company with Cause (as defined therein), upon which in all cases no further payments (other than accrued salary) will be payable to Mr. Duke, or by Mr. Duke with Good Reason (as defined therein and which includes, among other things, demotion, relocation and change of control (other than a management buy-out)), in which case Mr. Duke will be paid his base salary for the remainder of the term of the Employment Agreement. The Parent has guaranteed the performance of the covenants and agreements in the Employment Agreement made by the Company. 12. PURPOSE OF THE OFFER; THE MERGER; PLANS FOR THE COMPANY. The purpose of the Offer is to acquire control of, and the entire equity interest in, the Company. The Offer is being made pursuant to the Merger Agreement. As promptly as practicable following consummation of the Offer and after satisfaction or waiver of all conditions to the Merger set forth in the Merger Agreement, the Purchaser intends to acquire the remaining equity interest in the Company not acquired in the Offer by consummating the Merger. REQUIREMENT OF VOTE TO APPROVE THE MERGER. The Board of Directors of the Company has approved and adopted the Merger Agreement and the transactions contemplate therein, so as to render inapplicable the limitation on business combination contained in Section 203 of the DGCL. If required by the DGCL, the Board will submit the Merger Agreement for approval at a stockholders' meeting convened for that purpose, where the Merger Agreement would generally need to be approved by the vote of the holders of a majority of the outstanding Shares. The Minimum Condition requires that Shares representing more than 50% of the voting power (determined on a fully-diluted basis) of all securities of the Company entitled to vote generally in the election of directors or in a merger be validly tendered and not properly withdrawn prior to the expiration of the Offer. Therefore, if the Minimum Condition is satisfied, the Purchaser will have the power to approve the Merger Agreement without the affirmative vote of any stockholder. 27 If the Purchaser acquires or controls the voting power of at least 90% of the outstanding Shares, however, the Merger may not require the vote of stockholders, and the Purchaser and the Company may effect a Short-Form Merger. Pursuant to the Merger Agreement, the Company has agreed, if and to the extent permitted by law, at the request of the Purchaser, to take all necessary and appropriate actions to cause the Merger to become effective as soon as reasonably practicable after the purchase of the Shares pursuant to the Offer without a meeting of the Company's stockholders in accordance with the DGCL. THIS OFFER TO PURCHASE DOES NOT CONSTITUTE A SOLICITATION OF A PROXY, CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO THE ANNUAL MEETING OR ANY SPECIAL MEETING OF THE COMPANY'S STOCKHOLDERS OR ANY ACTION IN LIEU THEREOF. ANY SUCH SOLICITATION THAT THE PURCHASER MAY MAKE WILL BE MADE ONLY PURSUANT TO SEPARATE PROXY MATERIALS IN COMPLIANCE WITH THE REQUIREMENTS OF SECTION 14(A) OF THE EXCHANGE ACT. APPRAISAL RIGHTS IN CONNECTION WITH THE OFFER. Stockholders do not have appraisal rights as a result of the Offer. If the Merger is consummated, however, stockholders of the Company at the time of the Merger who do not vote in favor of the Merger, including any stockholders at the time of a Short-Form Merger, will have the right under the DGCL to dissent and demand appraisal of, and receive payment in cash of the fair value of, their Shares outstanding immediately prior to the Effective Date in accordance with Section 262 of the DGCL. Under the DGCL, dissenting stockholders who comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their Shares (exclusive of any element of value arising from the accomplishment or expectation of such merger or similar business combination) and to receive payment of such fair value in cash. Any such judicial determination of the fair value of such Shares could be based upon considerations other than or in addition to the price paid in the Offer and the Merger and the market value of the Shares. In WEINBERGER V. UOP, INC., the Delaware Supreme Court stated, among other things, that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered in an appraisal proceeding. Stockholders should recognize that the value so determined could be higher or lower than the price per Share paid pursuant to the Offer or the consideration per Share to be paid in the Merger or other similar business combination. In addition, several decisions by Delaware courts have held that in certain circumstances a controlling stockholder of a corporation involved in a merger has a fiduciary duty to other stockholders that requires that the merger be fair to other stockholders. In determining whether a merger is fair to minority stockholders, Delaware courts have considered, among other things, the type and amount of the consideration to be received by the stockholders and whether there was fair dealing among the parties. The Delaware Supreme Court stated in WEINBERGER AND RABKIN V. PHILIP A. HUNT CHEMICAL CORP. that the remedy ordinarily available to minority stockholders in a cash-out merger is the right to appraisal described above. A damages remedy or injunctive relief may be available if a merger is found to be the product of procedural unfairness, including fraud, misrepresentation or other misconduct. THE FOREGOING SUMMARY OF THE RIGHTS OF OBJECTING STOCKHOLDERS DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL. THE FOREGOING DESCRIPTION OF THE DGCL IS NOT NECESSARILY COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DGCL. RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act that is applicable to certain "going private" transactions and that may under certain circumstances be applicable to the Merger following the purchase of Shares pursuant to the Offer in which the Purchaser seeks to acquire any remaining Shares. Rule 13e-3 should not be applicable to the Merger if the Merger is consummated within one year after the expiration or termination of the Offer and the price paid in the Merger is not less than the price per Share paid pursuant to the Offer. However, in the event that the Purchaser is deemed to have acquired control of the Company pursuant to the Offer and if the Merger is consummated more than one year after completion of the Offer or an alternative acquisition transaction is effected whereby stockholders of the Company receive consideration less than that paid 28 pursuant to the Offer, in either case at a time when the Shares are still registered under the Exchange Act, the Purchaser may be required to comply with Rule 13e-3 under the Exchange Act. If applicable, Rule 13e-3 would require, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the Merger or such alternative transaction and the consideration offered to minority stockholders in the Merger or such alternative transaction, be filed with the Commission and disclosed to stockholders prior to consummation of the Merger or such alternative transaction. The purchase of a substantial number of Shares pursuant to the Offer may result in the Company being able to terminate its Exchange Act registration. See Section 14. If such registration were terminated, Rule 13e-3 would be inapplicable to any such future Merger or such alternative transaction. PLANS FOR THE COMPANY. It is expected that, initially following the Merger, the business and operations of the Company and its subsidiaries will continue without substantial change. The Parent intends to conduct a detailed review of the Company and its subsidiaries and their assets, corporate structure, dividend policy, capitalization, operations, properties, policies, management and personnel and to consider, subject to the terms of the Merger Agreement, what, if any, changes would be desirable in light of the circumstances then existing. The Parent reserves the right to take such actions and make such changes as it deems desirable. Such changes could include changes in the Company's business, corporate structure, capitalization, management or dividend policy. Except as otherwise described in this Offer to Purchase, the Purchaser and the Parent have no current, definite plans or proposals that would relate to, or result in, any extraordinary corporate transaction involving the Company, such as a merger, reorganization or liquidation involving the Company or any of its subsidiaries, a sale or transfer of a material amount of assets of the Company or any of its subsidiaries, any change in the Company's capitalization or dividend policy (except that, after consummation of the Merger, the Parent may cause a change in the Company's dividend policy to reflect the fact that it would be a wholly owned subsidiary of the Parent) or any other material change in the Company's business, corporate structure present Board of directors or management or personnel. The Merger Agreement provides that, commencing upon the purchase of the tendered Shares pursuant to the Offer, and from time to time thereafter, the Parent will be entitled to designate directors to serve on the Board of Directors of the Company as described above under "The Merger Agreement and Other Agreements; the Rights; Employee Arrangements--Designation of Directors." The Merger Agreement also provides that the directors of the Purchaser, at the effective time of the Merger, will be the initial directors of the Company after the Merger. For the potential effects of the Offer and the Merger on the listing of the Shares on Nasdaq and their registration under the Exchange Act, see Section 14. 13. DIVIDENDS AND DISTRIBUTIONS. If the Company should, on or after the date of the Merger Agreement, (i) split, combine or otherwise change the Shares or its capitalization, or disclose that it has taken any such action, (ii) issue or sell any additional securities of the Company or otherwise cause an increase in the number of outstanding securities of the Company or (iii) acquire currently outstanding Shares or otherwise cause a reduction in the number of outstanding Shares, then without prejudice to the Purchaser's rights as set forth herein, the Purchaser may make such adjustments to the purchase price and other terms of the Offer as it deems appropriate to reflect such split, combination or other change. If, on or after the date of the Merger Agreement, the Company should declare or pay any cash or stock dividend or other distribution on, or issue any rights with respect to, the Shares that is payable or distributable to stockholders of record on a date prior to the transfer to the name of the Purchaser or the nominee or transferee of the Purchaser on the Company's stock transfer records of such Shares that are purchased pursuant to the Offer, then without prejudice to the Purchaser's rights as set forth herein, (i) the purchase price payable per Share by the Purchaser pursuant to the Offer will be reduced to the extent any such dividend or distribution is payable in cash and (ii) any non-cash dividend, distribution (including additional Shares) or right received and held by a 29 tendering stockholder will be required to be promptly remitted and transferred by the tendering stockholder to the Depositary for the account of the Purchaser, accompanied by appropriate documentation of transfer. Pending such remittance or appropriate assurance thereof, the Purchaser will, subject to applicable law, be entitled to all rights and privileges as owner of any such non-cash dividend, distribution or right and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Purchaser in its sole discretion. 14. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; NASDAQ NATIONAL MARKET LISTING; MARGIN REGULATIONS; EXCHANGE ACT REGISTRATION. The purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and could reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares by the public. Following completion of the Offer, at least a majority of the outstanding Shares will be owned by the Purchaser. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the standards of the National Association of Securities Dealers, Inc. ("NASD"), for continued inclusion in the Nasdaq National Market (the top tier market). If, as a result of the purchase of Shares pursuant to the Offer, the Shares no longer meet the criteria for quotation on the Nasdaq National Market, the market for the Shares could be adversely affected. According to the Nasdaq National Market's published guidelines, in order for the Shares to be eligible for continued quotation on the Nasdaq National Market, there must continue to be, among other things, either (i) at least 750,000 publicly held Shares, held by at least 400 round lot shareholders, with a market value of at least $5,000,000, net tangible assets of at least $4,000,000 and at least two registered and active market makers for the Shares, or (ii) at least 1,100,000 publicly held Shares, held by at least 400 round lot shareholders, with a market value of at least $15,000,000, either (x) market capitalization of at least $50,000,000 or (y) total assets and total revenue of $50,000,000 each for the most recently completed fiscal year or two of the last three most recently completed fiscal years, and at least four registered and active market makers for the Shares. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Shares are not considered as being publicly held for this purpose. If the Shares were no longer eligible for quotation on the Nasdaq National Market, they may nevertheless continue to be included in The Nasdaq SmallCap Market unless, among other things, the number of publicly held Shares (excluding Shares held by officers, directors and beneficial owners of more than 10% of the Shares) was less than 100,000, or there were fewer than 300 round lot holders in total. If the Shares are no longer eligible for inclusion in the Nasdaq National Market or The Nasdaq SmallCap Market, the Shares might still be quoted on the OTC Bulletin Board. The extent of the public market for the Shares and availability of such quotations would, however, depend upon such factors as the number of holders and/or the aggregate market value of the publicly-held Shares at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act and other factors. According to the Company, there were 183 holders of record of Shares as of November 16, 1998, and 6,010,795 Shares were outstanding. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet NASD requirements for continued inclusion in the Nasdaq National Market or in any other tier of The Nasdaq Stock Market, the market for such Shares could be adversely affected. The Shares are currently "margin securities" under the rules of the Board of Governors of the Federal Reserve System (the "FEDERAL RESERVE BOARD"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such Shares for the purpose of buying, carrying, or trading in securities ("purpose loans"). Depending upon factors similar to those described above with respect to listing and market quotations, it is possible that, following the Offer, the Shares might no longer constitute "margin securities" for the purposes of the Federal Reserve Board's margin regulations and therefore could no longer be used as collateral for purpose loans made by brokers. The Shares are currently registered under the Exchange Act. The purchase of Shares pursuant to the Offer may result in the Shares becoming eligible for deregistration under the Exchange Act. Registration of the Shares may be terminated upon application of the Company to the Commission if the Shares are not listed on a national securities exchange and there are fewer than 300 record holders. The termination of the registration of the Shares 30 under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of the Shares and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with stockholders' meetings and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Shares. Furthermore, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of the securities pursuant to Rule 144 under the Securities Act of 1933. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or eligible for quotation on the Nasdaq National Market. The Purchaser intends to seek to cause the Company to terminate the registration of the Shares as soon after the consummation of the Offer or the Merger as the requirements for termination of registration are met. 15. OFFER CONDITIONS. Notwithstanding any other provision of the Offer, the Purchaser will not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for any Shares tendered pursuant to the Offer, and may postpone the acceptance for payment or payment for any Shares tendered pursuant to the Offer, and may terminate the Offer (whether or not the Purchaser has purchased or paid for any Shares) to the extent permitted by the Merger Agreement unless the following conditions (the "OFFER CONDITIONS") have been satisfied: (a) at the expiration of the Offer, a number of Shares that constitutes more than 50% of the voting power (determined on a fully-diluted basis) on the date of purchase of all the securities of the Company entitled to vote generally in the election of directors or in a merger has been validly tendered in the Offer and not properly withdrawn prior to the expiration of the Offer (i.e., the Minimum Condition); (b) all of the representations and warranties of the Company set forth in the Merger Agreement that are qualified by reference to a Material Adverse Effect are true and correct, and any such representations and warranties that are not so qualified are true and correct in all respects except in any respect that is not likely to have a Material Adverse Effect, in each case as if such representations and warranties were made at the time of such determination; or (c) at any time on or after the date of the Merger Agreement, none of the following events has occurred: (1) the entry or issuance of any order, preliminary or permanent injunction, decree, judgment or ruling in any action or proceeding before any court or governmental, administrative or regulatory authority or agency, or any statute, rule or regulation enacted, entered, enforced, promulgated, amended or issued that is applicable to the Parent, the Purchaser, the Company or any subsidiary or affiliate of the Purchaser or the Company or the Offer or the Merger, by any legislative body, court, government or governmental, administrative or regulatory authority or agency that is likely to have the effect of: (i) making illegal or otherwise directly or indirectly restraining or prohibiting the making of the Offer in accordance with the terms of the Merger Agreement, the acceptance for payment of, or payment for, some of or all the Shares by the Purchaser or any of its affiliates or the consummation of the Merger; (ii) prohibiting the ownership or operation of the Company and its subsidiaries by the Parent or any of the Parent's subsidiaries; (iii) imposing material limitations on the ability of the Parent, the Purchaser or any of the Parent's affiliates effectively to acquire or hold or to exercise in all material respects full rights of ownership of the Shares, including without limitation the right to vote any Shares acquired or owned by the Parent or the Purchaser or any of its affiliates on all matters properly presented to the stockholders of the Company, including, without limitation, the adoption of the Merger Agreement or the right to vote any shares of capital stock of any subsidiary directly or indirectly owned by the Company; or (iv) requiring divestiture by the Parent or the Purchaser or any of their affiliates of any Shares; (2) (i) any general suspension of trading in, or limitation on prices (other than suspensions or limitations triggered on Nasdaq National Market by price fluctuations on a trading day) for, securities 31 on any national securities exchange, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) a commencement of a war or material armed hostilities or other material national calamity directly involving the entire United States or materially adversely affecting the consummation of the Offer or (v) in the case of any of the foregoing existing at the time of commencement of the Offer, a material acceleration or worsening thereof; (3) (i) the Board of Directors of the Company or any committee thereof has withdrawn or modified in a manner adverse to the Parent or the Purchaser the approval or recommendation of the Offer, the Merger or the Merger Agreement, or approved or recommended any takeover proposal or any other acquisition of Shares other than the Offer, (ii) any such person or group has entered into a definitive agreement or an agreement in principle with the Company with respect to a tender offer or exchange offer for any Shares or a merger, consolidation or other business combination with or involving the Company or any of its subsidiaries, or (iii) the Board of Directors of the Company or any committee thereof has resolved to do any of the foregoing; (4) the Company fails to perform in any material respect any material obligation or to comply in any material respect with any material agreement or material covenant of the Company to be performed or complied with by it under the Merger Agreement; (5) the Merger Agreement has been terminated in accordance with its terms or the Offer has been terminated with the consent of the Company; or (6) any waiting periods under the HSR Act applicable to the purchase of Shares pursuant to the Offer or the Merger have not expired or been terminated; and, upon the failure of any of the conditions set forth in paragraphs (b) or (c) above, the Purchaser determines, in its reasonable judgment, that it is inadvisable for the Purchaser to proceed with the Offer or with the acceptance for payment of or payment for Shares. The Offer Conditions (other than the Minimum Condition) are for the sole benefit of the Purchaser and may be waived by the Purchaser in whole or in part at any time and from time to time in its sole discretion. 16. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS. GENERAL. Except as set forth below, based upon its examination of publicly available filings by the Company with the Commission and other publicly available information concerning the Company, neither the Purchaser nor the Parent is aware of any licenses or other regulatory permits that appear to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the Purchaser's acquisition of Shares (and the indirect acquisition of the stock of the Company's subsidiaries) as contemplated herein, or of any filings, approvals or other actions by or with any domestic (U.S. federal or state), foreign or supranational governmental authority or administrative or regulatory agency that would be required prior to the acquisition of Shares (or the indirect acquisition of the stock of the Company's subsidiaries) by the Purchaser pursuant to the Offer as contemplated herein. Should any such approval or other action be required, it is the Purchaser's present intention to seek such approval or action. However, the Purchaser does not presently intend to delay the purchase of Shares tendered pursuant to the Offer pending the receipt of any such approval or the taking of any such action (subject to the Purchaser's right to delay or decline to purchase Shares if any of the conditions in Section 15 will have occurred). There can be no assurance that any such approval or other action, if needed, would be obtained without substantial conditions or that adverse consequences might not result to the business of the Company, the Parent or the Purchaser or that certain parts of the businesses of the Company, the Parent or the Purchaser might not have to be disposed of or held separate or other substantial conditions complied with in order to obtain such approval or other action or in the event that such approval was not obtained or such other action was not taken, any of which could cause the Purchaser to elect to terminate the Offer without the purchase of the Shares hereunder. The Purchaser's obligation under the Offer to accept for payment and pay for Shares is subject to certain conditions, including conditions relating to the legal matters discussed in this Section 16. 32 STATE TAKEOVER LAWS. A number of states have adopted takeover laws and regulations that purport to varying degrees to be applicable to attempts to acquire securities of corporations that are incorporated in such states or which have or whose business operations have substantial economic effects in such states, or which have substantial assets, security holders, principal executive offices or principal places of business therein. To the extent that certain provisions of certain of these state takeover statutes purport to apply to the Offer, the Purchaser believes that such laws conflict with U.S. federal law and constitute an unconstitutional burden on interstate commerce. In 1982, the Supreme Court of the United States, in EDGAR V. MITE CORP., invalidated on constitutional grounds the Illinois Business Takeovers Act, which as a matter of state securities law made takeovers of corporations meeting certain requirements more difficult, and the reasoning in such decision is likely to apply to certain other state takeover statutes. In 1987, however, in CTS CORP. V. DYNAMICS CORP. OF AMERICA, the Supreme Court of the United States held that the State of Indiana could, as a matter of corporate law and in particular those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquirer from voting on the affairs of a target corporation without the prior approval of the remaining stockholders, provided that such laws were applicable only under certain conditions. Subsequently, in TLX ACQUISITION CORP. V. TELEX CORP., a federal district court in Oklahoma ruled that the Oklahoma statutes were unconstitutional insofar as they applied to corporations incorporated outside Oklahoma in that they would subject such corporations to inconsistent regulations. Similarly, in TYSON FOODS, INC. V. MCREYNOLDS, a federal district court in Tennessee ruled that four Tennessee takeover statutes were unconstitutional as applied to corporations incorporated outside Tennessee. This decision was affirmed by the United States Court of Appeals for the Sixth Circuit. In December 1988, a federal district court in Florida held in GRAND METROPOLITAN PLC V. BUTTERWORTH that the provisions of the Florida Affiliated Transactions Act and the Florida Control Share Acquisition Act were unconstitutional as applied to corporations incorporated outside of Florida. Except as described herein, the Purchaser has not attempted to comply with any state takeover statutes in connection with the Offer. The Purchaser reserves the right to challenge the validity or applicability of any state law allegedly applicable to the Offer and nothing in this Offer to Purchase nor any action taken in connection herewith is intended as a waiver of that right. In the event that any state takeover statute is found applicable to the Offer, the Purchaser might be unable to accept for payment or purchase Shares tendered pursuant to the Offer or be delayed in continuing or consummating the Offer. In such case, the Purchaser may not be obligated to accept for purchase or pay for, any Shares tendered. See Section 15. ANTITRUST. Under the HSR Act, certain acquisition transactions may not be consummated unless certain information has been furnished to the United States Department of Justice's Antitrust Division ("ANTITRUST DIVISION") and the Federal Trade Commission (the "FTC") and certain waiting period requirements have been satisfied. The acquisition of Shares pursuant to the Offer and the Merger is subject to such requirements. See Section 2. The Parent has filed, on November 12, 1998, with the FTC and the Antitrust Division, a Premerger Notification and Report Form in connection with the purchase of Shares pursuant to the Offer. Under the provisions of the HSR Act, the purchase of Shares pursuant to the Offer may not be consummated until the expiration of a 15-calendar day waiting period following the filing by the Parent. Accordingly, the waiting period under the HSR Act applicable to such purchases of Shares pursuant to the Offer will expire at 11:59 p.m., EST, on November 27, 1998, unless such waiting period is terminated early by the FTC or the Antitrust Division or unless such waiting period is extended by a request from the FTC or the Antitrust Division for additional information or documentary material prior to the expiration of the waiting period. The Merger would not require an additional filing under the HSR Act if the Purchaser owns 50% or more of the outstanding Shares at the time of the Merger. If either the FTC or the Antitrust Division were to request additional information or documentary material from the Parent, the waiting period would expire at 11:59 p.m., EST, on the tenth calendar day after the date of substantial compliance by the Parent with such request. Thereafter, the waiting period may be extended only by court order or agreement of the parties. If the acquisition of Shares is delayed pursuant to a request by the FTC 33 or the Antitrust Division for additional information or documentary material pursuant to the HSR Act, the Offer may, but need not, be extended, and in any event the purchase of and payment for Shares will be deferred until ten days after the request is substantially complied with, unless the waiting period is sooner terminated by the FTC and the Antitrust Division. See Section 2. Any such extension of the waiting period will not give rise to any withdrawal rights not otherwise provided for by applicable law. See Section 4. Under the HSR Act, the FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as the proposed acquisition of Shares by the Purchaser pursuant to the Offer. At any time before or after the purchase by the Purchaser of Shares pursuant to the Offer, either the FTC or the Antitrust Division could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or seeking the divestiture of Shares purchased by the Purchaser or the divestiture of substantial assets of the Parent, its subsidiaries or the Company. Private parties and state attorneys general also may bring legal action under U.S. federal or state antitrust laws under certain circumstances. Based upon an examination of publicly available information relating to the businesses in which the Parent and SWVA are engaged, the Parent and the Purchaser believe that the acquisition of Shares by the Purchaser will not violate the antitrust laws. Should the FTC or the Antitrust Division raise any concerns, the Purchaser and the Parent are prepared, in order to expedite the Offer and the Merger, to address those concerns promptly. Of course, there is no guarantee that the Purchaser and the FTC or the Antitrust Division would reach an agreement with respect to such concerns. See Section 15 for the Offer Conditions, including conditions with respect to litigation and certain government actions. The parties to the Merger Agreement will consult and cooperate with one another, and consider in good faith the views of one another, with respect to any actions taken in connection with proceedings under or relating to the HSR Act or any other U.S. federal, state or foreign antitrust or fair trade law. 17. FEES AND EXPENSES. Ewing Monroe is serving as financial advisor to the Parent and the Purchaser in connection with the proposed acquisition of the Company. The Parent agreed to pay Ewing $250,000 for the preparation of a fairness opinion and a fee of $900,000 upon the successful closing of a purchase of the Company or upon payment of the Termination Fee. The Parent has also agreed to pay Ewing Monroe reasonable out-of-pocket expenses. The Parent also agreed to indemnify Ewing Monroe against certain liabilities and expenses in connection with the Offer. The Purchaser has retained Georgeson & Company, Inc. to act as the Information Agent and First Union National Bank to act as the Depositary in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telegraph and personal interview and may request brokers, dealers and other nominee stockholders to forward the Offer materials to beneficial owners. The Information Agent and the Depositary will receive reasonable and customary compensation for services relating to the Offer and will be reimbursed for certain out-of-pocket expenses. The Purchaser and the Parent have also agreed to indemnify the Information Agent and the Depositary against certain liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities laws. The Purchaser will not pay any fees or commissions to any broker or dealer or any other person for soliciting tenders of Shares pursuant to the Offer (other than to the Information Agent and the Depositary). Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by the Purchaser for customary mailing and handling expenses incurred by them in forwarding offering materials to their customers. 18. MISCELLANEOUS. The Offer is being made solely by this Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares. The Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If the Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, the Purchaser will make a good faith effort to comply with any such state statute. If after such good faith effort, the Purchaser cannot comply with such state statute, the Offer will not be made to nor will tenders be 34 accepted from or on behalf of the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. The Purchaser and the Parent have filed with the Commission a Tender Offer Statement on Schedule 14D-1 (including exhibits) pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional information with respect to the Offer. Such statement and any amendments thereto, including exhibits, may be inspected and copies may be obtained from the offices of the Commission (except that they will not be available at the regional offices of the Commission) in the manner set forth in Section 7 of this Offer to Purchase. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER OR THE PARENT NOT CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. SWVA ACQUISITION, INC. November 17, 1998 35 [THIS PAGE INTENTIONALLY LEFT BLANK] 36 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER AND THE PARENT 1. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The Purchaser and the Parent share the same directors and executive officers. Accordingly, each of the directors and executive officers of the Parent has the same position with the newly-created Purchaser. The required information with respect to each such person is set forth under "Directors and Executive Officers of the Parent" below. All such directors and executive officers are citizens of the United States. 2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT. The name, residence or business address, present principal occupation or employment and material occupations, positions, offices or employments during the last five years of each director and executive officer of the Parent and certain other information are set forth below. Unless otherwise indicated, the business address of each such director and executive officer is: c/o Roanoke Electric Steel Corporation, P.O. Box 13948, Roanoke, Virginia 24038-3948. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with the Parent. All directors and executive officers listed below are citizens of the United States.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR NAME AND ADDRESS EMPLOYMENT HELD DURING THE LAST FIVE YEARS - ---------------- ----------------------------------------------- Frank A. Boxley.......... President of Southwest Construction, Inc., a general P.O. Box 917 contractor since 1993. Vinton, VA 24179 George B. Cartledge, Jr.. President, Grand Home Furnishings, Inc., a retailer 4235 Electric Road Suite of home and office furnishings. 100 Roanoke, VA 24014 Thomas J. Crawford....... Vice President--Administration of the Parent since 1998; Secretary of the Parent since January 1985; Assistant Vice President since January 1993; prior thereto, he had served as Manager of Inside Sales since 1984 and as a Sales Representative since 1977. He has 21 years of service with the Parent. Donald R. Higgins........ Vice President--Sales of the Parent since January 1986; prior thereto, he had served as General Sales Manager since 1984 and Assistant Sales Manager since 1978. He has 33 years of service with the Parent. George W. Logan.......... Chairman of Valley Financial Corporation, a holding P.O. Box 1190 company for general commercial and retail banking Salem, VA 24153 business, since 1994; Chairman of Warsaw Industrial Centers, a developer of commercial distribution warehouses; Director, Valley Financial Corporation since 1997. Charles I. Lunsford, II.. Retired since January 1998. Previously, Chairman, 1812 Diamond Hill Road Charles Lunsford Sons & Associates, a general Moneta, VA 24121 insurance firm and agency.
37
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR NAME AND ADDRESS EMPLOYMENT HELD DURING THE LAST FIVE YEARS - ---------------- ----------------------------------------------- John E. Morris............. Vice President--Finance of the Parent since October 1988 and as Assistant Treasurer since 1985; prior thereto, he had served as Controller since 1971. He has 27 years of service with the Parent. Thomas L. Robertson........ President and Chief Executive Officer, Carilion P.O. Box 13727 Health System, a provider of healthcare services. Roanoke, VA 24026 Director, Roanoke Gas Company, an energy provider, since 1992. Donald G. Smith............ Chairman of the Board, President, Treasurer and Chief Executive of the Parent. Director, American Electric Power Company, Inc. Chairman of the Board of the Parent since February 1989, as Chief Executive Officer since November 1986, as President and Treasurer since January 1985 and as Director of the Parent since April 1984; prior thereto, he had served as Vice President--Administration since September 1980 and as Secretary since January 1967. He has 41 years of service with the Parent. Paul E. Torgerson.......... President, Virginia Polytechnic Institute and State VPI & SU University since 1994; Prior thereto, 210 Burress Hall President,Virginia Tech Corporate Research Center, Blacksburg, VA 24061 Inc. John D. Wilson............. Retired since May, 1995. Previously, President, 3211 Laurel Drive Washington & Lee University. Blacksburg, VA 24060
3. OWNERSHIP OF SUBJECT COMPANY'S SECURITIES BY DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER. To the best knowledge of the Parent and the Purchaser, none of the Parent's and the Purchaser's other directors or executive officers beneficially owns any equity securities, or rights to acquire any equity securities of the Company and none has been involved in any transactions with respect to any class of the Company's Securities or with the Company or any of its directors, executive officers, affiliates or associates during the past 60 days. 38 Facsimile copies of the Letter of Transmittal, properly completed and duly executed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or his broker, dealer, commercial bank, trust company or other nominee to the Depositary as follows: THE DEPOSITARY FOR THE OFFER IS: FIRST UNION NATIONAL BANK By Overnight Courier: By Mail or Hand Delivery: First Union Customer Information First Union Customer Information Center Center Corporate Trust Operations Corporate Trust Operations 1525 West W.T. Harris Blvd. 3C3 1525 West W.T. Harris Blvd., 3C3 Charlotte, North Carolina 28262-1153 Charlotte, North Carolina 28288-1153 Attn: Mike Klotz, Reorganization Attn: Mike Klotz, Reorganization Department Department By Facsimile Transmission: (for Eligible Institutions Only) (704) 590-7628 For Information or Confirmation: (704) 590-7408 CONFIRM BY TELEPHONE: Any questions and requests for assistance may be directed to the Information Agent at its telephone numbers and address listed below. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may also be obtained from the Information Agent. You may also contact your broker, dealer, commercial bank or trust company for assistance concerning the Offer. The Information Agent for the Offer is: [LOGO OF GEORGESON & COMPANY INC. APPEARS HERE] Wall Street Plaza 88 Pine Street 30th Floor New York, New York 10005 Banks and Brokers Call Collect: (212) 440-9800 All Others Call Toll-Free: (800) 223-2064 FAX: (212) 440-9009 EX-99.A2 3 LETTER OF TRANSMITTAL Exhibit (a)(2) Letter of Transmittal LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF STEEL OF WEST VIRGINIA, INC. (INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) PURSUANT TO THE OFFER TO PURCHASE DATED NOVEMBER 17, 1998 BY SWVA ACQUISITION, INC. A WHOLLY OWNED SUBSIDIARY OF ROANOKE ELECTRIC STEEL CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN STANDARD TIME, ON TUESDAY, DECEMBER 15, 1998, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer Is: FIRST UNION NATIONAL BANK By Overnight Courier: By Mail or Hand Delivery: First Union Customer Information First Union Customer Information Center Center Corporate Trust Operations Corporate Trust Operations 1525 West W.T. Harris Blvd., 3C3 1525 West W.T. Harris Blvd., 3C3 Charlotte, North Carolina 28288-1153 Charlotte, North Carolina 28262- Attn: Mike Klotz, Reorganization 1153 Department Attn: Mike Klotz, Reorganization Department By Facsimile Transmission: (for Eligible Institutions Only) (704) 590-7628 For Information or Confirmation: (704) 590-7408 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL WHERE INDICATED AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED BELOW. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by stockholders, either if certificates for Shares (as defined below) are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is sent to the Transfer Facility, if tenders of Shares are to be made by book-entry transfer into the account of First Union National Bank, as Depositary (the "Depositary"), at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 3 of the Offer to Purchase (as defined below). Stockholders who tender Shares by book-entry transfer are referred to herein as "Book-Entry Stockholders". 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 - --------------------------------------------------------------------------------
NAME(S) & ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S) AND SHARE(S) TENDERED CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) - -------------------------------------------------------------------------------- TOTAL NUMBER SHARE OF SHARES NUMBER CERTIFICATE REPRESENTED BY OF SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- 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. - -------------------------------------------------------------------------------- The names and addresses of the registered holders should be printed, if not already printed above, exactly as they appear on the certificates representing Shares tendered hereby. The certificates and number of Shares that the undersigned wishes to tender should be indicated. [_]CHECK HERE IF SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution: _____________________________________________ The Depository Trust Company Account Number __________________ Transaction Code Number __________________ [_]CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s): ____________________________________________ Window Ticket Number (if any): _____________________________________________ Date of Execution of Notice of Guaranteed Delivery: ________________________ Name of Institution that Guaranteed Delivery: ______________________________ If delivered by book-entry transfer, please complete the following: The Depository Trust Company Account Number __________________ Transaction Code Number __________________ NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY 2 Ladies and Gentlemen: The undersigned hereby tenders to SWVA Acquisition, Inc., a Virginia corporation (the "Purchaser"), a wholly owned subsidiary of Roanoke Electric Steel Corporation, a Virginia corporation (the "Parent"), the above-described shares of Common Stock, $0.01 par value per share ("Shares"), of Steel of West Virginia, Inc., a Delaware corporation (the "Company"), and the associated rights to purchase Common Stock of the Company (the "Rights") issued pursuant to the Rights Agreement dated as of March 19, 1997, between the Company and Continental Stock Transfer and Trust Company, as Rights Agent, as amended on November 10, 1998, at a purchase price of $10.75 per Share, net to the seller in cash without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated November 17, 1998 (the "Offer to Purchase") and in this Letter of Transmittal (which together, as amended or supplemented from time to time, constitute the "Offer"). Unless the context otherwise requires, all references herein to Shares include the associated Rights. The undersigned understands that the Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, receipt of which is hereby acknowledged. Subject to, and effective upon, acceptance for payment for the Shares tendered herewith in accordance with the terms of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all of the Shares that are being tendered hereby and any and all non-cash dividends, distributions (including additional Shares) or rights declared, paid or issued with respect to the tendered Shares on or after November 17, 1998 and payable or distributable to the undersigned on a date prior to the transfer to the name of the Purchaser or nominee or transferee of the Purchaser on the Company's stock transfer records of the Shares tendered herewith (collectively, a "Distribution"), and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and any Distribution) with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) to (a) deliver such Share Certificates (and any Distribution) or transfer ownership of such Shares (and any Distribution) on the account books maintained by the Book-Entry Transfer Facility, together in either case with appropriate evidences of transfer, to the Depositary for the account of the Purchaser, (b) present such Shares (and any Distribution) for transfer on the books of the Company and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any Distribution), all in accordance with the terms and subject to the conditions of the Offer. The undersigned irrevocably appoints designees of the Purchaser as such stockholder's proxy, with full power of substitution, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by the Purchaser and with respect to any and all other Shares or other securities issued or issuable in respect of such Shares on or after November 17, 1998. Such appointment will be effective when, and only to the extent that, the Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior proxies given by such stockholder with respect to such Shares (and such other shares and securities) will be revoked without further action, and no subsequent proxies may be given nor any subsequent written consents executed (and, if given or executed, will not be deemed effective). The designees of the Purchaser will be empowered to exercise all voting and other rights of such stockholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's stockholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's payment for such Shares the Purchaser must be able to exercise full voting rights with respect to such Shares. The undersigned hereby represents and warrants that (a) the undersigned has full power and authority to tender, sell, assign and transfer the Shares (and any Distribution) tendered hereby and (b) when the Shares are accepted for payment by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title to the Shares (and any Distribution), free and clear of all liens, restrictions, charges and encumbrances, and the same will not be subject to any adverse claim. The undersigned, upon request, will execute and deliver any additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby (and any Distribution). In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Purchaser any and all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer; and pending such remittance or appropriate assurance thereof, the Purchaser will be, subject to applicable law, entitled to all rights and privileges as owner of any such Distribution and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Purchaser in its sole discretion. 3 All authority herein conferred or agreed to be conferred shall not be affected by and shall survive the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Tenders of Shares made pursuant to the Offer are irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date (as defined in the Offer to Purchase) and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time after December 15, 1998. See Section 4 of the Offer to Purchase. The undersigned understands that tenders of Shares pursuant to any of the procedures described in Section 3 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions set forth in the Offer, including the undersigned's representation that the undersigned owns the Shares being tendered. Unless otherwise indicated herein under "Special Payment Instructions", please issue the check for the purchase price and/or issue or return any certificate(s) for Shares not tendered or not accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered". Similarly, unless otherwise indicated herein under "Special Delivery Instructions", please mail the check for the purchase price and/or any certificate(s) for Shares not tendered or not accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered". In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price and/or any certificate(s) for Shares not tendered or accepted for payment in the name of, and deliver such check and/or such certificates to, the person or persons so indicated. The undersigned recognizes that the Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Shares from the name(s) of the registered holder(s) thereof if the Purchaser does not accept for payment any of the Shares so tendered. SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7 OF THIS LETTER OF TRANSMITTAL) To be completed ONLY if certifi- cate(s) for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for pay- ment are to be issued in the name of someone other than the under- signed. Issue check and/or certificate(s) to: Name _____________________________ (PLEASE PRINT) Address __________________________ __________________________________ (INCLUDE ZIP CODE) __________________________________ (TAX ID. OR SOCIAL SECURITY NO.) (SEE SUBSTITUTE FORM W-9 ON THE REVERSE SIDE) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7 OF THIS LETTER OF TRANSMITTAL) To be completed ONLY if certificate(s) for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown above. Mail check and/or certificates to: Name _____________________________ (PLEASE PRINT) Address __________________________ __________________________________ __________________________________ (INCLUDE ZIP CODE) 4 SIGN HERE (SIGN AND COMPLETE SUBSTITUTE FORM W-9 BELOW) X ............................................................................ X ............................................................................ (SIGNATURE(S) OF HOLDER(S)) Dated: ................................................................, 199 (Must be signed by the registered holder(s) exactly as name(s) appear(s) on Share Certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5.) Name(s)....................................................................... ....................................................................... (PLEASE PRINT) Capacity (full title)......................................................... Address....................................................................... ....................................................................... (INCLUDE ZIP CODE) Area Code and Telephone Number................................................ Tax Identification or Social Security No. .................................... GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) Authorized Signature.......................................................... Name.......................................................................... (PLEASE PRINT) Title......................................................................... Name of Firm.................................................................. Address....................................................................... (INCLUDE ZIP CODE) Area Code and Telephone Number................................................ Dated: ................................................................, 199 5 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. No signature guarantee is required on this Letter of Transmittal (a) if this Letter of Transmittal is signed by the registered holder(s) of Shares tendered herewith, unless such holder(s) has completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" above, or (b) if such Shares are tendered for the account of a firm that is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agents Medallion Program (each of the foregoing being referred to as an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5 of this Letter of Transmittal. 2. Requirements of Tender. This Letter of Transmittal is to be completed by stockholders either if certificates are to be forwarded herewith or, unless an Agent's Message is transmitted, if tenders are to be made pursuant to the procedure for tender by book-entry transfer set forth in Section 3 of the Offer to Purchase. Share Certificates, or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility, as well as this Letter of Transmittal (or a facsimile hereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). Stockholders whose Share Certificates are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot complete the procedure for delivery by book-entry transfer on a timely basis may tender their Shares by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Purchaser, must be received by the Depositary prior to the Expiration Date; and (iii) the Share Certificates (or a Book-Entry Confirmation) representing all tendered Shares, in proper form for transfer, in each case together with the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry delivery, an Agent's Message) and any other documents required by this Letter of Transmittal, must be received by the Depositary within three Nasdaq National Market trading days after the date of execution of such Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering stockholders, by execution of this Letter of Transmittal (or a facsimile hereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. Inadequate Space. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares and any other required information should be listed on a separate signed schedule attached hereto. 4. Partial Tenders. (NOT APPLICABLE TO BOOK-ENTRY STOCKHOLDERS.) If fewer than all of the Shares evidenced by any Share Certificate submitted are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered". In such cases, new Share Certificates for the Shares that were evidenced by your old Share Certificates, but were not tendered by you, will be sent to you, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by Share Certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal; Stock Powers And Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. 6 If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the tendered Shares are registered in different names, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Purchaser of their authority so to act must be submitted. If this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made to or certificates for Shares not tendered or not purchased are to be issued in the name of a person other than the registered holder(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the certificate(s) listed, the certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the certificate(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. 6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6, the Purchaser will pay any stock transfer taxes with respect to the transfer and sale of Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificate(s) for Shares not tendered or accepted for payment are to be registered in the name of, any person other than the registered holder(s), or if tendered certificate(s) are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s) or such person) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or an exemption therefrom, is submitted. Except as otherwise provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the certificate(s) listed in this Letter of Transmittal. 7. Special Payment and Delivery Instructions. If a check is to be issued in the name of, and/or certificates for Shares not tendered or not accepted for payment are to be issued or returned to, a person other than the signer of this Letter of Transmittal or if a check and/or such certificates are to be returned to a person other than the person(s) signing this Letter of Transmittal or to an address other than that shown in this Letter of Transmittal, the appropriate box(es) on this Letter of Transmittal must be completed. 8. Waiver of Conditions. Subject to the terms and conditions of the Merger Agreement, the conditions of the Offer (other than the Minimum Condition (as defined in the Offer to Purchase)) may be waived by the Purchaser in whole or in part at any time and from time to time in its sole discretion. 9. 31% Backup Withholding; Substitute Form W-9. Under U.S. Federal income tax law, a stockholder whose tendered Shares are accepted for payment is required to provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") (e.g., social security number or employer identification number) on Substitute Form W-9 below. If the Depositary is not provided with the correct TIN, the Internal Revenue Service may subject the stockholder or other payee to a $50 penalty. In addition, payments that are made to such stockholder or other payee with respect to Shares purchased pursuant to the Offer may be subject to 31% backup withholding. Certain stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, the stockholder must submit a Form W-8, signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8 can be obtained from the Depositary. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. 7 If backup withholding applies, the Depositary is required to withhold 31% of any such payments made to the stockholder or other payee. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. The box in Part 3 of the Substitute Form W-9 must be checked if the tendering stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the stockholder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Depositary. The stockholder is required to give the Depositary the TIN of the record owner of the Shares or of the last transferee appearing on the transfers attached to, or endorsed on, the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 10. Requests for Assistance or Additional Copies. Questions or requests for assistance may be directed to the Information Agent at its respective address and telephone numbers set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may also be obtained from the Information Agent or from brokers, dealers, commercial banks or trust companies. 11. Lost, Destroyed or Stolen Certificates. If any certificate representing Shares has been lost, destroyed or stolen, the stockholder should promptly notify the Depositary. The stockholder will then be instructed as to the steps that must be taken in order to replace the certificate. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), PROPERLY COMPLETED AND DULY EXECUTED WITH ANY REQUIRED SIGNATURE GUARANTEED OR AN AGENT'S MESSAGE (TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER OR THE NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS), MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE. 8 PAYER'S NAME: FIRST UNION NATIONAL BANK, AS DEPOSITARY - -------------------------------------------------------------------------------- PART 1--PLEASE PROVIDE YOUR SUBSTITUTE TIN IN THE BOX AT THE RIGHT ----------------------- FORM W-9 AND CERTIFY BY SIGNING AND Social security number DATING BELOW. OR ----------------------- Employer identification number -------------------------------------------------------- PART 2--Certification--Under penalties of perjury, I certify that: DEPARTMENT OF (1) The number shown on this form is my correct THE TREASURY Taxpayer Identification Number (or I am waiting INTERNAL for a number to be issued to me) and REVENUE SERVICE (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or or (c) the IRS has notified me that I am no longer subject to backup withholding. -------------------------------------------------------- Certification Instructions--You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withhold- ing because of under-reporting inter- est or dividends on your tax return. PAYER'S REQUEST FOR However, if after being notified by PART 3-- TAXPAYER IDENTIFICATION the IRS that you were subject to NUMBER backup withholding you received an- Awaiting other notification from the IRS that TIN [_] you are no longer subject to backup withholding, do not cross out such Item (2). Signature: _________ Date: _____, 199 - -------------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. 9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld. Signature: ______________________________ Date: __________________, 199 Questions and requests for assistance or additional copies of the Offer to Purchase, the Letter of Transmittal and other tender offer materials may be directed to the Information Agent as set forth below: THE INFORMATION AGENT FOR THE OFFER IS: GEORGESON & COMPANY INC. Wall Street Plaza 88 Pine Street, 30th Floor New York, New York 10005 Bankers & Brokers Call Collect: (212) 440-9800 All Others Call Toll-Free: (800) 223-2064 FAX: (212) 440-9009 November 17, 1998 10 EX-99.A3 4 NOTICE OF GUARANTEED DELIVERY Exhibit (a)(3) Notice of Guaranteed Delivery NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) OF STEEL OF WEST VIRGINIA, INC. TO SWVA ACQUISITION, INC. A WHOLLY OWNED SUBSIDIARY OF ROANOKE ELECTRIC STEEL CORPORATION (NOT TO BE USED FOR SIGNATURE GUARANTEES) As set forth in Section 3 of the Offer to Purchase (as defined below), this instrument or one substantially equivalent hereto must be used to accept the Offer (as defined below) if certificates for Shares (as defined below) are not immediately available or the certificates for Shares and all other required documents cannot be delivered to the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) or if the procedure for delivery by book-entry transfer cannot be completed on a timely basis. This instrument may be delivered by hand or mail or transmitted by facsimile transmission to First Union National Bank (the "Depositary"). The Depositary for the Offer is: FIRST UNION NATIONAL BANK By Overnight Courier: By Mail or Hand Delivery: First Union Customer Information Center First Union Customer Information Center Corporate Trust Operations Corporate Trust Operations 1525 West W.T. Harris Blvd., 3C3 1525 West W.T. Harris Blvd., 3C3 Charlotte, North Carolina 28262-1153 Charlotte, North Carolina 28288-1153 Attn: Mike Klotz, Reorganization Department Attn: Mike Klotz, Reorganization Department
By Facsimile Transmission: (for Eligible Institutions Only) (704) 590-7628 For Information or Confirmation: (704) 590-7408 DELIVERY OF THIS FORM TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. LADIES AND GENTLEMEN: The undersigned hereby tender(s) to SWVA Acquisition, Inc., a Virginia corporation and a wholly owned subsidiary of Roanoke Electric Steel Corporation, a Virginia corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase dated November 17, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal (which together, as amended or supplemented from time to time, constitute the "Offer"), receipt of each of which is hereby acknowledged, the number of shares of Common Stock, $0.01 par value per share (including the associated Common Stock purchase rights) ("Shares"), of Steel of West Virginia, Inc., a Delaware corporation, pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Signature(s) ______________________________________________________________ Address(es) _______________________________________________________________ (ZIP CODE) Name(s) of Record Holder(s) _______________________________________________ ___________________________________________________________________________ (PLEASE TYPE OR PRINT) Area Code and Tel. No.(s) _________________________________________________ Number of Shares _________________________________________________________ Certificate Nos. (If Available) ___________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ Check the following box if Shares will be tendered by book-entry transfer: [_] Dated _____________, 199 //The Depository Trust Company Account Number ____________________________________________________________ 2 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm that is a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program, (a) represents that the above named person(s) "own(s)" the Shares tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended ("Rule 14e-4"), (b) represents that such tender of Shares complies with Rule 14e-4, and (c) guarantees to deliver to the Depositary either the certificates evidencing all tendered Shares, in proper form for transfer, or to deliver Shares pursuant to the procedure for book-entry transfer into the Depositary's account at The Depository Trust Company, in either case together with the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other required documents, all within three Nasdaq National Market trading days after the date hereof. Name of Firm ______________________________________________________________ Authorized Signature ______________________________________________________ (NAME) Address ___________________________________________________________________ (PLEASE TYPE OR PRINT) (ZIP CODE) Title _____________________________________________________________________ Area Code and Tel. No. ____________________________________________________ Date ______________, 199 NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.A4 5 LETTER FROM DEALER MANAGERS TO BROKERS Exhibit (a)(4) Letter from the Dealer Manger to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) OF STEEL OF WEST VIRGINIA, INC. AT $10.75 NET PER SHARE BY SWVA ACQUISITION, INC. A WHOLLY OWNED SUBSIDIARY OF ROANOKE ELECTRIC STEEL CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN STANDARD TIME, ON TUESDAY, DECEMBER 15, 1998, UNLESS THE OFFER IS EXTENDED. November 17, 1998 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by SWVA Acquisition, Inc., a Virginia corporation (the "Purchaser"), and a wholly owned subsidiary of Roanoke Electric Steel Corporation, a Virginia corporation (the "Parent"), to act as Information Agent in connection with the Purchaser's offer to purchase for cash all the outstanding shares of Common Stock, par value $0.01 per share ("Shares"), of Steel of West Virginia, Inc., a Delaware corporation (the "Company") and the associated rights to purchase Common Stock of the Company (the "Rights") issued pursuant to the Rights Agreement dated as of March 19, 1997, between the Company and Continental Stock Transfer and Trust Company, as Rights Agent, as amended on November 10, 1998, at a purchase price of $10.75 per Share, net to the seller in cash without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated November 17, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together, as amended or supplemented from time to time, constitute the "Offer") enclosed herewith. Unless the context otherwise requires, all references herein to Shares include the associated Rights. Holders of Shares whose certificates for such Shares (the "Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary (as defined below) prior to the Expiration Date (as defined in the Offer to Purchase), or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Enclosed herewith for your information and for forwarding to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee are copies of the following documents: 1. The Offer to Purchase, dated November 17, 1998. 2. The Letter of Transmittal to tender Shares for your use and for the information of your clients. Facsimile copies of the Letter of Transmittal may be used to tender Shares. 3. The Notice of Guaranteed Delivery for Shares to be used to accept the Offer if Share Certificates are not immediately available or if such certificates and all other required documents cannot be delivered to First Union National Bank (the "Depositary") by the Expiration Date or if the procedure for book-entry transfer cannot be completed by the Expiration Date. 4. The Letter to Stockholders of the Company from the President and Chief Executive Officer of the Company, accompanied by the Company's Solicitation/Recommendation Statement on Schedule 14D-9. 5. A printed form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer. 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9. 7. A return envelope addressed to the Depositary. Your prompt action is requested. We urge you to contact your clients as promptly as possible. Please note that the offer and withdrawal rights expire at 12:00 midnight, Eastern Standard Time, on Tuesday, December 15, 1998, unless the Offer is extended. The Offer is conditioned upon, among other things, Shares representing more than 50% of the voting power (determined on a fully-diluted basis) of all securities of the Company entitled to vote generally in the election of directors or in a merger being validly tendered and not properly withdrawn prior to the expiration of the Offer (excluding Shares issuable pursuant to the Stock Option Agreement, as defined in the Offer to Purchase). The Offer is also subject to other terms and conditions contained in the Offer to Purchase. In order to accept the Offer, (i) a duly executed and properly completed Letter of Transmittal and any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of Shares, and other required documents should be sent to the Depositary, and (ii) either Share Certificates representing the tendered Shares should be delivered to the Depositary or such Shares should be tendered by book-entry transfer into the Depositary's account maintained at the Book- Entry Transfer Facility (as described in the Offer to Purchase), all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. If holders of Shares wish to tender, but it is impracticable for them to forward their Share Certificates or other required documents on or prior to the Expiration Date or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures specified in Section 3 of the Offer to Purchase. The Purchaser will not pay any commissions or fees to any broker, dealer or other person (other than to the Depositary and the Information Agent (as described in the Offer to Purchase)) for soliciting tenders of Shares pursuant to the Offer. The Purchaser will, however, upon request, reimburse brokers, dealers, commercial banks and trust companies for customary clerical and mailing expenses incurred in forwarding any of the enclosed materials to clients. The Purchaser will pay or cause to be paid any stock transfer taxes payable on the transfer of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to the Information Agent, at its address and telephone numbers set forth on the back cover of the Offer to Purchase. Additional copies of the enclosed materials may be obtained from the Information Agent. Very truly yours, [Georgeson & Company Inc. Logo] NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL MAKE YOU OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE PARENT, THE COMPANY, THE DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. ENCLOSURES 2 EX-99.A5 6 LETTER TO CLIENTS Exhibit (a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) OF STEEL OF WEST VIRGINIA, INC. AT $10.75 NET PER SHARE BY SWVA ACQUISITION, INC. A WHOLLY OWNED SUBSIDIARY OF ROANOKE ELECTRIC STEEL CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN STANDARD TIME, ON TUESDAY, DECEMBER 15, 1998, UNLESS THE OFFER IS EXTENDED. November 17, 1998 To Our Clients: Enclosed for your consideration is an Offer to Purchase, dated November 17, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal relating to an offer by SWVA Acquisition, Inc., a Virginia corporation (the "Purchaser") and a wholly owned subsidiary of Roanoke Electric Steel Corporation, a Virginia corporation (the "Parent"), to purchase all of the outstanding shares of Common Stock, $0.01 par value per share (the "Shares"), of Steel of West Virginia, Inc., a Delaware corporation (the "Company"), and the associated rights to purchase Common Stock of the Company (the "Rights") issued pursuant to the Rights Agreement dated as of March 19, 1997, between the Company and Continental Stock Transfer and Trust Company, as Rights Agent, as amended on November 10, 1998 , at a purchase price of $10.75 per Share, net to the seller in cash without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which together, as amended or supplemented from time to time, constitute the "Offer"). Unless the context otherwise requires, all references herein to Shares include the associated Rights. We are the holder of record of Shares held by us for your account. A tender of such Shares can be made only by us as the holder of record and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Shares held by us for your account. We request instructions as to whether you wish to have us tender on your behalf any or all of such Shares held by us for your account, pursuant to the terms and subject to the conditions set forth in the Offer to Purchase. Your attention is directed to the following: 1. The tender price is $10.75 per share, net to the seller in cash without interest thereon. 2. The Offer is made for all of the outstanding Shares, and is conditioned upon, among other things, Shares representing more than 50% of the voting power (determined on a fully-diluted basis) of all securities of the Company entitled to vote generally in the election of directors or in a merger being validly tendered and not properly withdrawn prior to the expiration of the Offer (excluding Shares issuable pursuant to the Stock Option Agreement, as defined in the Offer to Purchase). The Offer is also subject to other terms and conditions set forth in the Offer to Purchase. 3. The Board of Directors of the Company has unanimously determined that each of the transactions contemplated by the Merger Agreement (as defined below) including each of the Offer and the Merger (as defined below), are fair to and in the best interests of the stockholders of the Company and unanimously recommends that holders of the Shares accept the Offer and tender their Shares to the Purchaser. 4. The Offer and withdrawal rights will expire at 12:00 midnight, Eastern Standard Time, on Tuesday, December 15, 1998, unless the Offer is extended. 5. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares pursuant to the Offer. The Offer is being made solely by the Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares. The Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If the Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, the Purchaser will make a good faith effort to comply with any such state statute. If, after such good faith effort, the Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) any holders of Shares in such state. In any jurisdiction whose securities, "blue sky" or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed made on behalf of the Purchaser by or one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. If you wish to have us tender any or all of your Shares, please instruct us by completing, executing and returning to us the instruction form contained in this letter. If you authorize a tender of your Shares, all such Shares will be tendered unless otherwise specified in such instruction form. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. 2 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) OF STEEL OF WEST VIRGINIA, INC. The undersigned acknowledge(s) receipt of your letter enclosing the Offer to Purchase dated November 17, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal pursuant to an offer by SWVA Acquisition, Inc., a Virginia corporation and a wholly owned subsidiary of Roanoke Electric Steel Corporation, a Virginia corporation, to purchase all outstanding shares of Common Stock, $0.01 par value per share (including the associated Common Stock purchase rights) ("Shares"), of Steel of West Virginia, Inc., a Delaware corporation, at a price of $10.75 per Share net to the seller in cash without interest thereon, upon the terms and subject to the conditions set forth in the Offer. This will instruct you to tender the number of Shares indicated below (or, if no number is indicated below, all Shares) that are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal furnished to the undersigned. NUMBER OF SHARES TO BE SIGN HERE TENDERED* ---------------------------------- SHARES: -------------------------- ---------------------------------- SIGNATURE(S) ACCOUNT NUMBER: ------------------ ---------------------------------- ---------------------------------- Dated , 199 ---------- - ---------------------------------- PLEASE PRINT NAME(S) ---------------------------------- ---------------------------------- ADDRESS ---------------------------------- AREA CODE AND TELEPHONE NUMBER ---------------------------------- TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER - ------- * Unless otherwise indicated, it will be assumed that all of your Shares held by us for your account are to be tendered. 3 EX-99.A6 7 SUBSTITUTE FORM W-9 Exhibit (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER -- Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. - ----------------------------------- -----------------------------------
GIVE THE NAME AND SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - --------------------------------------------- 1. An individual's account The individual 2. Two or more individuals The actual owner (joint account) of the account or, if combined funds, any one of the individuals(2) 3. Husband and wife (joint The actual owner account) of the account or, if joint funds, either person(2) 4. Custodian account of a The minor(3) minor (Uniform Gift to Minors Act) 5. Adult and minor (joint The adult or, if account) the minor is only contributor, the minor(1) 6. Account in the name of The ward, minor, guardian or committee or incompetent for a designated ward, person(4) minor, or incompetent person 7. a. The usual revocable The grantor- savings trust account trustee(1) (grantor is also trustee) b. So-called trust The actual account that is not a owner(1) legal or valid trust under State law 8. Sole proprietorship The owner(5) account - ---------------------------------------------
GIVE THE NAME AND EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF-- --- 9. A valid trust, estate, Legal entity (Do or pension trust not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(1) 10. Corporate account The organization 11. Religious, charitable, The organization or educational organization account 12. Partnership account The partnership held in the name of the business 13. Association, club, or The organization other tax-exempt organization 14. A broker or registered The broker or nominee nominee 15. Account with the The public Department of entity Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments ---
(1) List first and circle the name of the legal trust, estate, or pension trust. (2) List first and circle the name of the person whose number you furnish. (3) Circle the minor's name and furnish the minor's social security number. (4) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (5) Show the name of the owner. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a TIN or you don't know your number, obtain Internal Revenue Service Form SS-5, Application for a Social Security Number Card, or Form SS- 4, Application for Employer Identification Number, at your local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: . A corporation. . A financial institution. . An organization exempt from tax under section 501(a), or an individual retirement plan. . The United States or any agency or instrumentality thereof. . A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. . A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. . An international organization or any agency, or instrumentality thereof. . A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. . A real estate investment trust. . A common trust fund operated by a bank under section 584(a). . An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). . An entity registered at all times under the Investment Company Act of 1940. . A foreign central bank of issue. . A middleman known in the investment community as a nominee or who is listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: . Payments to nonresident aliens subject to withholding under section 1441. . Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. . Payments of patronage dividends where the amount received is not paid in money. . Payments made by certain foreign organizations. . Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: . Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. . Payments of tax-exempt interest (including exempt-interest dividends under section 852). . Payments described in section 6049(b)(5) to nonresident aliens. . Payments on tax-free covenant bonds under section 1451. . Payments made by certain foreign organizations. . Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. IF YOU ARE A NONRESIDENT ALIEN OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS). Certain payments other than interest dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Beginning January 1, 1984, payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to include any portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an under-payment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.A7 8 FORM OF SUMMARY ADVERTISEMENT 11/17/98 Exhibit (a)(7) Form of Summary Advertisement as published on November 17, 1998. This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made solely by the Offer to Purchase dated November 17, 1998, and the related Letter of Transmittal, and is being made to all holders of Shares, except in any jurisdiction where the making of such would be illegal. The Purchaser is not aware of any state in which the making of the Offer is prohibited by administrative or judicial action pursuant to a state statute. If the Purchaser becomes aware of any state where the making of the Offer is so prohibited, the Purchaser will make a good faith effort to comply with any such statute or seek to have such statute declared inapplicable to the Offer. If, after such good faith effort, the Purchaser cannot comply with any applicable statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) holders of Shares in such state. In any jurisdiction whose securities laws or blue sky laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by one or more registered brokers or dealers licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) OF STEEL OF WEST VIRGINIA, INC. AT $10.75 NET PER SHARE BY SWVA ACQUISITION, INC. A WHOLLY-OWNED SUBSIDIARY OF ROANOKE ELECTRIC STEEL CORPORATION SWVA Acquisition, Inc., a Virginia corporation (the "Purchaser") and a wholly- owned subsidiary of Roanoke Electric Steel Corporation, a Virginia corporation (the "Parent"), is offering to purchase any and all of the outstanding shares of Common Stock, par value $0.01 per share (including the associated common stock purchase rights) ("Shares"), of Steel of West Virginia, Inc., a Delaware corporation (the "Company"), at a purchase price of $10.75 per Share, net to the seller in cash without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated November 17, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together, as amended or supplemented from time to time, constitute the "Offer"). THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN STANDARD TIME, ON TUESDAY, DECEMBER 15, 1998, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SHARES REPRESENTING MORE THAN 50% OF THE VOTING POWER (DETERMINED ON A FULLY-DILUTED BASIS) OF ALL SECURITIES OF THE COMPANY ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS OR IN A MERGER BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER (THE "MINIMUM CONDITION"). SEE SECTIONS 1 AND 15 OF THE OFFER TO PURCHASE FOR ADDITIONAL TERMS AND CONDITIONS OF THE OFFER. The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of November 10, 1998 (as amended or supplemented from time to time, the "Merger Agreement"), among the Company, the Purchaser and the Parent pursuant to which, following the consummation of the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company (the "Merger"), with the Company continuing as the surviving corporation (the "Surviving Corporation"). At the effective time of the Merger (the "Effective Time"), each Share (other than Shares held by the Parent, the Purchaser or any wholly-owned subsidiary of the Parent or the Purchaser or held in treasury of the Company, which will be canceled with no payment being made in respect thereto, and other than Shares, if any, held by stockholders who object to the Merger and demand a right to receive payment of the fair value of such stockholders' Shares in accordance with Section 262 of the Delaware General Corporation law (the "DGCL"), unless such right has been withdrawn or otherwise lost ("Dissenting Shares")) then issued and outstanding will, by virtue of the Merger and without any action by the holder thereof, be converted into the right to receive $10.75 in cash or any higher price that may be paid pursuant to the Offer, payable to the holder thereof, without interest thereon, upon the surrender of the certificate formerly representing such Share in the manner described in the Merger Agreement, less any required withholding taxes. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT EACH OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE OFFER AND THE MERGER, ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES TO THE PURCHASER. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by First Union National Bank (the "Depositary") of (i) certificates for such Shares ("Share Certificates") or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or an Agent's Message, as set forth in the Offer to Purchase in connection with a book-entry transfer), and (iii) any other documents required by the Letter of Transmittal. "Expiration Date" means 12:00 Midnight, Eastern Standard Time ("EST"), on Tuesday, December 15, 1998, or, if the Purchaser extends the period during which the Offer is open, such later time and date at which the Offer expires. The Purchaser may, under the circumstances described in the Offer to Purchase, extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary, followed as promptly as practicable by public announcement no later than 9:00 A.M., EST, on the next business day after the previously scheduled Expiration Date. THE PURCHASER HAS NO OBLIGATION TO PAY INTEREST ON THE PURCHASE PRICE OF TENDERED SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING PAYMENT FOR SUCH SHARES. If, on the Expiration Date, the conditions to the Offer (the "Offer Conditions") have not been satisfied or waived, the Purchaser will have the right, in its sole discretion, to extend the Offer for one or more periods not to exceed an aggregate of thirty business days, and, if all of the Offer Conditions have been satisfied or waived and less than 90% of the outstanding Shares have been tendered in the Offer and not withdrawn, then the Purchaser will have the additional right, in its sole discretion, so long as the Purchaser and the Parent each waive in writing the satisfaction of each of the Offer Conditions, to extend the Offer for one or more periods not to exceed an aggregate of twenty business days. Notwithstanding the foregoing, however, the Purchaser may not extend the Expiration Date beyond February 28, 1999 (the "Outside Date") without the consent of the Company. During any such extension, subject to the right of tendering stockholders to withdraw their Shares, all Shares previously tendered and not withdrawn will remain subject to the Offer. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares pursuant to the Offer. If for any reason whatsoever acceptance for payment of or payment for any Shares tendered pursuant to the Offer is delayed or the Purchaser is unable to accept for payment or pay for Shares tendered pursuant to the Offer, then without prejudice to the Purchaser's rights set forth herein, the Depositary may nevertheless, on behalf of the Purchaser and subject to Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), retain tendered Shares, and such Shares may not be withdrawn except to the extent that the tendering stockholder is entitled to and duly exercises withdrawal rights as described in Section 4 of the Offer to Purchase. Any such delay in acceptance for payment will be accompanied by an extension of the Offer to the extent required by law. If any tendered Shares are not accepted for payment for any reason or if Share Certificates are submitted for more Shares than are tendered, Share Certificates evidencing unpurchased or untendered Shares will be returned without expense to the tendering stockholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3 of the Offer to Purchase, such Shares will be credited to an account maintained at the Book-Entry Transfer Facility), as promptly as practicable following the expiration, termination or withdrawal of the Offer. Except as set forth in Section 4 of the Offer to Purchase, tenders of Shares made pursuant to the Offer are irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time after the Outside Date. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If Share Certificates to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution (as defined in Section 3 of the Offer to Purchase) unless such Shares have been tendered for the account of any Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer set forth in Section 3 of the Offer to Purchase, the notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination will be final and binding. Withdrawals of Shares may not be rescinded. None of the Purchaser, the Parent, any of their affiliates or assigns, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. Withdrawn Shares, however, may be re-tendered at any time prior to the Expiration Date by following the procedures described in Section 3 of the Offer to Purchase. The information required to be disclosed by Rule 14d-6(e)(1)(vii) under the Exchange Act is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided its stockholder list and security position listings to the Purchaser for the purpose of disseminating the Offer to stockholders. The Offer to Purchase and the related Letter of Transmittal and, if required, other relevant materials, will be mailed to stockholders whose names appear on the Company's stockholder list and will be furnished for subsequent transmittal to beneficial owners of Shares, brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security listing. STOCKHOLDERS ARE URGED TO READ THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR SHARES. Requests for copies (at the Purchaser's expense) of the Offer to Purchase or the related Letter of Transmittal may be directed to the Information Agent at its address and telephone numbers set forth below. The Purchaser will not pay any fees or commissions to brokers, dealers or other persons (other than the Information Agent and the Depositary) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: [Georgeson & Company Inc. Logo] Wall Street Plaza New York, New York 10005 Banks and Brokers Call Collect: (212)440-9800 ALL OTHERS CALL TOLL-FREE:(800) 223-2064 November 17, 1998 EX-99.B1 9 COMMITMENT LETTER-FIRST UNION NATIONAL BANK Exhibit (b)(1) Commitment Letter, dated November 5, 1998, from First Union National Bank to Roanoke Electric Steel Corporation. November 5, 1998 Roanoke Electric Steel Corporation 102 Westside Boulevard Roanoke, Virginia 24017 Attention: Mr. John E. Morris Vice President-Finance Gentlemen: Roanoke Electric Steel Corporation (the "Company") has advised First Union National Bank ("First Union") that the Company intends to acquire Steel of West Virginia, Inc. ("Steel of West Virginia") by merger or stock/asset acquisition (the "Steel Acquisition") pursuant to merger or stock/asset acquisition documents (the "Acquisition Documents") to be negotiated and entered into between the Company and Steel of West Virginia. Based on First Union's understanding of the proposed transaction, First Union anticipates that the Company would enter into a Credit Agreement with certain financial institutions, having substantially the terms set forth on the summary of terms and conditions attached hereto (the "Term Sheet"), providing for credit facilities in an aggregate amount not to exceed $180 million (the "Facilities"), up to $30 million of which would be a revolving credit facility and up to $150 million of which would be a term loan facility. First Union understands that the borrowings under the Facilities will provide funds sufficient to enable the Company to consummate the Steel Acquisition, to refinance certain existing indebtedness of the Company, to pay related fees and expenses and to provide for working capital and other general corporate purposes. Based upon and subject to the foregoing and to the terms and conditions set forth below and in the Term Sheet, First Union is pleased to confirm its commitment (this "Commitment") (1) to provide up to $10 million of the revolving credit facility and up to $50 million of the term loan facility, and (2) to serve as administrative agent for the syndicate of financial institutions (collectively with First Union, the "Lenders") arranged by the Company. First Union's obligations hereunder are subject to (i) the Company's written acceptance of the letter from First Union to the Company of even date herewith (the "Fee Letter"), pursuant to which the Company agrees to pay First Union certain fees in connection with the Facilities as more particularly set forth therein, (ii) the completion of a definitive credit agreement and related documentation for the Facilities, customary for transactions of this type, in form and substance satisfactory to First Union, (iii) satisfactory completion of all documentation relating to the Steel Acquisition including the Acquisition Documents in form and substance reasonably satisfactory to First Union; (iv) compliance with all applicable laws and regulations (including compliance of this Commitment and the transactions described herein with all applicable federal banking laws, rules and regulations), (v) the absence of any condition in the financial or capital markets prior to the execution of such definitive credit documentation that could reasonably be expected to have a material adverse effect on the primary syndication of the Facilities, (vi) the receipt by the Company of commitments from other Lenders acceptable to First Union for the entire amount of the Facilities not committed for by First Union, and (vii) the satisfaction of all other conditions described herein, in the Term Sheet and in such definitive documentation. It is agreed that First Union will act as the sole administrative agent (the "Agent") for the Lenders under the Facilities. First Union reserves the right to engage the services of its affiliates in furnishing the services to be performed by First Union as contemplated herein and to allocate (in whole or in part) to any such affiliates any fees payable to it in such manner as First Union and its affiliates may agree in their sole discretion. The Company agrees that First Union may share with any of its affiliates and advisors any information related to the transaction or any other matter contemplated hereby, on a confidential basis. First Union reserves the right, prior to or after the execution of definitive documentation with respect to the Facilities, and as part of any syndication thereof or otherwise, to arrange for the assignment of a portion of this Commitment, in accordance with the Term Sheet, to one or more mutually acceptable financial institutions that will become Lenders and party to such definitive documentation. It is agreed that no Lender will receive compensation from or on behalf of the Company outside the terms contained herein and the Fee Letter in order to obtain its commitment to participate in the Facilities. The Company also agrees that First Union and its affiliates will be afforded an opportunity to offer proposals to provide (i) any interest rate caps, currency swaps and other hedging transactions to be entered into by the Company, any of its subsidiaries, or any of their respective affiliates and (ii) cash management, funds transfer, trade, corporate trust and securities services to be obtained by the Company, any of its subsidiaries or their respective affiliates. By executing this letter, the Company agrees to reimburse First Union from time to time on demand for all reasonable out-of-pocket fees, syndication expenses and other expenses (including, but not limited to, the reasonable fees, disbursements and other charges of Mays & Valentine, L.L.P., as counsel to First Union) incurred in connection with the Facilities, including the preparation of definitive documentation for the Facilities and the transactions contemplated hereby. By executing this letter, the Company further agrees to indemnify and hold harmless First Union, each other Lender and each director, officer, employee, attorney and affiliate of First Union and each other Lender (each such person or entity referred to hereafter as an "Indemnified Person") from any losses, claims, costs, damages, expenses or liabilities (or actions, suits or proceedings, including any inquiry or investigation, with respect thereto) to which any Indemnified Person may become liable to any third party, insofar as such losses, claims, costs, damages, expenses or liabilities (or actions, suits or proceedings, including any inquiry or investigation, with respect thereto) arise out of, in any way relate to, or result from, this letter, the Facilities or the transactions contemplated hereby and thereby and to reimburse upon demand each Indemnified Person for any and all legal and other expenses incurred in connection with investigating, preparing to defend or defending any such loss, claim, cost, damage, expense or inquiry or investigation with respect thereto; provided that the Company shall have no obligation under this indemnity provision for liabilities resulting from the gross negligence or willful misconduct of any Indemnified Person. The foregoing provisions of this paragraph shall be in addition to any right that an Indemnified Person shall have at common law or otherwise. No Indemnified Person shall be responsible or liable for consequential damages which may be alleged as a result of this letter or any of the transactions referred to herein. The provisions of this paragraph shall remain in full force and effect until the definitive documentation shall be executed and delivered and notwithstanding the termination of this letter or the commitment of First Union hereunder or the failure of the Facilities, or either of them, to close. Except as required by applicable law, this letter, the Term Sheet, the Fee Letter and the contents hereof and thereof will not be disclosed by the Company or any of its subsidiaries to any third person or entity without the prior written consent of First Union, other than to the Company's attorneys, financial advisors and accountants, in each case in connection with the Company's evaluation hereof and to the extent necessary in the Company's reasonable judgment. The Company acknowledges and agrees that First Union may share with its affiliates, on a confidential basis, any information relating to the Facilities and the Company and its subsidiaries. First Union may disclose information relating to the Facilities to Gold Sheets and other similar bank ----------- trade publications, with such information to consist of deal terms and other information customarily found in such publications. This Commitment shall terminate at 5:00 p.m. (Roanoke, Virginia time) on November 9, 1998, unless this Commitment is accepted by the Company in writing prior to such time and, if accepted prior to such time, shall expire at the earlier of (i) consummation of the Steel Acquisition or another transaction or series of transactions in which the Company acquires all or a substantial portion of the stock or assets of Steel of West Virginia, (ii) termination of the Acquisition Documents regarding the Acquisition, (iii) the occurrence of any event that has, or could be expected to have, a material adverse effect on the business, properties, operations or conditions (financial or otherwise) of the Company or any of its subsidiaries or Steel of West Virginia, and (iv) 5:00 p.m. (Roanoke, Virginia time) on February 28, 1999, if the closing of the Steel Acquisition and the Facilities shall not have occurred by such time. This Commitment, the Term Sheet and the Fee Letter shall be governed by and construed in accordance with the internal laws of the Commonwealth of Virginia without reference to conflict of law principles thereof, and together constitute the entire agreement between the parties relating to the subject matter hereof and thereof and supersede any previous agreement, written or oral, between the parties with respect to the subject matter hereof and thereof. This Commitment supersedes any prior or contemporaneous agreement or understanding between any parties hereto with respect to the subject matter hereof. No party or person has been authorized by First Union to make any oral or written statements inconsistent with this letter. This Commitment may not be assigned without the prior written consent of First Union. This letter may be executed in any number of counterparts by the parties hereto, each of which so executed shall be deemed to be an original binding on such parties, and all of which taken together shall constitute one and the same instrument. This letter replaces and supersedes any and all earlier commitment letters delivered to the Company by First Union in connection with the proposed Steel Acquisition and all such earlier commitment letters are of no further force and effect. If the Company is in agreement with the foregoing, please sign the enclosed copy of this Commitment and return it to First Union, together with an executed copy of the Fee Letter, by no later than 5:00 p.m. (Roanoke, Virginia time) on November 9, 1998. Sincerely, FIRST UNION NATIONAL BANK By: /s/ Laurence M. Levy ------------------------------ Name: Laurence M. Levy ---------------------------- Title: Vice President --------------------------- Agreed to and accepted this 9th day of November, 1998 ROANOKE ELECTRIC STEEL CORPORATION By: /s/ John E. Morris ------------------------------- Name: John E. Morris ----------------------------- Title: Vice President - Finance ----------------------------- ROANOKE ELECTRIC STEEL CORPORATION SUMMARY OF TERMS AND CONDITIONS ---------------------------------- BORROWER: Roanoke Electric Steel Corporation (the "Company") ADMINISTRATIVE AGENT: First Union National Bank ("First Union" or the "Agent") LENDERS: First Union and a group of lenders arranged by the Company and acceptable to the Agent. First Union has committed up to $10 million of the revolving credit facility not to exceed $30 million and up to $50 million of the term loan facility not to exceed $150 million. FACILITIES/AMOUNTS: (1) $30 million five-year revolving credit facility (the "revolving Credit Facility") (2) Up to $150 million ten-year term loan (the "Term Loan Facility") PURPOSE: (1) The proceeds of the Revolving Credit Facility will be used by the Company to provide working capital and for other general corporate purposes. (2) The proceeds of the Term Loan Facility will be used by the Company to finance the acquisition of Steel of West Virginia (the "Steel Acquisition"), to pay related fees and expenses and to refinance certain existing term debt. MATURITY: (1) The Revolving Credit Facility will mature five years after the date of closing. (2) The principal amount of the Term Loan Facility will amortize as provided below, and the Term Loan Facility will mature seven years after the date of closing. SECURITY: The Revolving Credit Facility and the Term Loan Facility will be secured by a first priority, perfected security interest in the accounts, inventory and equipment (and other assets required by the Lenders) of the Company and its subsidiaries, including, without limitation, Steel of West Virginia and its subsidiaries. In the event that no Event of Default (or event or condition which, with the giving of notice or the passage of time, or both, would constitute such an Event of Default) has occurred or exists under the Credit Agreement after the third anniversary of the closing of the Revolving Credit Facility and the Term Loan Facility, the Lenders will, upon request of the Company and the Company's sole expense, release the Lender's security interest in accounts, inventory, equipment and other assets. All such accounts, inventory, equipment and other assets so released will remain subject to the negative pledge provisions of the Credit Agreement. GUARANTORS: The Revolving Credit Facility and the Term Loan Facility will be jointly and severally guaranteed by all operating subsidiaries of the Company, including, without limitation, John W. Hancock, Jr., Incorporated, Socar, Inc., RESCO Steel Products Corporation, Shredded Products Corp., Roanoke Technical Treatment and Services, Inc., Socar of Ohio, Inc., Steel of West Virginia and all operating subsidiaries of Steel of West Virginia, pursuant to one or more guaranty agreements (the "Guaranties") in form and substance acceptable to First Union. UPFRONT FEE: The Company will pay an upfront fee equal to 25 basis points on the aggregate amount of the Facilities payable at closing. The upfront fee will be fully earned and non- refundable once paid. PREPAYMENTS: (1) The Company may prepay amounts outstanding under the Revolving Credit Facility, without premium or penalty (other than breakage costs in the event that any such prepayment occurs during a LIBOR interest period), and reborrow such amounts up to the maximum amount of the Revolving Credit Facility upon the terms and subject to the conditions to be set out in the Credit Agreement. (2) The Company may prepay amounts outstanding under the Term Loan Facility, without premium or penalty (other than breakage costs in the event that any such prepayment occurs during a LIBOR interest period), upon the terms and subject to the conditions to be set out in the Credit Agreement, and, except as provided in the next sentence, all such prepayments of the Term Loan Facility will be applied to reduce the remaining payments of principal due under the Term Loan Facility in their inverse chronological order of maturity. In the event that the Company makes a prepayment of principal of the Term Loan Facility equal to or greater than $10.0 million, such prepayment will be applied to reduce by an equal amount each of the remaining payments of principal due under the Term Loan Facility. VOLUNTARY REDUCTION OF REVOLVING CREDIT COMMITMENT: The Company will have the option from time to time during the term of the Revolving Credit Facility to reduce the maximum amount available under the Revolving Credit Facility (with a corresponding reduction in the facility fee due under the Credit Agreement) upon the terms and subject to the Conditions to be set out in the Credit Agreement, without premium or penalty (other than breakage costs in the event that any such reduction causes a prepayment to occur during a LIBOR interest period). AMORTIZATION OF FACILITIES: There will be no required amortization under the Revolving Credit Facility prior to maturity. The principal amount of the Term Loan Facility will be due and payable in twenty-eight (28) consecutive quarterly installments, the first twenty-seven (27) of which will be based on a ten year amortization schedule and the last of which will be equal to the entire remaining principal balance of the Term Loan Facility. INTEREST RATE OPTIONS: Principal advances under the revolving Credit Facility and the outstanding principal balance of the Term Loan Facility will bear interest, at the option of the Company, at either (i) the Base Rate plus the Applicable Margin, or (ii) Adjusted one, two or three month LIBOR plus the Applicable Margin. The Base Rate means the higher of (i) First Union's Prime Rate, or (ii) the Federal Funds Rate plus 0.50%. Adjusted LIBOR means the London Interbank Offered Rate, as reported by Telerate, adjusted for applicable reserves, if any. Interest rates will be selected and set as provided in the Credit Agreement. Accrued interest on Base Rate Loans will be due and payable quarterly, and accrued interest on LIBOR Loans will be due and payable on the last day of each interest period. The Credit Agreement will include provisions protecting the Lenders in the event of unavailability of funding, illegality, capital adequacy requirements, increased costs, withholding taxes and funding losses. INTEREST RATE MARGINS: The Applicable Margin for Base Rate Loans and LIBOR Loans will vary based on the Net Funded Debt to EBITDA ratio of the Company and its subsidiaries (Funded Debt minus cash and cash equivalents divided by EBITDA) in effect from time to time as provided in the following table:
NET FUNDED BASE RATE LIBOR REVOLVING LIBOR TERM LOAN DEBT TO APPLICABLE CREDIT APPLICABLE EBITDA MARGIN APPLICABLE MARGIN MARGIN ------------------------------------------------------------------------------ Less than 1.00 0.00% 0.30% 0.65% ------------------------------------------------------------------------------ 1.01 to 1.50 0.00% 0.30% 0.85% ------------------------------------------------------------------------------ 1.51 to 2.00 0.00% 0.40% 1.05% ------------------------------------------------------------------------------ 2.01 to 2.50 0.00% 0.50% 1.25% ------------------------------------------------------------------------------ Greater than 2.51 0.00% 0.60% 1.45% ------------------------------------------------------------------------------
Notwithstanding anything to the contrary contained herein, for purposes of determining the Applicable Margin from closing through the end of the second full fiscal quarter of the Company occurring after closing, the Net Funded Debt to EBITDA Ratio will be deemed to be in the 2.01 to 2.50 range. INTEREST RATE PROTECTION: The Company will be required to enter into and maintain an interest rate swap or other hedging transaction with First Union (or other counterparty acceptable to First Union), which covers at least one-half of the Company's floating interest expense exposure under the Term Loan Facility. The swap will be governed by an ISDA Master Agreement, will be secured by all collateral and will be guaranteed by the Guarantor(s) described herein. DEFAULT RATE: After the occurrence and during the existence of an Event of Default under the Credit Agreement, interest on the Revolving Credit Facility and the Term Loan Facility will accrue at a rate equal to the then highest rate (including the Applicable Margin) which may be applicable plus 2.0%. FACILITY FEES: (1) The Company will pay a facility fee with respect to the Revolving Credit Facility based on the maximum amount thereof, which facility fee will vary based on the Net Funded Debt to EBITDA ratio of the Company and its subsidiaries (Funded Debt minus cash and cash equivalents divided by EBITDA) in effect from time to time as provided in the following table:
NET FUNDED DEBT TO EBITDA REVOLVING CREDIT FACILITY FEE ----------------------------------------------------------------------- Less than 1.00 0.125% ----------------------------------------------------------------------- 1.01 to 1.50 0.20% ----------------------------------------------------------------------- 1.51 to 2.00 0.25% ----------------------------------------------------------------------- 2.01 to 2.50 0.30% ----------------------------------------------------------------------- Greater than 2.51 0.35% -----------------------------------------------------------------------
Notwithstanding anything to the contrary contained herein, for the purposes of determining the Revolving Credit Facility Fee from closing through the end of the second full fiscal quarter of the Company occurring after closing, the Net Funded Debt to EBITDA Ratio will be deemed to be in the 2.01 to 2.50 range. The facility fee with respect to the Revolving Credit Facility will be payable quarterly in arrears. REPRESENTATIONS AND WARRANTIES: The Credit Agreement will contain representations and warranties which are usual and customary for borrowers of this size and type or usual and customary for credit facilities of this size, type and purpose, including, but not limited to, representations relating to the following: (a) Organization, Power, Qualification (b) Ownership (c) Authorization (d) Compliance of Agreement, Etc. (e) Compliance with Law, Governmental Approvals (f) Tax Returns and Payments (g) Intellectual Property Matters (h) Environmental Matters (i) ERISA (j) Margin Stock (k) Governmental Regulation (l) Material Contracts (m) Employee Relations (n) Burdensome Provisions (o) Financial Statements (p) No Material Adverse Change (q) Solvency (r) Title to Properties (s) Liens (t) Debt and Contingent Obligations (u) Litigation (v) Absence of Defaults (w) Year 2000 Compliance (x) Accuracy and Completeness of Information FINANCIAL REPORTING: The Credit Agreement will contain provisions requiring the Company to provide periodic financial reports and information with respect to the Company and its subsidiaries, including, but not limited to, provisions requiring the following: (a) Annual, audited financial statements, including, but not limited to, a consolidated balance sheet, profit and loss statement and statement of cash flows, with supporting schedules, and SEC 10K report, as soon as available and in any event within ninety (90) days after the close of each fiscal year of the Company. (b) Quarterly, unaudited financial statements, including, hut not limited to, a consolidated balance sheet, profit and loss statement and statement of cash flows, with supporting schedules, and SEC 10Q report, as soon as available and in any event within forty-five (45) days after the close of each fiscal quarter of the Company. All financial Statements will be in reasonable detail, prepared in conformity with generally accepted accounting principles, applied on a basis consistent with the preceding year, and accompanied by a covenant compliance certificate in form and detail satisfactory to First Union. Such Statements will be certified as to their correctness by a principal financial officer of the Company. AFFIRMATIVE COVENANTS: The Credit Agreement will contain affirmative covenants which are usual and customary for borrowers of this size and type or usual and customary for credit facilities of this size, type and purpose, including but not limited to, affirmative covenants relating to the following: (a) Preservation of Corporate Existence and Related Matters (b) Maintenance of Property (c) Insurance (d) Accounting Methods and Financial Records (e) Payment and Performance of Obligations (f) Compliance with Laws and Approvals (g) Environmental Laws (h) Environmental Liability Insurance (i) Compliance with ERISA (j) Compliance with Agreements (k) Conduct of Business (l) Visits and Inspections (m) Additional Guarantors (n) Year 2000 Compliance (o) Further Assurances NEGATIVE COVENANTS: The Credit Agreement will contain negative covenants which are usual and customary for borrowers of this size and type or usual and customary for credit facilities of this size, type and purpose, including, but not limited to, negative covenants relating to the following: (a) Limitations on Debt (b) Limitations on Contingent Obligations (c) Limitations on Liens (d) Limitation on Loans, Advances, Investments and Acquisitions (e) Limitations on Mergers and Liquidation (f) Limitation on Sale of Assets (g) Limitations on Exchange and Issuance of Capital Stock (h) Transactions with Affiliates (i) Certain Accounting Changes (j) Restrictive Agreements FINANCIAL COVENANTS:The Credit Agreement will contain the following financial covenants: (a) Fixed Charge Coverage Ratio; the ratio, measured quarterly, of Consolidated EBITDA for the four-quarter period ending on the date of measurement to the sum of Consolidated Current Maturities of Long-Term Debt as of the beginning of such four-quarter period and Consolidated Interest Expense for such four-quarter period, will not be less than (i) 1.5 to 1 at any time from closing through October 30, 2001, or (ii) 1.75 to l at October 31, 2001, or at any time thereafter. (b) Funded Debt to Cash Flow Ratio; the ratio, measured quarterly, of Funded Debt to Cash Flow will not be greater than (i) 3.0 to 1 from closing through October 30, 2000, or (ii) 2.5 to 1 at October 31, 2000, or at any time thereafter. "Funded Debt to Cash Flow" shall mean the sum of all funded debt divided by earnings before interest, taxes, depreciation and amortization. (c) Debt to Capital Ratio: the ratio, measured quarterly, of Consolidated Funded Debt to Consolidated Total Capitalization (Consolidated Funded Debt plus Consolidated Net Worth), will not be greater than (i) .60 to 1 at any time from closing through October 30, 1999, (ii) .55 to 1 at October 31, 1999, or at any time thereafter through October 30, 2000, (iii) .50 to 1 at October 31, 2000, or at any time thereafter. (d) Current Ratio: the ratio, measured quarterly, of Consolidated Current Assets to Consolidated Current Liabilities, will not be less than l.5 to l at anytime. EVENTS OF DEFAULT: The Credit Agreement will contain events of default usual and customary for borrowers of this size and type or usual and customary for credit facilities of this size, type and purpose, including, but not limited to, events of default relating to the following: (a) Nonpayment of Principal (b) Other Payment Defaults (c) Misrepresentation (d) Default in Performance of Certain Covenants (e) Default in Performance of Other Covenants (f) Hedging Agreement (g) Debt Cross-Default (h) Other Cross-Defaults (i) Change in Control (j) Voluntary Bankruptcy (k) Involuntary Bankruptcy (l) Failure of Agreements (m) ERISA (n) Judgments CONDITIONS PRECEDENT: The Credit Agreement will contain conditions precedent usual and customary for borrowers of this size and type or usual and customary for credit facilities of this size, type and purpose, including but not limited to, conditions precedent relating to the following: (a) Due authorization, execution, delivery and filing of the Credit Agreement, the Security Agreements, the financing statements, the Guaranties and all other credit documents (b) Consummation of the Steel Acquisition (c) Prepayment and cancellation of existing Bank lines of credit (d) UCC search reports satisfactory to Lenders (e) Corporate certificates and resolutions and legal opinions reasonably satisfactory to the Lenders and their counsel (f) Required approvals and consents (g) Representations and warranties are true and correct as of closing in all material respects (h) Payment of fees due at closing (i) No event or condition in the financial or capital markets that could reasonably be expected to have a material adverse effect on the primary syndication EXPENSES: The Company will pay all reasonable out-of-pocket costs and expenses (including, but not limited to, syndication expenses and the reasonable fees and disbursements of counsel) incurred by First Union in connection with the Revolving Credit Facility and the Term Loan Facility and the enforcement and maintenance of the respective rights of First Union and the Lenders under the Credit Agreement and related documents. VOTING RIGHTS: Lenders representing 100% of the commitments and/or Loans shall be required for changes in commitment amounts, time of payments, interest rates, facility fees and changes in the definition of Majority Lenders. Majority Lender approval will be required for all other modifications or amendments. MAJORITY LENDERS: 66 2/3% PARTICIPATIONS AND ASSIGNMENTS: Lenders will be permitted to assign their commitments in minimum amounts of $10,000,000 subject to the Agent's and (as long as no default or event of default has occurred) the Company's consent, which consent will not be unreasonably withheld. An assignment fee of $3,500 will be paid to the Agent by the assigning Lender with respect to each such assignment. Participations will also be permitted in minimum amounts of $5,000,000 and upon the other terms and subject to the other conditions to be contained in the Credit Agreement; provided that no participant may be granted voting rights except with respect to matters that require the consent of all Lenders. GOVERNING LAW: Commonwealth of Virginia AGENT'S COUNSEL: Mays & Valentine, L.L.P., Richmond, Virginia MISCELLANEOUS: This summary of terms and conditions is intended as a summary only and does not purport to set forth all of the conditions, covenants, representations, warranties and other provisions which will be contained in the Credit Agreement and the other related documentation for the Revolving Credit Facility and the Term Loan Facility described herein. EX-99.B2 10 COMMITMENT LETTER-CRESTAR BANK Exhibit (b)(2) Commitment Letter, dated November 6, 1998, from Crestar Bank to Roanoke Electric Steel Corporation. November 6, 1998 Roanoke Electric Steel Corporation 102 Westside Boulevard Roanoke, Virginia 24017 Attention: Mr. John E. Morris Vice President - Finance Gentlemen: This letter will confirm that Crestar Bank (the "Lender") has committed to provide to Roanoke Electric Steel Corporation (the "Company") up to $5,000,000 of the Revolving Credit Facility and up to $25,000,000 of the Term Loan Facility described in the commitment letter to the Company from First Union National Bank dated November 5, 1998, including the Roanoke Electric Steel Corporation Summary of Terms and Conditions (the "First Union Commitment"). The commitments described above are expressly subject to the Lender's satisfaction with each of the condition's set forth in the First Union Commitment including, without limitation, the completion of a definitive credit agreement and related documentation acceptable to the Lender. Further, we understand that all costs and expenses associated with the closing of the Facilities, including legal fees, will be paid by Roanoke Electric Steel Corporation. Crestar agrees to accept Mays & Valentine as the sole legal counsel for the bank group. Sincerely, s/Martha D. Shifflett Martha D. Shifflett Senior Vice President ACCEPTED: ROANOKE ELECTRIC STEEL CORPORATION By: s/ John E. Morris Title: Vice President - Finance EX-99.B3 11 COMMITMENT LETTER-NATIONSBANK, N.A. Exhibit (b)(3) Commitment Letter, dated November 6, 1998, from NationsBank, N.A. to Roanoke Electric Steel Corporation. November 6, 1998 Roanoke Electric Steel Corporation 102 Westside Boulevard Roanoke, Virginia 24017 Attention: Mr. John E. Morris Vice President - Finance Dear John: This letter will confirm that NationsBank, N.A. (the "Lender") has committed to provide to Roanoke Electric Steel Corporation (the "Company") up to $7.5 million of the Revolving Credit Facility and up to $37.5 million of the Term Loan Facility described in the commitment letter dated November 5, 1998, from First Union National Bank to the Company (the "First Union Commitment Letter"). The Lender's commitments described above are expressly subject to (i) satisfaction of each of the conditions precedent set forth in the First Union Commitment Letter, including, without limitation, the completion of a definitive credit agreement and related documentation acceptable to the Lender, and (ii) each of the other terms and conditions contained in the First Union Commitment Letter. Sincerely, s/ James D. Cockey James D. Cockey Senior Vice President bc EX-99.B4 12 COMMITMENT LETTER - WACHOVIA BANK, N.A. Exhibit (b)(4) Commitment Letter, dated November 9, 1998, from Wachovia Bank, N.A., to Roanoke Electric Steel Corporation. November 9, 1998 Roanoke Electric Steel Corporation 102 Westside Boulevard Roanoke, Virginia 24017 Attention: Mr. John E. Morris Vice President - Finance Gentlemen: Reference is made to that certain letter dated November 5, 1998 from First Union National Bank to Roanoke Electric Steel Corporation, a copy of which is attached hereto as Exhibit A (the "First Union Commitment"). Unless otherwise defined herein, capitalized terms used in this letter which are defined in the First Union Commitment shall have the meaning set forth therein. Based upon and subject to the terms and conditions set forth below and in the Term Sheet (as modified herein), Wachovia is pleased to confirm its commitment (this "Wachovia Commitment") to provide up to $7.5 million of the revolving credit facility and up to $37.5 million of the term loan facility. Wachovia's obligations hereunder are subject to (i) the Company's written acceptance of this commitment letter, (ii) the completion of a definitive credit agreement and related documentation for the Facilities, customary for transactions of this type, in form and substance satisfactory to Wachovia, (iii) completion of all documentation relating to the Steel Acquisition including the Acquisition Documents in form and substance reasonably satisfactory to Wachovia; (iv) compliance with all applicable laws and regulations (including compliance of the Wachovia commitment and the transactions described herein with all applicable federal banking laws, rules and regulations), (v) the absence of any material adverse condition or change in the financial or capital markets prior to the execution of such definitive credit documentation, (vi) the receipt by the Company of commitments from other Lenders acceptable to Wachovia for the entire amount of the Facilities not committed for by Wachovia, and (vii) the satisfaction, in Wachovia's discretion, of all other conditions described herein, in the Term Sheet (as modified herein) and in such definitive documentation. By executing this letter, the Company agrees to indemnify and hold harmless Wachovia and each director, officer, employee, attorney and affiliate of Wachovia (each such person or entity referred to hereinafter as a "Indemnified Person") from any losses, claims, costs, damages, expenses or liabilities (or actions, suits or proceedings, including any inquiry or investigation, with respect thereto) to which any Indemnified Person may become liable to any third party, insofar as such losses, claims, costs, damages, expenses or liabilities (or actions, suits or proceedings, including any inquiry or investigation, with respect thereto) arise out of, in any way relate to, or result from, this letter, the Facilities or the transactions contemplated hereby and thereby and to reimburse upon demand each Indemnified Person for any and all legal and other expenses incurred in connection with investigating, preparing to defend or defending any such loss, claim, cost, damage, expense or inquiry or investigation with respect thereto; provided that the Company shall have no obligation under this indemnity provision for liabilities resulting from the gross negligence or willful misconduct of any Indemnified Person. The foregoing provisions of this paragraph shall be in addition to any right that Indemnified Person shall have at common law or otherwise. No Indemnified Person shall be responsible or liable for consequential damages which may be alleged as a result of this letter or any of the transactions referred to herein. The provisions of this paragraph shall remain in full force and effect until the definite documentation shall be executed and delivered and notwithstanding the termination of this letter or the commitment of Wachovia hereunder or the failure of the Facilities or either of them, to close. The Term Sheet, as attached to the First Union Commitment shall be amended as follows: 1. The reference to "First Union" in the last line of the paragraph entitled "Guarantors" shall be changed to "the Lenders". 2. The paragraph entitled "Upfront Fee" shall be amended and restated to read in its entirety as follows: "The Company will pay to First Union, for the ratable benefit of each of the Lenders, an Upfront Fee equal to 25 basis points on the aggregate amount of the Facilities; payable at closing. The Upfront Fee will be fully earned and non-refundable once paid. 3. The paragraph entitled "Interest Rate Protection" shall be amended to provide that the reference to "First Union" in the second line of said paragraph shall be replaced by the phrase "one or more of the Lenders"; and the references to "First Union" in the third line of said paragraph shall be replaced with the phrase "the Lenders". 4. The paragraph entitled "Expenses" shall be amended to add after the term "First Union" the phrase "and the Lenders". 5. The paragraph entitled "Voting Rights" shall be amended to provide that Lenders representing 100% of the commitments and/or loans shall be required for any changes or releases in or to any collateral, except for the automatic release referenced in the Security section of the Term Sheet, or the release of any Guarantor. The Company further agrees that Wachovia and its affiliates will be afforded an opportunity to offer proposals to provide (i) any interest rate caps, currency swaps and other hedging transactions to be entered into by the Company, any of its subsidiaries, or any of their respective affiliates and (ii) cash management, funds transfer, trade, corporate trust and securities services to be obtained by the Company, any of its subsidiaries or their respective affiliates. The Company shall reimburse Wachovia from time to time on demand for all reasonable out-of-pocket fees and other expenses (including, but not limited to, the reasonable fees, disbursements and other charges of counsel to Wachovia) incurred in connection with the Facilities, including the preparation and/or review of definitive documentation for the Facilities and the transactions contemplated hereby. The Wachovia Commitment shall terminate at 5:00 p.m. (Roanoke, Virginia time) on November 13,1998, unless the Wachovia Commitment is accepted by the Company in writing prior to such time and, if accepted prior to such time, shall expire at the earlier of (i) consummation of the Steel Acquisition or another transaction or series of transactions in which the Company acquires all or a substantial portion of the stock or assets of Steel of West Virginia, (ii) termination of the Acquisition Documents regarding the Steel Acquisition, (iii) the occurrence of any event that has, or could be expected to have, a material adverse effect on the business, properties, operations or conditions (financial or otherwise) of the Company or any of its subsidiaries or Steel of West Virginia, and (iv) 5:00 p.m. (Roanoke, Virginia time) on February 28, 1999, if the closing of the Steel Acquisition and the Facilities shall not have occurred by such time. The Wachovia Commitment and the Term Sheet (as modified herein) shall constitute the entire agreement between the parties relating to the subject matter hereof and thereof and supersede any previous agreement, written or oral, between the parties with respect to the subject matter hereof and thereof. No party or person has been authorized by Wachovia to make any oral or written statements inconsistent with this letter. The Wachovia Commitment may not be assigned by the Company or relied upon by any person or entity (other than the Company) without the prior written consent of Wachovia. [The remainder of this page intentionally left blank] This letter replaces and supersedes any and all earlier commitment letters delivered to the Company by Wachovia in connection with the proposed Steel Acquisition and all such earlier commitment letters are of no further force or effect. Sincerely, WACHOVIA BANK, N.A. By: /s/ Michael H. Trainor ---------------------------- Name: Michael H. Trainor -------------------------- Title: Vice President ------------------------- Agreed to and accepted this 9th day of November, 1998. ROANOKE ELECTRIC STEEL CORPORATION By: /s/ John E. Morris ----------------------------- Name: John E. Morris --------------------------- Title: Vice President - Finance -------------------------- EX-99.C1 13 AGREEMENT AND PLAN OF MERGER DATED 11/10/98 Exhibit (c)(1) Agreement and Plan of Merger, dated as of November 10, 1998, among Roanoke Electric Steel Corporation, SWVA Acquisition, Inc., and Steel of West Virginia, Inc. AGREEMENT AND PLAN OF MERGER AMONG ROANOKE ELECTRIC STEEL CORPORATION SWVA ACQUISITION, INC. AND STEEL OF WEST VIRGINIA, INC. DATED AS OF NOVEMBER 10, 1998 TABLE OF CONTENTS
ARTICLE PAGE - ------- ---- ARTICLE I THE OFFER................................................................... 2 Section 1.1: The Offer..................................................... 2 Section 1.2: Company Action................................................ 3 ARTICLE II THE MERGER.................................................................. 4 Section 2.1: The Merger.................................................... 4 Section 2.2: Closing; Effective Time....................................... 5 Section 2.3: Effects of the Merger......................................... 5 Section 2.4: Certificate of Incorporation; By-Laws......................... 5 Section 2.5: Directors and Officers of the Surviving Corporation........... 5 Section 2.6: Conversion of Securities...................................... 6 Section 2.7: Treatment of Options.......................................... 6 Section 2.8: Dissenting Shares and Section 262 Shares...................... 7 Section 2.9: Surrender of Shares; Stock Transfer Books..................... 7 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................... 9 Section 3.1: Organization and Qualification; Subsidiaries.................. 9 Section 3.2: Certificate of Incorporation and By-Laws...................... 9 Section 3.3: Capitalization................................................ 9 Section 3.4: Authority Relative to This Agreement.......................... 10 Section 3.5: No Conflict; Required Filings and Consents.................... 11 Section 3.6: Compliance.................................................... 12 Section 3.7: SEC Filings; Financial Statements............................. 12 Section 3.8: Absence of Certain Changes or Events.......................... 13 Section 3.9: Absence of Litigation......................................... 14 Section 3.10: Employee Benefit Plans........................................ 14 Section 3.11: Tax Matters................................................... 15 Section 3.12: Offer Documents; Proxy Statement.............................. 17 Section 3.13: Environmental Matters......................................... 17 Section 3.14: Title and Condition of Properties............................. 19 Section 3.15: Brokers....................................................... 21 Section 3.16: Intellectual Property......................................... 21 Section 3.17: Contracts..................................................... 22 Section 3.18: Potential Conflicts of Interest............................... 23 Section 3.19: Year 2000 Compliance.......................................... 23
i ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER....................... 24 Section 4.1: Corporate Organization......................................... 24 Section 4.2: Authority Relative to This Agreement........................... 24 Section 4.3: No Conflict; Required Filings and Consents..................... 24 Section 4.4: Offer Documents; Proxy Statement............................... 25 Section 4.5: Brokers........................................................ 25 Section 4.6: Funds.......................................................... 25 Section 4.7: No Prior Activities............................................ 26 ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER....................................... 26 Section 5.1: Conduct of Business of the Company Pending the Merger.......... 26 Section 5.2: No Amendment of the Rights Agreement........................... 28 ARTICLE VI ADDITIONAL AGREEMENTS........................................................ 28 Section 6.1: Stockholders Meeting........................................... 28 Section 6.2: Proxy Statement................................................ 29 Section 6.3: Company Board Representation; Section 14(f).................... 29 Section 6.4: Access to Information; Confidentiality......................... 30 Section 6.5: No Solicitation of Transactions................................ 31 Section 6.6: Employee Matters............................................... 32 Section 6.7: Directors' and Officers' Indemnification and Insurance......... 33 Section 6.8: Nomination of Timothy R. Duke.................................. 34 Section 6.9: Notification of Certain Matters................................ 34 Section 6.10: Further Action; Reasonable Best Efforts........................ 34 Section 6.11: Public Announcements........................................... 35 Section 6.12: Disposition of Litigation...................................... 35 Section 6.13: Commitment Letter.............................................. 35 ARTICLE VII CONDITIONS OF MERGER......................................................... 36 Section 7.1: Conditions to Obligation of Each Party to Effect the Merger.... 36 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER............................................ 37 Section 8.1: Termination.................................................... 37 Section 8.2: Effect of Termination.......................................... 38 Section 8.3: Fees and Expenses.............................................. 38 Section 8.4: Amendment...................................................... 39
ii Section 8.5: Waiver.......................................................... 39 ARTICLE IX GENERAL PROVISIONS............................................................ 39 Section 9.1: Non-Survival of Representations, Warranties and Agreements...... 39 Section 9.2: Notices......................................................... 39 Section 9.3: Certain Definitions............................................. 41 Section 9.4: Severability.................................................... 42 Section 9.5: Entire Agreement; Assignment.................................... 42 Section 9.6: Parties in Interest............................................. 42 Section 9.7: Governing Law................................................... 42 Section 9.8: Headings........................................................ 42 Section 9.9: Counterparts; Facsimile Signatures.............................. 43 Section 9.10: Specific Performance............................................ 43 ANNEX A............................................................................ 45
iii AGREEMENT AND PLAN OF MERGER, dated as of November 10, 1998 (this "Agreement"), among Roanoke Electric Steel Corporation, a Virginia corporation ("Parent"), SWVA Acquisition, Inc., a Virginia corporation and a wholly owned subsidiary of Parent ("Purchaser"), and Steel of West Virginia, Inc., a Delaware corporation (the "Company"). B A C K G R O U N D A. The Board of Directors of the Company has determined that it is in the best interests of the Company and the stockholders of the Company to enter into this Agreement with Parent and Purchaser, providing for a tender offer (as may be amended from time to time, the "Offer") for all of the issued and outstanding shares of common stock, par value $0.01 per share, of the Company (being 6,010,795) (the "Shares"), including the associated rights to purchase common stock of the Company (the "Rights") issued pursuant to the Rights Agreement dated as of March 19, 1997, between Steel of West Virginia, Inc., and Continental Stock Transfer & Trust Company, as Rights Agent (the "Rights Agreement"), to be made by Purchaser, followed by the merger of Purchaser with the Company (the "Merger") in accordance with the General Corporation Law of the State of Delaware (the "DGCL"), and the Virginia Stock Corporation Act (the "VSCA"), in each case upon the terms and subject to the conditions set forth herein. B. The Board of Directors of Parent and Purchaser have each approved the Offer and the Merger, in each case, upon the terms and subject to the conditions set forth herein. C. Concurrently with the execution and delivery of this Agreement, and as an inducement to Parent and Purchaser to enter into this Agreement, the Company has entered into a Stock Option Agreement with Parent and Purchaser (the "Stock Option Agreement"), pursuant to which the Company has granted to Purchaser an option to purchase Shares upon the terms and subject to the conditions set forth in the Stock Option Agreement. D. Concurrently with the execution and delivery of this Agreement, and as an inducement to Parent and Purchaser to enter into this Agreement, certain stockholders of the Company have each entered into a Stock Tender and Voting Agreement, dated as of the date hereof, among Parent, Purchaser and the stockholders named therein providing, among other things, that each such stockholder will tender such Shares beneficially owned by such stockholder pursuant to the Offer and will vote such Shares beneficially owned by such stockholder in favor of the Merger. A G R E E M E N T NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Purchaser and the Company hereby agree as follows: ARTICLE I THE OFFER SECTION 1.1: THE OFFER. ----------------------- (a) Provided that this Agreement shall not have been terminated in accordance with Section 8.1 and no event shall have occurred and no circumstance shall exist that would result in a failure to satisfy any of the conditions set forth in Annex A hereto (the "Offer Conditions," as defined in Annex A), Purchaser shall, as soon as reasonably practicable after the date hereof (and in any event within five business days from the date of public announcement of the execution hereof), commence the Offer to purchase for cash all of the Shares, together with the associated Rights (all references herein to Shares in the context of the transactions contemplated by this Agreement shall be deemed to include such Rights), at a price of $10.75 per Share, net to the seller in cash. The obligation of Purchaser to accept for payment Shares tendered pursuant to the Offer shall be subject to the terms and conditions of this Agreement and to the satisfaction or waiver by Purchaser of the Offer Conditions. Purchaser shall not, without the prior written consent of the Company, (i) decrease the price per Share to be paid in the Offer, change the form of consideration payable in the Offer (other than by adding consideration) or decrease the number of Shares sought in the Offer, (ii) change or amend the Offer Conditions (other than to waive any condition, except that the Minimum Condition (as defined in Annex A) may not be waived without the consent of the Company), (iii) impose additional conditions to the Offer or (iv) amend any other term of the Offer in any manner adverse to the holders of Shares (other than insignificant changes or amendments). The Offer shall expire at 12:00 midnight, Eastern Standard Time, on the 20/th/ business day following commencement of the Offer (such date and time, as may be extended in accordance with the terms hereof, is referred to as the "Expiration Date"); provided, -------- however, that if, on the Expiration Date, the Offer Conditions have not been - ------- satisfied or waived, Purchaser shall have the right, in its sole discretion, to extend the Offer for one or more periods not to exceed an aggregate of thirty business days; provided further that if all of the Offer Conditions have been ---------------- satisfied or waived and less than 90% of the outstanding Shares have been tendered in the Offer and not withdrawn, then Purchaser shall have the additional right, in its sole discretion, so long as Purchaser and Parent each waives in writing the satisfaction of each of the Offer Conditions, to extend the Offer for one or more periods not to exceed an aggregate of twenty business days; and provided further that in no event shall the Expiration Date be ---------------- extended beyond February 28, 1999 (the "Outside Date") without the consent of the Company. The Offer Conditions shall be for the benefit of Purchaser and, except with respect to the Minimum Condition, may be waived by Purchaser, in whole or in part at any time and from time to time, in its sole discretion. (b) As soon as reasonably practicable after the date hereof (and in any event within five business days from the date of public announcement of the execution hereof), Purchaser shall file a Tender Offer Statement on Schedule 14D-1 (together with all amendments and supplements thereto, collectively the "Schedule 14D-1") with respect to the Offer with the Securities and Exchange Commission (the "SEC"). The Schedule 14D-1 shall contain an offer to 2 purchase (together with all amendments and supplements thereto collectively the "Offer to Purchase"), form of the related letter of transmittal, together with all amendments and supplements thereto (collectively the "Letter of Transmittal"), and the form of summary advertisement (which Schedule 14D-1, Offer to Purchase, Letter of Transmittal and other documents, together with any supplements or amendments thereto, are referred to herein collectively as the "Offer Documents"). The Company and its counsel shall be given an opportunity to review the Offer Documents before they are filed with the SEC. Parent and Purchaser jointly represent and warrant that the Offer Documents will, in all material respects, comply with the requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations thereunder and all other applicable laws, and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading; provided, however, that the -------- ------- representations and warranties in this subsection shall not apply to statements in or omissions from the Offer Documents made in reliance upon and in conformity with information furnished to Parent in writing by or on behalf of the Company. Parent and Purchaser shall promptly provide to the Company a copy of any written comments received by them from the SEC with respect to the Offer Documents. Parent and Purchaser shall promptly correct any information provided by it for use in the Offer Documents that have become false or misleading in any material respect, and Parent and Purchaser further agree to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and the Offer Documents (other than the Schedule 14D-1), as so corrected, to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. SECTION 1.2: COMPANY ACTION. ---------------------------- (a) The Company hereby approves of and consents to the Offer and represents and warrants that: (i) its Board of Directors, at a meeting duly called and held on September 29, 1998, has unanimously (A) determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are advisable and in the best interests of the Company and the holders of Shares, (B) approved this Agreement, the Stock Option Agreement, and the transactions contemplated hereby and thereby, including each of the Offer and the Merger, and (C) resolved to recommend that the stockholders of the Company accept the Offer, tender their Shares to Purchaser thereunder and adopt this Agreement; provided, however, that prior to the consummation of the Offer, if -------- ------- the Company's Board of Directors by majority vote shall have determined in good faith, based upon the advice of outside counsel to the Company, that failure to modify or withdraw its recommendation is reasonably likely to constitute a breach of the Board's fiduciary duty under applicable law, then the Board of Directors may so modify or withdraw its recommendation; and (ii) Janney Montgomery Scott, Inc. (the "Financial Adviser"), has delivered to the Board of Directors of the Company its opinion that the consideration to be paid to the holders of Shares, other than Parent and Purchaser, pursuant to each of the Offer and the Merger is fair to such holders from a financial point of view. The Company has been authorized by the Financial Adviser to permit, subject to prior review and consent by such Financial Adviser, the inclusion of such fairness opinion, in its entirety, in the Schedule14D-9 (as defined in subsection (b) hereof) and the Proxy Statement (as defined in Section 3.12). The Company hereby consents to the inclusion in the Offer Documents of the recommendations of the Company's Board of Directors described in this Section 1.2(a). 3 (b) As soon as reasonably practicable after the date hereof (and in any event within five business days from the date of public announcement of the execution hereof), the Company shall file with the SEC, a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto, the "Schedule 14D-9"), containing the recommendations of the Company's Board of Directors described in and subject to Section 1.2(a)(i) and shall promptly mail the Schedule 14D-9 to the stockholders of the Company. The Company represents and warrants that the Schedule 14D-9 will comply in all material respects with all applicable laws, including without limitation the Exchange Act and the rules and regulations promulgated thereunder and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading; provided, however, that the representations and warranties in this subsection - -------- ------- shall not apply to statements in or omissions from the Schedule 14D-9 made in reliance upon and in conformity with information furnished to the Company in writing by or on behalf of Parent or Purchaser. Parent and Purchaser and their counsel shall be given an opportunity to review the Schedule 14D-9 before it is filed with the SEC. The Company shall promptly provide to Parent and Purchaser a copy of any written comments received by it from the SEC with respect to the Schedule 14D-9. The Company, Parent and Purchaser shall promptly correct any information provided by it for use in the Schedule 14D-9 that shall have become false or misleading in any material respect, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9, as so corrected, to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. (c) In connection with the Offer, the Company shall promptly furnish Purchaser with mailing labels, security position listings, any non-objecting beneficial owner lists and any available listings or computer files containing the names and addresses of the record holders of Shares, each as of a recent date, and shall promptly furnish Purchaser with such additional information (including but not limited to updated lists of stockholders, mailing labels, security position listings and non-objecting beneficial owner lists) and such other customary assistance as Parent, Purchaser or their agents may reasonably require in communicating the Offer to the record and beneficial holders of Shares. Subject to the requirements of law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer and the Merger, Purchaser, Parent and each of their affiliates, agents and associates shall hold in confidence the information contained in any of such lists, labels or additional information subject to the terms and conditions of the Confidentiality Agreement (as defined below). ARTICLE II THE MERGER SECTION 2.1: THE MERGER. Upon the terms and subject to the conditions ------------------------ of this Agreement and in accordance with the DGCL and the VSCA, at the Effective Time (as defined in Section 2.2), Purchaser shall be merged with and into the Company. As a result of the Merger, 4 the separate corporate existence of Purchaser shall cease and the Company shall continue as the surviving corporation of the Merger (the "Surviving Corporation"). SECTION 2.2: CLOSING; EFFECTIVE TIME. Subject to the provisions of ------------------------------------- Article VII, the closing of the Merger (the "Closing") shall take place in Roanoke, Virginia at the offices of Woods, Rogers & Hazlegrove, P.L.C., First Union Tower, Suite 1400, 10 South Jefferson Street, Roanoke, Virginia, as soon as practicable but in no event later than the fifth business day after the satisfaction or waiver of the conditions set forth in Article VII, or at such other place or at such other date as Parent and the Company may mutually agree. The date on which the Closing actually occurs is hereinafter referred to as the "Closing Date". At the Closing, the parties hereto shall cause the Merger to be consummated by the filing of (a) articles of merger and (b) a certificate of merger or a certificate of ownership and merger (the Articles of Merger and such appropriate certificate to be referred to herein collectively as the "Certificate of Merger"), respectively, with the Virginia State Corporation Commission and the Secretary of State of the State of Delaware, in such form as required by and executed in accordance with the relevant provisions of the DGCL and the VSCA (the later of (x) the date and time of the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and (y) the date and time of the filing of the Articles of Merger with the Virginia State Corporation Commission being the "Effective Time"). SECTION 2.3: EFFECTS OF THE MERGER. The Merger shall have the effects ----------------------------------- set forth in the applicable provisions of the DGCL and the VSCA. Without limiting the generality of the foregoing and subject thereto, at the Effective Time all the property, rights, privileges, immunities, powers and franchises of the Company and Purchaser shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Purchaser shall become the debts, liabilities and duties of the Surviving Corporation. SECTION 2.4: CERTIFICATE OF INCORPORATION; BY-LAWS. --------------------------------------------------- (a) At the Effective Time and without any further action on the part of the Company and Purchaser, the Certificate of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended as provided therein and under the DGCL. (b) At the Effective Time and without any further action on the part of the Company and Purchaser, the By-Laws of the Company, as in effect immediately prior to the Effective Time, shall be the By-Laws of the Surviving Corporation and thereafter may be amended or repealed in accordance with their terms or the Certificate of Incorporation of the Company and as provided by law. SECTION 2.5: DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The ----------------------------------------------------------------- directors of Purchaser immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and By-Laws of the Surviving Corporation (directors and officers of the Company shall tender their resignations effective upon the Effective Time), and the officers of the Surviving Corporation shall be Timothy R. Duke, President, Mark Meikle, Vice President and Treasurer, Bruce Groff, 5 Vice President of Human Resources and Secretary and Donald G. Smith, Chairman of the Board, in each case to hold office until their respective successors are duly elected or appointed (as the case may be) and qualified. SECTION 2.6: CONVERSION OF SECURITIES. At the Effective Time, by virtue -------------------------------------- of the Merger and without any action on the part of Purchaser, the Company, holders of any Shares, holders of common stock of Purchaser or the holders of any of the following securities: (a) Each Share issued and outstanding immediately prior to the Effective Time (other than any Shares to be canceled pursuant to Section 2.6(b), and any Dissenting Shares (as defined in Section 2.8(a)) by virtue of the Merger and without any action on the part of the holder thereof, shall be canceled, extinguished and converted into the right to receive $10.75 in cash or such greater amount that may be paid pursuant to the Offer (the "Merger Consideration"), payable to the holder thereof, without interest, less any required withholding taxes. Each holder of a certificate representing any such Shares shall thereafter cease to have any rights with respect to such Shares, except the right to receive the Merger Consideration for such Shares upon the surrender of such certificate in accordance with Section 2.9 below. (b) Each share of Company common stock, par value $0.01 per share (the "Company Common Stock") held in the treasury of the Company together with the associated Rights (all references herein to Company Common Stock in the context of the transactions contemplated by this Agreement shall be deemed to include such Rights), and each Share owned by the Company, Parent, Purchaser or any other direct or indirect subsidiary of such persons, in each case immediately prior to the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof, shall be canceled and retired without any conversion thereof and no payment or distribution shall be made with respect thereto. (c) Each share of common stock of Purchaser issued and outstanding immediately prior to the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof, shall be converted into and become one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation. SECTION 2.7: TREATMENT OF OPTIONS. Immediately after the payment for ---------------------------------- Shares in the Offer, the Company shall cause each of the 153,500 outstanding options, which the Company represents and warrants are the only outstanding options to purchase Company Common Stock (including, without limitation, under the Company's 1995 Employee Stock Option Plan and the Company's 1995 Non- Employee Directors' Stock Option Plan), as set forth in Schedule 2.7 to the Company Disclosure Letter (the "Options"), whether or not then exercisable or vested, to be canceled, and the holder thereof to be entitled to receive thereafter in consideration for such cancellation, an amount in cash equal to the product of (a) the number of Shares subject to such Option immediately before the cancellation of same and (b) the excess, if any, of the Merger Consideration over the exercise price per Share of the Option immediately before the cancellation of same (such payment to be net of applicable withholding taxes). 6 SECTION 2.8: DISSENTING SHARES AND SECTION 262 SHARES. ------------------------------------------------------ (a) Notwithstanding anything in this Agreement to the contrary, Shares that are issued and outstanding immediately prior to the Effective Time and which are held by stockholders who have not voted in favor of or consented to the Merger and who shall have delivered a written demand for appraisal of such Shares in the time and manner provided in Section 262 of the DGCL and who shall not have failed to perfect or shall not have effectively withdrawn or lost their rights to appraisal and payment under the DGCL (the "Dissenting Shares") shall not be converted into the right to receive the Merger Consideration, but shall be entitled to receive the consideration as shall be determined pursuant to Section 262 of the DGCL; provided, however, that if such holder shall have failed to perfect or shall have effectively withdrawn or lost his, her or its right to appraisal and payment under the DGCL, such holder's Shares shall thereupon be deemed to have been converted, at the Effective Time, into the right to receive the Merger Consideration set forth in Section 2.6(a) of this Agreement, without any interest thereon. (b) The Company shall give Parent (i) prompt notice of any demands for appraisal pursuant to Section 262 received by the Company, withdrawals of such demands, and any other instruments served pursuant to the DGCL and received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the DGCL. The Company shall not, except with the prior written consent of Parent or as otherwise required by applicable law, make any payment with respect to any such demands for appraisal or offer to settle or settle any such demands. SECTION 2.9: SURRENDER OF SHARES; STOCK TRANSFER BOOKS. ------------------------------------------------------- (a) Prior to the Effective Time, Purchaser shall designate First Union National Bank, NationsBank, N.A., or such other bank or trust company reasonably acceptable to the Company, to act as agent for the holders of Shares in connection with the Merger (the "Paying Agent") to receive and disburse the cash to which holders of Shares shall become entitled pursuant to Section 2.6(a). At the Effective Time, Parent or Purchaser will make available to the Paying Agent sufficient funds to make all payments pursuant to Section 2.6(a). Such funds shall be invested by the Paying Agent as directed by Purchaser or, after the Effective Time, the Surviving Corporation, provided that such investments shall be in obligations of or guaranteed by the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively, or in certificates of deposit, bank repurchase agreements or banker's acceptances of commercial banks with capital exceeding $500 million. Any net profit resulting from, or interest or income produced by, such investments will be payable to the Surviving Corporation or Parent, as Parent directs. (b) Promptly after the Effective Time, the Surviving Corporation shall cause to be mailed to each record holder, as of the Effective Time, of an outstanding certificate, certificates or lost certificate affidavits which immediately prior to the Effective Time represented Shares (the "Certificates"), a form of letter of transmittal mutually agreeable to the Company and Parent (which shall specify that delivery shall be effected, and risk of loss and title 7 to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent) and instructions for use in effecting the surrender of the Certificates for payment of the Merger Consideration therefor. Upon surrender to the Paying Agent of a Certificate, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each Share formerly represented by such Certificate, and such Certificate shall then be canceled. Upon surrender to the Paying Agent of such certificates, together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, the Surviving Corporation promptly, but in no event later than three business days after receipt of such documents by the Paying Agent, shall cause to be paid to the persons entitled thereto, a check in the amount to which such persons are entitled. No interest shall be paid or accrued for the benefit of holders of the Certificates on the Merger Consideration payable upon the surrender of the Certificates. If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered Certificate is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the person requesting such payment shall have paid any transfer and other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such tax either has been paid or is not applicable. The Surviving Corporation shall pay all charges and expenses, including those of the Paying Agent, in connection with the exchange of Merger Consideration for Shares. In the event any certificate representing Shares shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such certificate to be lost, stolen or destroyed, the Paying Agent will issue in exchange for such affidavit, as well as an unsecured indemnity in favor of the Surviving Corporation for any claim that may be made against the Surviving Corporation with respect to the certificate alleged to have been lost, stolen or destroyed, the Merger Consideration deliverable in respect thereof. (c) At any time following the first anniversary of the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) which had been made available to the Paying Agent and which have not been disbursed to holders of Certificates, and thereafter such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat or other similar laws) only as general creditors thereof with respect to the Merger Consideration payable upon due surrender of their Certificates. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of a Certificate for Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (d) At the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of Shares on the records of the Company. From and after the Effective Time, the holders of Certificates evidencing ownership of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares except as otherwise provided for herein or by applicable law. 8 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Parent and Purchaser that, except as set forth in the letter (the "Company Disclosure Letter") delivered by the Company to Purchaser prior to the date of execution of this Agreement: SECTION 3.1: ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Except as ---------------------------------------------------------- set forth on Schedule 3.1 to the Company Disclosure Letter, the Company and each of its subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite corporate power and authority and has all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so organized, existing and in good standing or to have such power, authority and governmental approvals will not, individually or in the aggregate, have a Material Adverse Effect (as defined below) or prevent or materially delay the consummation of the Offer or the Merger. Each of the Company and each of its subsidiaries is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except for such failures to be so duly qualified or licensed and in good standing as are not likely, to have a Material Adverse Effect. When used in connection with the Company or any of its subsidiaries, the term "Material Adverse Effect" means any change or effect that would be materially adverse to the results of operations, financial condition or business of the Company and its subsidiaries taken as a whole. SECTION 3.2: CERTIFICATE OF INCORPORATION AND BY-LAWS. Except as set ------------------------------------------------------ forth on Schedule 3.2 to the Company Disclosure Letter, the Company has heretofore furnished to Parent a complete and correct copy of the Certificate of Incorporation and the By-Laws of the Company as currently in effect. Such Certificate of Incorporation and By-Laws are in full force and effect and no other organizational documents are applicable to or binding upon the Company. The Company is not in violation of any of the provisions of its Certificate of Incorporation or By-Laws. SECTION 3.3: CAPITALIZATION. The authorized capital stock of the ---------------------------- Company consists of 17,000,000 shares of Company Common Stock. As of November 10, 1998, (a) 6,010,795 shares of Company Common Stock were issued and outstanding, all of which were validly issued, fully paid and nonassessable and were issued free of preemptive (or similar) rights and (b) 1,105,300 shares of Company Common Stock were held in the treasury of the Company. Except for options issued pursuant to the Stock Option Agreement, no Options have been granted and no Shares have been issued and the total number of Options outstanding as of the date of this Agreement is 153,500. Except (i) as set forth above and (ii) as a result of the exercise of Options, there are outstanding (A) no shares of capital stock or other voting or non-voting securities of the Company, (B) no securities of the Company convertible into or exchangeable for shares of capital stock or voting or non-voting securities of the Company, (C) no options, warrants or other rights to acquire from the Company, and no obligation of the Company to issue, any capital 9 stock, non-voting securities, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company and (D) no equity equivalents, interests in the ownership or earnings of the Company or other similar rights (collectively, "Company Securities"). Except as set forth above, there are no outstanding obligations of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any Company Securities. There are no other options, calls, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any of its subsidiaries to which the Company or any of its subsidiaries is a party. All shares of Company Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be duly authorized, validly issued, fully paid and nonassessable and free of preemptive (or similar) rights. Except as disclosed in Schedule 3.3 to the Company Disclosure Letter, there are no outstanding contractual obligations of the Company or any of its subsidiaries to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any such subsidiary or any other entity. Each of the outstanding shares of capital stock of each of the Company's subsidiaries is duly authorized, validly issued, fully paid and nonassessable and all such shares are owned by the Company or another wholly owned subsidiary of the Company as set forth in Schedule 3.3 to the Company Disclosure Letter and are owned free and clear of all security interests, liens, claims, pledges, agreements, limitations in voting rights, charges or other encumbrances of any nature whatsoever, except where the failure to own such shares free and clear is not, individually or in the aggregate, likely to have a Material Adverse Effect. Disclosed in Schedule 3.3 to the Company Disclosure Letter is a list of the subsidiaries and affiliates of the Company which evidences, among other things, the percentage of capital stock or other equity interests owned by the Company, directly or indirectly, in such subsidiaries or associated entities. SECTION 3.4: AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all -------------------------------------------------- necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby (other than, with respect to the Merger, the adoption of this Agreement by the holders of a majority of the Shares if and to the extent required by applicable law, and the filing of appropriate merger documents as required by the DGCL and the VSCA). The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions so contemplated (other than, with respect to the Merger, the adoption of this Agreement by the holders of a majority of the Shares if and to the extent required by applicable law, and the filing of appropriate merger documents as required by the DGCL and the VSCA). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery hereof by Parent and Purchaser, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms. The Board of Directors of the Company has approved this Agreement and the transactions contemplated hereby (including but not limited to the Offer and the Merger and the Stock Option Agreement, and the transactions contemplated by each such agreement) so as to render inapplicable hereto and thereto the limitation on business combinations contained in Section 203 of the DGCL (or any similar provision). As a result of 10 the foregoing actions subject to the applicability of Section 253 of the DGCL, the only vote required to authorize the Merger is the affirmative vote of a majority of the outstanding Shares. SECTION 3.5: NO CONFLICT; REQUIRED FILINGS AND CONSENTS. -------------------------------------------------------- (a) Except as disclosed in Schedule 3.5 to the Company Disclosure Letter, the execution and delivery of this Agreement by the Company do not and the performance of this Agreement by the Company will not: (i) conflict with or violate the Certificate of Incorporation or By-Laws of the Company or the equivalent organizational documents of any of its subsidiaries; (ii) assuming that all consents, approvals and authorizations contemplated by clauses (i), (ii) and (iii) of subsection (b) below have been obtained and all filings described in such clauses have been made, conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Company or any of its subsidiaries or by which its or any of their respective properties are bound or affected; or (iii) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both could become a default) or result in the loss of a material benefit under, or give rise to any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the properties or assets of the Company or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or its or any of their respective properties are bound or affected, except, in the case of clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults or other occurrences which are not, individually or in the aggregate, likely to have a Material Adverse Effect. (b) The execution, delivery and performance of this Agreement by the Company and the consummation of the Merger by the Company do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to, any governmental or regulatory authority, except for (i) applicable requirements, if any, of the Exchange Act and the rules and regulations promulgated thereunder, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), state securities, takeover and "blue sky" laws, (ii) the filing and recordation of appropriate merger or other documents as required by the DGCL and the VSCA and (iii) such consents, approvals, authorizations, permits, actions, filings or notifications the failure of which to make or obtain are not, individually or in the aggregate, likely to (x) prevent or materially delay the Company from performing its obligations under this Agreement or (y) have a Material Adverse Effect. (c) Concurrently with the execution of this Agreement, the Company has, by all proper and required actions, consents and approvals of the Board of Directors of the Company, amended the Rights Agreement (the "Rights Amendment") to provide that (i) Parent and Purchaser each will be deemed to be an Exempt Person (as defined in the Rights Agreement) so long as Parent or Purchaser only acquires beneficial ownership of Shares pursuant to the transactions contemplated by this Agreement (including, without limitation, the Offer and the Merger) or acquires shares of Company Common Stock pursuant to the Stock Option Agreement and (ii) the Rights shall expire upon the consummation of the Offer. So long as Parent and Purchaser are each an Exempt Person, (1) neither shall become an Acquiring Person (as defined 11 in the Rights Agreement) and (2) no Distribution Date, Triggering Event or Exchange (as such terms are defined in the Rights Agreement) or any adjustment to the Purchase Price (as defined in the Rights Agreement) shall occur solely by reason of the execution of this Agreement, the execution of the Stock Option Agreement, the Offer, the Merger or any of the transactions contemplated by this Agreement or the Stock Option Agreement. SECTION 3.6: COMPLIANCE. Except as disclosed in Schedule 3.6 to the ------------------------ Company Disclosure Letter, neither the Company nor any of its subsidiaries is in conflict with, or in default or violation of, (i) any law, rule, regulation, order, judgment or decree applicable to the Company or any of its subsidiaries or by which its or any of their respective properties are bound or affected, or (ii) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or its or any of their respective properties are bound or affected, except for any such conflicts, defaults or violations which are not, individually or in the aggregate, likely to have a Material Adverse Effect. All licenses, permits and approvals required under such laws, rules and regulations are in full force and effect, except where the failure to have such licenses, permits and approvals would not have a Material Adverse Effect on the Company or its subsidiaries. SECTION 3.7: SEC FILINGS; FINANCIAL STATEMENTS. ----------------------------------------------- (a) The Company and, to the extent applicable, each of its then or current subsidiaries, has filed all forms, reports, statements and documents required to be filed with the SEC for periods beginning January 1, 1995 (collectively, the "SEC Reports"). Each of the SEC Reports (exclusive of financial statements and any selected or other financial data for periods prior to January 1, 1995, and any Management's Discussion and Analysis of Financial Conditions and Results of Operations applicable to such financial information), at the time of its filing, complied in all material respects with the applicable requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations promulgated thereunder, or the Exchange Act, and the rules and regulations promulgated thereunder, each as in effect on the date so filed. Except as disclosed in Schedule 3.7(a) to the Company Disclosure Letter, none of the SEC Reports (including, but not limited to, any financial statements or schedules included or incorporated by reference therein but excluding any financial statements and any selected or other financial data for periods prior to January 1, 1995, and any Management's Discussion and Analysis of Financial Conditions and Results of Operations applicable to such financial information) contained when filed, or (except to the extent revised or superseded by a subsequent filing with the SEC) contains, any untrue statement of a material fact or omitted or omits to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. None of the Company's subsidiaries is required to file any forms, reports or other documents with the SEC. (b) Each of the audited consolidated balance sheets of the Company for periods beginning January 1, 1995, and the related statements of consolidated income and retained earnings, and statements of consolidated cash flows for each of the financial statements of the Company included in the SEC Reports for fiscal years beginning January 1, 1995, in each 12 case, including any related notes thereto, as filed with the SEC (collectively, the "Company Financial Statements"), and each of the unaudited interim financial statements for the three- and six-month periods ending March 31, 1998, June 30, 1998, and September 30, 1998, respectively, has been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and fairly presents in all material respects the consolidated financial position of the Company and its subsidiaries at the respective date thereof and the consolidated results of its operations and changes in cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which will not materially alter the financial position of the Company and its subsidiaries, as reflected on such interim financial statements. (c) Except as disclosed in Schedule 3.7(c) to the Company Disclosure Letter, there are no liabilities of the Company or any of its subsidiaries of any kind whatsoever, whether or not accrued and whether or not contingent or absolute, which individually or in the aggregate is likely to have a Materially Adverse Effect, other than (i) liabilities disclosed or provided for in the consolidated balance sheet of the Company and its subsidiaries at December 31, 1997, including the notes thereto, (ii) the SEC Reports, (iii) liabilities incurred on behalf of the Company in connection with this Agreement and the contemplated Merger, and (iv) liabilities incurred in the ordinary course of business consistent with past practice since December 31, 1997, none of which are, individually or in the aggregate, likely to have a Material Adverse Effect. (d) The Company has heretofore furnished or made available to Parent a complete and correct copy of any amendments or modifications which have not yet been filed with the SEC to agreements, documents or other instruments which previously had been filed by the Company with the SEC pursuant to the Securities Act and the rules and regulations promulgated thereunder or the Exchange Act and the rules and regulations promulgated thereunder. SECTION 3.8: ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, -------------------------------------------------- 1997, except as contemplated by this Agreement or as disclosed in Schedule 3.8 to the Company Disclosure Letter, the Company and its subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice and, since such date, there has not been: (i) any changes in the assets, liabilities, results of operation, financial condition or business of the Company or any of its subsidiaries having or likely to have a Material Adverse Effect; (ii) any condition, event or occurrence which, individually or in the aggregate, is likely to have a Material Adverse Effect; (iii) any damage, destruction or loss (whether or not covered by insurance) with respect to any assets of the Company or any of its subsidiaries which is likely, individually or in the aggregate, to have a Material Adverse Effect; (iv) any change by the Company in its accounting methods, principles or practices; (v) any revaluation by the Company of any of its material assets, including but not limited to writing down the value of inventory or writing off notes or accounts receivable other than in the ordinary course of business; (vi) any entry by the Company or any of its subsidiaries into any commitment or transactions material to the Company and its subsidiaries taken as a whole (other than commitments or transactions entered into in the ordinary course of business); (vii) any declaration, setting aside or payment of 13 any dividends or distributions in respect of the Shares; (viii) any increase in or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option (including without limitation the granting of stock options, stock appreciation rights, performance awards, or restricted stock awards), stock purchase or other employee benefit plan or agreement or arrangement, or any other increase in the compensation payable or to become payable to any present or former directors, officers or key employees of the Company or any of its subsidiaries, except for increases in base compensation in the ordinary course of business consistent with past practice, or any employment, consulting or severance agreement or arrangement entered into with any such present or former directors, officers or key employees; or (ix) any other action which, if it had been taken after the date hereof, would have required the consent of Parent under Section 5.1. SECTION 3.9: ABSENCE OF LITIGATION. Except as disclosed in Schedule ----------------------------------- 3.9 of the Company Disclosure Letter, there are no suits, claims, actions, proceedings or investigations pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries, or any properties or rights of the Company or any of its subsidiaries, before any court, arbitrator or administrative, governmental or regulatory authority or body, that, individually or in the aggregate, is likely to have a Material Adverse Effect. As of the date hereof, neither the Company nor any of its subsidiaries nor any of their respective properties is or are subject to any order, writ, judgment, injunction, decree, determination or award having, or which, insofar as can be reasonably foreseen, is likely to have a Material Adverse Effect or prevent or materially delay consummation of the transactions contemplated hereby. SECTION 3.1: EMPLOYEE BENEFIT PLANS. ------------------------------------ (a) Schedule 3.10(a) to the Company Disclosure Letter contains a true and complete list of each "employee benefit plan" (within the meaning of section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), including, without limitation, multiemployer plans within the meaning of ERISA section 3(37)), stock purchase, stock option, severance, employment, change-in-control, fringe benefit, collective bargaining, bonus, incentive, deferred compensation and all other employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA, whether formal or informal, oral or written, legally binding or not, under which any employee or former employee of the Company or any of its subsidiaries, has any present or future right to benefits or under which the Company or any of its subsidiaries has any present or future liability. All such plans, agreements, programs, policies and arrangements shall be collectively referred to as "Company Plans." (b) With respect to each Company Plan, the Company has delivered or made available to Parent a current, accurate and complete copy (or, to the extent no such copy exists, an accurate description) thereof and, to the extent applicable: (i) any related trust agreement or other funding instrument; (ii) the most recent determination letter, if applicable; (iii) any summary plan description and other written communications by the Company or any of its subsidiaries to their employees concerning the extent of the benefits provided under a Company Plan; and (iv) for the three most recent years (A) the Form 5500 and attached schedules, (B) audited financial statements and (C) actuarial valuation reports. 14 (c) Except as disclosed in Schedule 3.10(c) to the Company Disclosure Letter, (i) Each Company Plan has been established and administered in material compliance with its terms, and in material compliance with the applicable provisions of ERISA, the Internal Revenue Code of 1986, as amended (the "Code"), and other applicable laws, rules and regulations; (ii) each Company Plan which is intended to be qualified within the meaning of Code section 401(a) is so qualified and has received a favorable determination letter as to its qualification, and nothing has occurred, whether by action or failure to act, that would cause the loss of such qualification; (iii) no event has occurred and no condition exists that would subject the Company or any of its subsidiaries, either directly or by reason of their affiliation with any member of their "Controlled Group" (defined as any organization which is a member of a controlled group of organizations within the meaning of Code sections 414(b), (c), (m) or (o)), to any tax, fine, lien or penalty imposed by ERISA, the Code or other applicable laws, rules and regulations; (iv) for each Company Plan with respect to which a Form 5500 has been filed, no material change has occurred with respect to the matters covered by the most recent Form since the date thereof; and (v) no "reportable event" (as such term is defined in ERISA section 4043), "prohibited transaction" (as such term is defined in ERISA section 406 and Code section 4975) or "accumulated funding deficiency" (as such term is defined in ERISA section 302 and Code section 412 (whether or not waived)) has occurred with respect to any Company Plan. (d) With respect to each of the Company Plans that is subject to Title IV of ERISA, as of the Effective Time, the assets of each such Company Plan are at least equal in value to the present value of the accrued benefits (vested and unvested) of the participants in such Company Plan on a termination basis, based on the actuarial methods and assumptions indicated in the most recent actuarial valuation reports. (e) With respect to any Company Plan, (i) no actions, suits or claims (other than routine claims for benefits in the ordinary course) are pending or, to the knowledge of the Company, threatened, and (ii) no facts or circumstances exist, to the knowledge of the Company, that could give rise to any such actions, suits or claims. (f) Except as disclosed in Schedule 3.10(f) to the Company Disclosure Letter, no Company Plan exists that could result in the payment to any present or former employee of the Company or any of its subsidiaries of any money or other property or accelerate or provide any other rights or benefits to any present or former employee of the Company or any of its subsidiaries as a result of the transaction contemplated by this Agreement, whether or not such payment would constitute a parachute payment within the meaning of Code section 280G. SECTION 3.11: TAX MATTERS. -------------------------- (a) The Company and each of its subsidiaries, and any consolidated, combined, unitary or aggregate group for tax purposes of which the Company or any of its subsidiaries is or has been a member has timely filed all Tax Returns (as defined below) required to be filed by it in the manner provided by law, has paid all Taxes (as defined below) (including interest and penalties) shown thereon to be due and has provided adequate reserves in its financial statements according to generally accepted accounting principles for any Taxes that 15 have not been paid, whether or not shown as being due on any Tax Returns. All such Tax Returns were true, correct and complete in all material respects. (b) Except as has been disclosed in Schedule 3.11(b) to the Company Disclosure Letter: (i) no material claim for unpaid Taxes has become a lien or encumbrance of any kind against the property of the Company or any of its subsidiaries or is being asserted against the Company or any of its subsidiaries; (ii) as of the date hereof no audit of any Tax Return of the Company or any of its subsidiaries is being conducted by a Tax authority; and (iii) no extension of the statute of limitations on the assessment of any Taxes has been granted by the Company or any of its subsidiaries and is currently in effect. (c) Except as disclosed in Schedule 3.11(c) of the Company Disclosure Letter, during their most recent five taxable years respectively, neither the Company nor any of its subsidiaries has made a change in accounting methods (nor has any taxing authority proposed in writing any such adjustment or change of accounting method), received a ruling from any taxing authority or signed an agreement with any taxing authority which could have a Material Adverse Effect on the Company or any of its subsidiaries, or has entered into any closing or similar agreement with any taxing authority. (d) Except as disclosed in Schedule 3.11(d) of the Company Disclosure Letter, neither the Company nor any of its subsidiaries is a party to, is bound by or has any obligation under any Tax sharing agreement, Tax indemnification agreement or similar contract or arrangement. (e) Except as disclosed in Schedule 3.11(e) of the Company Disclosure Letter, no power of attorney with respect to any matter relating to Taxes or Tax Returns has been granted by or with respect to the Company or any of its subsidiaries. (f) Neither the Company nor any of its subsidiaries has filed a consent pursuant to Section 341(f) of the Code (or any predecessor provision) concerning collapsible corporations, or agreed to have Section 341(f)(2) of the code apply to any disposition of a "subsection (f) asset" (as such term is defined in Section 341(f)(4) of the Code) owned by the Company or any of its subsidiaries. (g) None of the subsidiaries of the Company is a controlled foreign corporation within the meaning of Section 957 of the Code or a passive foreign investment company within the meaning of Section 1296 of the Code. (h) Except as disclosed in Schedule 3.11(h) of the Company Disclosure Letter, the Company has delivered to Parent complete and accurate copies of each of: (A) all audit, examination and similar reports and all letter rulings and technical advice memoranda relating to United States federal, state, local and foreign Taxes due from or with respect to the Company and its subsidiaries; (B) all United States federal, state and local, and foreign Tax Returns, Tax examination reports and similar documents filed by the Company and its subsidiaries; and (C) all closing agreements entered into by the Company and its subsidiaries with any taxing authority and all statements of Tax deficiencies assessed against or agreed to by the Company and its 16 subsidiaries. The Company will deliver to Purchaser all materials with respect to the foregoing for all matters arising after the date hereof. (i) As used in this Agreement, the following terms shall have the following meanings: "Taxes" shall mean any taxes of any kind, including but not limited to those on or measured by or referred to as income, gross receipts, capital, sales, use, ad valorem, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, value added, property or windfall profits taxes, customs, duties or similar fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any governmental authority; "Tax Return" shall mean any return, report or statement required to be filed with any governmental authority with respect to Taxes. SECTION 3.12: OFFER DOCUMENTS; PROXY STATEMENT. Neither the Schedule 14D- ----------------------------------------------- 9, nor any of the information supplied by the Company for inclusion in the Offer Documents, shall, at the respective times such Schedule 14D-9, the Offer Documents or any amendments or supplements thereto are filed with the SEC or are first published, sent or given to stockholders, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Neither the proxy statement to be sent to the stockholders of the Company in connection with the Stockholders Meeting (as defined in Section 6.1) or the information statement to be sent to such stockholders, as appropriate (such proxy statement or information statement, as amended or supplemented, is herein referred to as the "Proxy Statement"), shall, at the date the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to stockholders and at the time of the Stockholders Meeting, if any, and at the Effective Time, contain any untrue or misleading statement of a material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Stockholders Meeting which has become false or misleading. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied by Parent or Purchaser or any of their respective representatives which is contained in the Schedule 14D-9 or the Proxy Statement. The Schedule 14D-9 and the Proxy Statement will comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations promulgated thereunder. SECTION 3.13: ENVIRONMENTAL MATTERS. ----------------------------------- (a) Except as disclosed in Schedule 3.13(a) of the Company Disclosure Letter and to the extent that the inaccuracy of any of the following (or the circumstances giving rise to such inaccuracy), individually or in the aggregate, is not likely to have a Material Adverse Effect: (i) the Company and its subsidiaries are, and within the period of all applicable statutes of limitation have been, in compliance with all applicable Environmental Laws; 17 (ii) the Company and its subsidiaries hold all Environmental Permits (each of which is in full force and effect) required for any of their current operations and for any property owned, leased, or otherwise operated by any of them, and are, and within the period of all applicable statutes of limitation have been, in compliance with all such Environmental Permits; (iii) no review by, or approval of, any Governmental Authority or other person is required under any Environmental Law in connection with the execution or delivery of this Agreement or the consummation of the transactions contemplated hereby; (iv) neither the Company nor any of its subsidiaries has received any Environmental Claim (as hereinafter defined) against any of them, and the Company has no knowledge of any such Environmental Claim being threatened; (v) to the knowledge of the Company, Hazardous Materials are not present on any property owned, leased, or operated by the Company or any of its subsidiaries, that is likely to form the basis of any Environmental Claim against any of them; and the Company has no reason to believe that Hazardous Materials are present on any other property that is likely to form the basis of any Environmental Claim against any of them; (vi) the Company has no knowledge of any material Environment Claim pending or threatened, or of the presence or suspected presence of any Hazardous Materials that is likely to form the basis of any Environmental Claim, in any case against any person or entity whose liability the Company or any of its subsidiaries has or may have retained or assumed either contractually or by operation of law. or against any real property which the Company or any of its subsidiaries formerly owned, leased, or operated, in whole or in part; and (vii) to the knowledge of the Company, the Company has informed Parent and Purchaser of: all material facts which the Company reasonably believes could form the basis of a material Environmental Claim against the Company or any of its subsidiaries arising out of the non-compliance or alleged non-compliance with any Environmental Law, or the presence or suspected presence of Hazardous Materials at any location. (b) For purposes of this Agreement, the terms below shall have the following meanings: 18 "Environmental Claim" means any claim, demand, action, suit, complaint, proceeding, directive, investigation, lien, demand letter, or notice (written or oral) of noncompliance, violation, or liability, by any person or entity asserting liability or potential liability (including without limitation liability or potential liability for enforcement, investigatory costs, cleanup costs, governmental response costs, natural resource damages, property damage, personal injury, fines or penalties) arising out of, based on or resulting from (i) the presence, discharge, emission, release or threatened release of any Hazardous Materials at any location, (ii) circumstances forming the basis of any violation or alleged violation of any Environmental Laws or Environmental Permits, or (iii) otherwise relating to obligations or liabilities under any Environmental Law. "Environmental Laws" means any and all laws, rules, orders, regulations, statutes, ordinances, guidelines, codes, decrees, or other legally enforceable requirement (including, without limitation, common law) of any foreign government, the United States, or any state, local, municipal or other governmental authority, regulating, relating to or imposing liability or standards of conduct concerning protection of human health as affected by the environment or Hazardous Materials (including without limitation employee health and safety) or the environment (including without limitation indoor air, ambient air, surface water, groundwater, land surface, subsurface strata, or plant or animal species). "Environmental Permits" means all permits, licenses, registrations, approvals, exemptions and other filings with or authorizations by any Governmental Authority under any Environmental Law. "Governmental Authority" means any government, any state or other political subdivision thereof and any entity (including, without limitation, a court) exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Hazardous Materials" means all hazardous or toxic substances, wastes, materials or chemicals, petroleum (including crude oil or any fraction thereof), petroleum products, asbestos, asbestos-containing materials, pollutants, contaminants, radioactivity, electromagnetic fields and all other materials, whether or not defined as such, that are regulated pursuant to any Environmental Laws or that could result in liability under any applicable Environmental Laws. SECTION 3.14: TITLE AND CONDITION OF PROPERTIES. ------------------------------------------------ (a) Except as disclosed in Schedule 3.14(a) of the Company Disclosure Letter, neither the Company nor any of its subsidiaries own any real property. (b) Except as disclosed in Schedule 3.14(b) of the Company Disclosure Letter, the Company or its subsidiaries, as the case may be, has good, valid, and, in the case of Owned Properties (as defined below), marketable fee simple title to: (i) all of the material real property 19 and interests in real property owned by the Company or its subsidiaries, except for properties sold or otherwise disposed of in the ordinary course of business (the "Owned Properties"), and (ii) all of the material leasehold estates in all real properties leased by the Company or its subsidiaries, except leasehold interests terminated in the ordinary course of business (the "Leased Properties"; the Owned Properties and Leased Properties being sometimes referred to herein as the "Real Properties"), in each case except as disclosed in Schedule 3.14 of the Company Disclosure Letter, free and clear of all mortgages, liens, security interests, easements, covenants, rights-of-way, subleases and other similar restrictions and encumbrances ("Encumbrances"), except for Encumbrances for current Taxes not yet due and payable. (c) Except to the extent that the inaccuracy of any of the following (or the circumstances giving rise to such inaccuracy), individually or in the aggregate, are not likely to have a Material Adverse Effect or as disclosed in Schedule 3.14(c) of the Company Disclosure Letter: (i) each of the agreements by which the Company has obtained a leasehold interest in each Leased Property (individually, a "Lease" and collectively, the "Leases") is in full force and effect in accordance with its respective terms and the Company or its subsidiary is the holder of the lessee's or tenant's interest thereunder; to the knowledge of the Company, there exists no default under any Lease and no circumstance exists which, with the giving of notice, the passage of time or both, is likely to result in such a default; the Company and its subsidiaries have complied with and timely performed all conditions, covenants, undertakings and obligations on their parts to be complied with or performed under each of the Leases; the Company and its subsidiaries have paid all rents and other charges to the extent due and payable under the Leases; (ii) there are no leases, subleases, licenses, concessions or any other contracts or agreements granting to any person or entity other than the Company or any of its subsidiaries any right to the possession, use, occupancy or enjoyment of any Real Property or any portion thereof; (iii) the current operation and use of the Real Properties does not violate any statute, law, regulation, rule, ordinance, permit, requirement, order or decree now in effect; the use being made of each Real Property at present materially conforms with the certificate of occupancy issued for such Real Property; (iv) there are no existing, or to the knowledge of the Company, threatened, condemnation or eminent domain proceedings (or proceedings in lieu thereof) affecting the Real Properties or any portion thereof; (v) no default or breach exists under any of the covenants, conditions, restrictions, rights-of- way, or easements, if any, affecting all or any portion of a Real Property, which are to be performed or complied with by the Company or any of its subsidiaries; and (vi) all the buildings, structures, equipment and other tangible assets of the Company (whether owned or leased) are in normal operating condition (normal wear and tear excepted). (d) Neither the Company nor any of its subsidiaries is obligated under or bound by any option, right of first refusal, purchase contract, or other contractual right to sell or dispose of any Owned Property or any portions thereof or interests therein which property, portions and interests, individually or in the aggregate, are material to the Company and its subsidiaries. (e) Except as disclosed in Schedule 3.14(e) of the Company Disclosure Letter, the Company and its subsidiaries own good and marketable title, free and clear of all Encumbrances, to all of the personal property and assets shown on the Company Financial Statements or acquired after December 31, 1997, except for (A) assets which have been disposed 20 of to nonaffiliated third parties since December 31, 1997, in the ordinary course of business, (B) Encumbrances reflected in the Company Financial Statements, (C) liens for fees, taxes, levies, imposts, duties or governmental charges of any kind which are not yet delinquent, (D) liens for mechanics or materialmen arising by operation of law for sums which are not yet delinquent, (E) easements and similar encumbrances ordinarily created for fuller utilization and enjoyment of property, (F) a security interest in favor of C.I.T., (G) Encumbrances or imperfections of title which will not, individually or in the aggregate, have a Material Adverse Effect. (f) All of the material equipment (including computer hardware) and other tangible personal property and assets owned or used by the Company and its subsidiaries are in operating condition and repair, except for ordinary wear and tear not caused by neglect, and are useable in the ordinary course of business. The personal property and assets reflected on the Financial Statements or acquired after December 31, 1997, the rights under Company agreements and the Intellectual Property (as defined in Section 3.16) owned or used by the Company under valid license, collectively include all assets necessary to provide, produce, franchise, sell and license the services and products currently provided, produced, franchised, sold and licensed by the Company and its subsidiaries and to conduct the business of the Company and its subsidiaries as presently conducted or as currently contemplated to be conducted. SECTION 3.15: BROKERS. No broker, finder or investment banker (other ---------------------- than the Financial Adviser) is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by and on behalf of the Company. The Company has heretofore furnished to Parent information concerning the fee which will be payable to the Financial Advisor in connection with the transactions contemplated hereby. SECTION 3.16: INTELLECTUAL PROPERTY. ------------------------------------- (a) As used in this Agreement, "Intellectual Property" means all of the following, in which the Company holds or owns any rights which are necessary to conduct the business of the Company and its subsidiaries as presently conducted or as currently proposed to be conducted: (i) trademarks, trade dress, service marks, logos, trade names, corporate names and all registrations and applications to register the same; (ii) patents and pending patent applications, and any and all divisions, continuations, continuations-in-part, reissues, reexaminations, and extensions thereof; (iii) copyrights, rights of publicity, rights in any semi-conductor chip product works or "mask works" and all registrations and applications to register the same; (iv) all computer software programs, including without limitation, all source code and object code; databases and compilations, including all data and compilations of data; all descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing; and all documentation, including user manuals and training materials relating to the foregoing (collectively, "Computer Software"); (v) all technology, know-how, trade secrets and proprietary processes and formulae; and (vi) all licenses and agreements to which the Company or any of the subsidiaries is a party which relate to any of the foregoing, including but not limited to Computer Software licenses other than shrink-wrap licenses for off-the-shelf applications ("Licenses"). 21 (b) Except as disclosed in Schedule 3.16(b) of the Company Disclosure Letter, the Company or its subsidiaries owns or has the right to use, sell or license all Intellectual Property, free and clear of all Encumbrances. Section 3.16(b) of the Company Disclosure Letter contains a true and complete list of all the following Intellectual Property: (i) copyright registrations and applications and material unregistered copyrights; (ii) trademarks and service mark registrations and applications and material applications; (iii) Computer Software; and (iv) material Licenses. (c) Except as disclosed in Section 3.16(c) of the Company Disclosure Letter, all Computer Software (i) was developed (x) by employees of the Company or its subsidiaries within the scope of their employment or (y) as "works-made- for-hire" as that term is defined under Section 101 of the United States copyright laws, pursuant to a written agreement; (ii) was assigned to the Company or its subsidiaries pursuant to a written agreement; (iii) is used in written License; or (iv) is in the public domain. Except as set forth in Section 3.16(c) of the Company Disclosure Letter, no former or present employees, officers or directors of the Company hold any right, title or interest directly or indirectly, in whole or in part, in or to any Computer Software or any other Intellectual Property. (d) No breach or default (or event which with notice or lapse of time or both would result in an event of default) by the Company or any of its subsidiaries exists under any of the Licenses, and the consummation of the transactions contemplated by this Agreement will not violate or conflict with or constitute such a default, result in a forfeiture under, or constitute a basis for termination of any such License. (e) Except as disclosed in Schedule 3.16(e) of the Company Disclosure Letter, to the Company's knowledge the conduct of the Company's and its subsidiaries' business and the use of the Intellectual Property do not infringe, violate or misuse any intellectual property rights or any other proprietary right of any person or give rise to any obligations to any person as a result of co-authorship, or co-inventorship. Neither the Company nor any of the subsidiaries have received any notice of any claims or threats that the Company's and its subsidiaries' use of any of the Intellectual Property infringes, violates or misuses, or is otherwise in conflict with any Intellectual Property or proprietary rights of any third party or that any of the Intellectual Property is invalid or unenforceable, nor to the Company's knowledge, is there a basis for such a claim. Except as disclosed in Schedule 3.16(e) of the Company Disclosure Letter, neither the Company nor any of its subsidiaries has sent to any other person any notice or claim of any present or threatened infringement, violation or misuse by any other person of any of the Intellectual Property and, to the Company's knowledge, there are no such infringements, violations or misuses. (f) The Company and its subsidiaries have used reasonable efforts to maintain the confidentiality of its trade secrets and other confidential Intellectual Property. SECTION 3.17: CONTRACTS. ------------------------ (a) Each material Company agreement is disclosed in Schedule 3.17(a) of the Company Disclosure Schedule and is legally valid and binding and in full force and effect. The 22 Company has previously made available for inspection by Parent or Purchaser or their representatives all such material Company agreements. (b) Each contract, agreement or arrangement between the Company and any bank or financial institution with respect to borrowing funds or financing arrangements (the "Bank Product Agreements") is disclosed in Schedule 3.17(b) of the Company Disclosure Letter and is legally valid and binding and in full force and effect. The Company is not in default, nor to the Company's knowledge is any third party in default, under any Bank Product Agreement. The Company has previously made available for inspection by Parent or Purchaser or their representatives complete and accurate copies of all Bank Product Agreements. SECTION 3.18: POTENTIAL CONFLICTS OF INTEREST. Except as disclosed in ---------------------------------------------- Schedule 3.18 of the Company Disclosure Letter, no officer or director of the Company or any of its subsidiaries owns, directly or indirectly, any interest in (excepting not more than 1% stock holdings for investment purposes in securities of publicly held and traded companies) or is an officer, director, employee or consultant of any person which is a competitor, lessor, lessee, franchisee, customer or supplier of the Company or any of its subsidiaries; and no officer or director of the Company or any of its subsidiaries (i) owns, directly or indirectly, in whole or in part, any Intellectual Property which the Company or any of its subsidiaries is using or the use of which is necessary for the business of the Company or any of its subsidiaries; (ii) has any claim, charge, action or cause of action against the Company or any of its subsidiaries, except for claims for accrued vacation pay, accrued benefits under the Benefits Plans and similar matters and agreements existing on the date hereof which have been disclosed in Schedule 3.18 of the Company Disclosure Letter; (iii) has made, on behalf of the Company or any of its subsidiaries, any payment or commitment to pay any commission, fee or other amount to, or to purchase or obtain or otherwise contract to purchase or obtain any goods or services from, any other person of which any officer or director of the Company, or, to the Company's knowledge, a relative of any of the foregoing, is a partner or stockholder (except stock holdings solely for investment purposes in securities of publicly held and traded companies); (iv) owes any money to the Company or any of its subsidiaries; (v) is owed any money by the Company or any of its subsidiaries; except for claims for accrued vacation pay, accrued benefits under the Benefits Plans and similar matters and agreements existing on the date hereof which have been disclosed in Schedule 3.18 of the Company Disclosure Letter; or (vi) is a party to any transaction, agreement, arrangement or understanding with the Company or any of its subsidiaries other than items arising out of the ordinary course of employment with the Company. SECTION 3.19: YEAR 2000 COMPLIANCE. The reports set forth on Schedule ---------------------------------- 3.19 of the Company Disclosure Letter regarding Year 2000 compliance are, to the Company's knowledge, true and correct in all material respects. 23 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER Parent and Purchaser hereby, jointly and severally, represent and warrant to the Company that: SECTION 4.1: CORPORATE ORGANIZATION. Each of Parent and Purchaser is a ------------------------------------ corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation and has the requisite corporate power and authority and any necessary governmental authority to own, operate or lease its properties and to carry on its business as it is now being conducted, except where the failure to be so organized, existing and in good standing or to have such power, authority and governmental approvals is not, individually or in the aggregate, likely to prevent the consummation of the Offer or the Merger. Each of Parent and Purchaser is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned, leased or operated by it or the nature of its activities makes such licensing necessary, except for such failures to be so qualified or licensed and in good standing as are not likely to have a Material Adverse Effect. SECTION 4.2: AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and -------------------------------------------------- Purchaser has all necessary corporate power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by each of Parent and Purchaser and the consummation by each of Parent and Purchaser of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and Purchaser other than filing and recordation of appropriate merger documents as required by the DGCL and the VSCA. This Agreement has been duly executed and delivered by Parent and Purchaser and, assuming due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of each such corporation enforceable against such corporation in accordance with its terms. SECTION 4.3: NO CONFLICT; REQUIRED FILINGS AND CONSENTS. -------------------------------------------------------- (a) The executions and delivery of this Agreement by Parent and Purchaser do not and the performance of this Agreement by Parent and Purchaser will not: (i) conflict with or violate the respective articles of incorporation or by-laws of Parent or Purchaser; (ii) assuming that all consents, approvals and authorizations contemplated by clauses (i), (ii) and (iii) of subsection (b) below have been obtained and all filings described in such clauses have been made, conflict with or violate any law, rule, regulation, order, judgment or decree applicable to Parent or Purchaser or by which either of them or their respective properties are bound or affected; or (iii) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both could become a default) or result in the loss of a material benefit under, or give rise to any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the property or assets of Parent or Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent or Purchaser is a party or by 24 which Parent or Purchaser or any of their respective properties are bound or affected, except, in the case of clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults or other occurrences which are not, individually or in the aggregate, likely to prevent or materially delay the consummation of the Offer or the Merger. (b) The execution, delivery and performance of this Agreement by Parent and Purchaser do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to, any governmental or regulatory authority, except (i) for applicable requirements, if any, of the Exchange Act and the rules and regulations promulgated thereunder, the HSR Act, state securities, takeover and "blue sky" laws, (ii) the filing and recordation of appropriate merger or other documents as required by the DGCL, and (iii) such consents, approvals, authorizations, permits, actions, filings or notifications the failure of which to make or obtain are not, individually or in the aggregate, likely to prevent the consummation of the Offer or the Merger. SECTION 4.4: OFFER DOCUMENTS; PROXY STATEMENT. The Offer Documents, as ---------------------------------------------- filed pursuant to Section 1.1, will not, at the time such Offer Documents are filed with the SEC or are first published, sent or given to stockholders, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The information supplied by Parent and Purchaser for inclusion in the Proxy Statement shall not, on the date the Proxy Statement is first mailed to stockholders, at the time of the Stockholders Meeting (as defined in Section 6.1), if any, or at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, or shall omit to state a material fact required to be stated therein or necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Stockholders Meeting which has become false or misleading. Notwithstanding the foregoing, Parent and Purchaser make no representation or warranty with respect to any information supplied by the Company or any of its representatives which is contained in or incorporated by reference in any of the foregoing documents or the Offer Documents. The Offer Documents, as amended and supplemented, will comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations promulgated thereunder. SECTION 4.5: BROKERS. No broker, finder or investment banker (other --------------------- than Ewing Monroe Bemiss & Co.) is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by and on behalf of Parent or Purchaser. SECTION 4.6: FUNDS. Parent or Purchaser has, and at the Expiration Date ------------------- and at the Effective Time, will have the funds necessary to consummate the Offer and the Merger, respectively. The Company has been provided with a true and accurate copy of commitment letters duly executed by all parties thereto evidencing the availability of such funds, which Parent currently anticipates will be used to consummate the Offer and the Merger. 25 SECTION 4.7: NO PRIOR ACTIVITIES. Except for obligations or liabilities --------------------------------- incurred in connection with its incorporation or organization or the negotiation and consummation of this Agreement and the transactions contemplated hereby (including any financing), Purchaser has not incurred any obligations or liabilities, and has not engaged in any business or activities of any type or kind whatsoever or entered into any agreements or arrangements with any person or entity. ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER SECTION 5.1: CONDUCT OF BUSINESS OF THE COMPANY PENDING THE MERGER. The ------------------------------------------------------------------- Company covenants and agrees that, during the period from the date hereof to the Effective Time, unless Parent shall otherwise agree in writing, the businesses of the Company and its subsidiaries shall be conducted only in, and the Company and its subsidiaries shall not take any action except in, the ordinary course of business and in a manner consistent with past practice; and the Company and its subsidiaries shall each use its reasonable best efforts to preserve substantially intact the business organization of the Company and its subsidiaries, to keep available the services of the present officers, employees and consultants of the Company and its subsidiaries and to preserve the present relationships of the Company and its subsidiaries with customers, suppliers and other persons with which the Company or any of its subsidiaries has significant business relations to the end that the Company's and its subsidiaries' goodwill and ongoing business shall be unimpaired at the Effective Time. By way of amplification and not limitation, neither the Company nor any of its subsidiaries shall, between the date of this Agreement and the Effective Time, directly or indirectly do, or commit to do, any of the following without the prior written consent of Parent: (a) Amend or otherwise change its certificate of incorporation or by- laws or equivalent organizational documents; (b) Except as disclosed in Schedule 5.1(b) of the Company Disclosure Letter, issue, deliver, sell, pledge, dispose of or encumber, or authorize or commit to the issuance, sale, pledge, disposition or encumbrance of, (i) any shares of capital stock of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of capital stock, or any other ownership interest (including but not limited to stock appreciation rights or phantom stock), of the Company or any of its subsidiaries or (ii) any material assets of the Company or any of its subsidiaries, except for sales of inventory in the ordinary course of business and in a manner consistent with past practice; (c) Declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock except as disclosed in Schedule 5.1(c) of the Company Disclosure Letter; (d) Reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock; 26 (e) (i) Acquire (by merger, consolidation, or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof; (ii) incur any indebtedness for borrowed money (except for drawdowns on the Company's existing credit facility in the ordinary course of business consistent with past practice) or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person, or make any loans, advances or capital contributions to, or investments in, any other person; (iii) enter into any contract or agreement other than in the ordinary course of business consistent with past practice; (iv) authorize any single capital expenditure except (A) as set forth in Schedule 5.1(e)(iv) of the Company Disclosure Letter, which letter includes the Company's capital expenditure budget, (B) with the prior approval of Purchaser or Parent, such approval not to be unreasonably withheld, or (C) in an amount not exceeding $100,000 for the emergency repair or replacement of the plant facility necessary to continue operation of the plant in the normal course of business; or (v) authorize several capital expenditures pursuant to clause (iv)(C) immediately above in an aggregate amount exceeding $300,000. (f) Except to the extent required under existing Company plans and employee and director agreements as in effect on the date of this Agreement and disclosed in the Company Disclosure Letter, increase the compensation or fringe benefits of any of its directors, officers or employees, except for increases in salary or wages of employees of the Company or its subsidiaries who are not officers of the Company in the ordinary course of business in accordance with past practice, or grant any severance or termination pay not currently required to be paid under existing severance plans to or enter into any employment, consulting or severance agreement or arrangement with any present or former director, officer or other employee of the Company or any of its subsidiaries, or establish, adopt, enter into or amend or terminate any collective bargaining agreement or Company Plan, including, but not limited to, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any directors, officers or employees; (g) Change any of the accounting practices or principles used by it; (h) Make any material Tax election, change any material method of Tax accounting or settle or compromise any material federal, state, local or foreign Tax liability; (i) Settle or compromise any pending or threatened suit, action or claim which is material or which relates to the transactions contemplated hereby; (j) Adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its subsidiaries not constituting an inactive subsidiary (other than the Merger); (k) Pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction (i) in the ordinary course of business and consistent with past practice of liabilities reflected or reserved against in the Company Financial Statements or incurred in the ordinary 27 course of business and consistent with past practice and (ii) of liabilities required to be paid, discharged or satisfied pursuant to the terms of any contract in existence on the date hereof (including, without limitation, benefit plans relating to directors); or (l) Take, or offer or propose to take, or agree to take in writing or otherwise, any of the actions described in Sections 5.1(a) through 5.1(k) or any action which would make any of the representations or warranties of the Company contained in this Agreement untrue and incorrect as of the date when made if such action had then been taken, or would result in any of the conditions set forth in Annex A not being satisfied. SECTION 5.2: NO AMENDMENT OF THE RIGHTS AGREEMENT. Subsequent to the ------------------------------------------------- Rights Amendment, the Company shall not amend or modify the Rights Agreement to change the status of Parent or Purchaser as an Exempt Person or the meaning and effect of such status. ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.1: STOCKHOLDERS MEETING. ---------------------------------- (a) If Shares are purchased in the Offer and adoption of this Agreement by the Company's stockholders is required, by applicable law, the Company's Certificate of Incorporation or Bylaws, to occur at a duly convened meeting of the Corporation's stockholders, the Company, acting through its Board of Directors, shall in accordance with and subject to applicable law and the Company's Certificate of Incorporation and By-Laws, (i) duly call, give notice of, convene and hold a meeting of its stockholders as soon as practicable following consummation of the Offer for the purpose of adopting this Agreement (the "Stockholders Meeting"), (ii) include in the Proxy Statement the unanimous recommendation of the Board of Directors that the stockholders of the Company vote in favor of the adoption of this Agreement and the written opinion of the Financial Adviser that the consideration to paid to the stockholders of the Company pursuant to the Offer and the Merger is fair to such stockholders from a financial point of view and (iii) use its reasonable best efforts to obtain the necessary adoption of this Agreement. (b) If Shares are purchased in the Offer and adoption of this Agreement by the Company's stockholders may, by applicable law, the Company's Certificate of Incorporation and By-Laws, occur by written consent of the holders of a majority of the Shares entitled to vote on such adoption (the "Written Consent"), then, subject to the Company's obligations with respect to the preparation, filing, and dissemination of the Proxy Statement (which, in such case, shall be an information statement prepared in accordance with the Exchange Act and the rules and regulations thereunder) as set forth in Section 6.2 below, Purchaser shall execute the Written Consent and take all necessary and appropriate action to cause the Merger to become effective as soon as reasonably practicable after such purchase of Shares in the Offer. 28 (c) Notwithstanding the foregoing, in the event that Purchaser shall acquire at least 90% of the outstanding Shares, the Company agrees, at the request of Purchaser, subject to Article VII, to take all necessary and appropriate action to cause the Merger to become effective as soon as reasonably practicable after such acquisition, without a meeting of the Company's stockholders, in accordance with Section 253 of the DGCL. SECTION 6.2: PROXY STATEMENT. If required by applicable law, as soon as ----------------------------- practicable following Parent's request, the Company shall file with the SEC under the Exchange Act and the rules and regulations promulgated thereunder, and shall use its reasonable best efforts to have cleared by the SEC, the Proxy Statement with respect to the Stockholders Meeting. Parent, Purchaser and the Company will cooperate with each other in the preparation of the Proxy Statement; without limiting the generality of the foregoing, each of Parent and Purchaser will furnish to the Company the information relating to it required by the Exchange Act and the rules and regulations promulgated thereunder to be set forth in the Proxy Statement. The Company agrees to use its reasonable best efforts, after consultation with the other parties hereto, to respond promptly to any comments made by the SEC with respect to the Proxy Statement and any preliminary version thereof filed by it and cause such Proxy Statement to be mailed to the Company's stockholders at the earliest practicable time. SECTION 6.3: COMPANY BOARD REPRESENTATION; SECTION 14(F). --------------------------------------------------------- (a) Promptly upon the purchase by Purchaser of Shares pursuant to the Offer, and from time to time thereafter, Purchaser shall be entitled to designate up to such number of directors, rounded up to the next whole number, on the Board of Directors of the Company as shall give Purchaser representation on the Board of Directors equal to the product of the total number of directors on such Board (giving effect to the directors elected pursuant to this sentence and including any vacancies or unfilled newly-created directorships) multiplied by the percentage that the aggregate number of Shares beneficially owned by Purchaser or any affiliate of Purchaser bears to the total number of Shares then outstanding, and the Company shall amend, or cause to be amended its by-laws to provide for each of the matters set forth in this Section 6.3 and shall, at such time, promptly take all action necessary to cause Purchaser's designees to be so elected, including either increasing the size of the Board of Directors or securing the resignations of incumbent directors or both. At such times, the Company will use its reasonable best efforts to cause persons designated by Purchaser to constitute the same percentage as is on the board of (i) each committee of the Board of Directors, (ii) each board of directors of each subsidiary of the Company and (iii) each committee of each such board, in each case only to the extent permitted by law. Until Purchaser acquires a majority of the outstanding Shares on a fully diluted basis, the Company shall use its reasonable best efforts to ensure that all the members of the Board of Directors and such boards and committees as of the date hereof who are not employees of the Company shall remain members of the Board of Directors and such boards and committees. (b) The Company's obligations to appoint Purchaser's designees to its Board of Directors (or to any committee of its Board of Directors or to the board of directors or any committee thereof of any subsidiary of the Company) pursuant to subsection (a) shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The Company shall promptly take all actions required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill 29 its obligations under this Section 6.3 and shall include in the Schedule 14D-9 or a separate Rule 14f-1 information statement provided to stockholders such information with respect to the Company and its officers and directors as is required under Section 14(f) and Rule 14f-1 to fulfill its obligations under this Section 6.3. Parent or Purchaser will supply to the Company and be solely responsible for the accuracy and completeness of any information with respect to either of them and their nominees, officers, directors and affiliates required by Section 14(f) and Rule 14f-1. (c) In addition to any vote of the Board of Directors required by law, the Certificate of Incorporation or the By-laws of the Company, or by this Agreement, following the election or appointment of Purchaser's designees pursuant to this Section 6.3 and prior to the Effective Time, the concurrence of a majority of the directors of the Company then in office who are neither designated by Purchaser nor are employees of the Company (the "Disinterested Directors") will be required to authorize any amendment, or waiver of any term or condition, of this Agreement or the Certificate of Incorporation or By-Laws of the Company, any termination of this Agreement by the Company, and any extension by the Company of the time for the performance of any of the obligations or other acts of Purchaser or waiver or assertion of any of the Company's rights hereunder. Notwithstanding Section 6.3(a) hereof, the number of Disinterested Directors shall be not less than two; provided, however, that, -------- ------- in such event, if the number of Disinterested Directors is reduced below two for any reason, the remaining Disinterested Director(s) shall be entitled to designate persons to fill such vacancies who shall be deemed to be Disinterested Directors for purposes of this Agreement, or if no Disinterested Directors then remain, the other directors who were directors prior to the date hereof shall designate two persons to fill such vacancies who cannot be officers or affiliates of the Company, Parent or Purchaser, and such persons shall be deemed to be Disinterested Directors for purposes of this Agreement. SECTION 6.4: ACCESS TO INFORMATION; CONFIDENTIALITY. ---------------------------------------------------- (a) From the date hereof to the Effective Time, upon reasonable prior notice, the Company shall, and shall cause its subsidiaries, officers, directors, employees, and shall use its reasonable best efforts to cause its auditors and other agents to, afford the officers, employees, auditors and other agents of Parent, and financing sources who shall agree to be bound by the provisions of this Section 6.4 as though a party hereto, complete access, consistent with applicable law, at all reasonable times to its officers, employees, agents, properties, offices, plants and other facilities and to all books and records, and shall furnish Parent and such financing sources with all financial, operating and other data and information as Parent, through its officers, employees or agents, or such financing sources may from time to time reasonably request. Notwithstanding the foregoing, any such investigation or consultation shall be conducted, where possible, during normal business hours and, in each case, in such a manner as not to interfere unreasonably with the business or operations of the Company or its subsidiaries. (b) As soon as practicable after the date of this Agreement, Company and Parent shall cooperate in good faith to develop a plan (the "Plan") with respect to the communications with their respective employees and the employees of their respective subsidiaries regarding the transactions contemplated by this Agreement. Prior to consummation 30 of the Offer, Parent shall coordinate any communications to the Company's employees (including employees of the Company's subsidiaries) through the officers of the Company and in a manner that will not disrupt the operations of the Company. (c) All information obtained by Parent and Purchaser pursuant to this Section 6.4 shall be kept confidential in accordance with that certain letter agreement, dated July 20, 1998 (the "Parent Confidentiality Agreement"), between Parent and the Financial Advisor as agent for the Company. SECTION 6.5: NO SOLICITATION OF TRANSACTIONS. The Company, its affiliates --------------------------------------------- and their respective officers, directors, employees, representatives and agents shall immediately cease any existing discussions or negotiations, if any, with any parties conducted heretofore with respect to any acquisition or exchange of all or any material portion of the assets of, or any equity interest in, the Company or any of its subsidiaries or any business combination with or involving the Company or any of its subsidiaries. At any time prior to consummation of the Offer, the Company may, directly or indirectly, furnish information and access, in each case only in response to a request for such information or access to any person made after the date hereof that was not solicited, initiated or knowingly encouraged by the Company or any of its affiliates or any of its or their respective officers, directors, employees, representatives or agents after the date hereof, pursuant to appropriate confidentiality agreements containing terms and conditions (including standstill provisions) that are no less favorable than the terms and conditions contained in the Parent Confidentiality Agreement. Additionally, the Company, its affiliates, officers, directors employees or representatives, may participate in discussions and negotiate with such person concerning any merger, sale of assets, sale of shares of capital stock or similar transaction (including an exchange of stock or assets) involving the Company or any subsidiary or division of the Company, only if such person has submitted a proposal to the Board of Directors of the Company relating to any such transaction and the Board by a majority vote determines in good faith, based upon the advice of outside counsel to the Company, that failing to take such action is reasonably likely to constitute a breach of the Board of Director's fiduciary duty under applicable law. The Board of Directors shall provide a copy of any such written proposal to Parent immediately after receipt thereof (except such written proposal shall be provided to Parent by 10:30 a.m. on the next business day in cases where such written proposal is not received during normal business hours) and shall notify Parent immediately if any proposal (oral or written) is made (except Parent shall be notified by 10:30 a.m. on the next business day in cases where such proposal is not received during normal business hours) and shall in such notice, indicate in reasonable detail the identity of the offeror and the terms and conditions of any proposal and shall keep Parent promptly advised of all developments which could reasonably be expected to culminate in the Board of Directors withdrawing, modifying or amending its recommendation of the Offer, the Merger and the other transactions contemplated by this Agreement. Except as set forth in this Section 6.5, neither the Company or any of its affiliates, nor any of its or their respective officers, directors, employees, representatives or agents, shall, directly or indirectly, solicit, initiate or knowingly encourage discussions or negotiations with, any corporation, partnership, person or other entity or group (other than Parent and Purchaser, any affiliate or associate of Parent and Purchaser or any designees of Parent or Purchaser) concerning any merger, sale of any material portion or assets, sale of any shares of capital stock or similar transactions (including an exchange of stock or assets) involving the Company or any 31 subsidiary or division of the Company. Nothing in this Section 6.5 shall prevent the Board of Directors from taking, and disclosing to the Company's stockholders, a position contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to any tender offer; provided, further, that the Board of Directors shall not recommend that the stockholders of the Company tender their Shares in connection with any such tender offer unless the Board by majority vote shall have determined in good faith, based upon the advice of outside counsel to the Company, that failing to take such action is reasonably likely to constitute a breach of the Board of Director's fiduciary duty under applicable law. The Company agrees not to release any third party from, or waive any provisions of, any confidentiality or standstill agreement to which the Company is a party, unless the Board of Directors determines, based upon the advice of outside counsel, that the failure to make such release or waiver is reasonably likely to constitute a breach of the Board of Director's fiduciary duties under applicable law. SECTION 6.6: EMPLOYEE MATTERS. ------------------------------ (a) On and after the Effective Time, Parent shall cause the Surviving Corporation and its subsidiaries to promptly pay or provide when due all compensation and benefits earned through or prior to the Effective Time as provided pursuant to the terms of any compensation arrangements, employment agreements and employee or director benefit plans, programs and policies in existence as of the date hereof for all employees (and former employees) and directors (and former directors) of the Company and its subsidiaries (including all compensation and benefits earned through the Effective Time pursuant to the Company Plans disclosed in the Company Disclosure Letter). Parent and the Company agree that the Surviving Corporation and its subsidiaries shall pay promptly or provide when due all compensation and benefits required to be paid pursuant to the terms of any individual agreement with any employee, former employee, director or former director in effect as of the date hereof and disclosed in the Company Disclosure Letter. (b) If employees of the Surviving Corporation and its subsidiaries become eligible to participate in a medical, dental or health plan of Parent or its subsidiaries, Parent shall cause such plan to (i) waive any preexisting condition limitations for conditions covered under the applicable medical, health or dental plans of the Company and its subsidiaries and (ii) honor any deductible and out-of-pocket expenses incurred by the employees and their beneficiaries under such plans during the portion of the calendar year prior to such participation. (c) The Surviving Corporation shall perform all of Company's obligations under and pursuant to the Union Contract. (d) Nothing in this Section 6.6 shall require the continued employment of any person or, with respect to clause (c) hereof, prevent the Company and/or the Surviving Corporation and their subsidiaries from taking any action or refraining from taking any action that the Company and its subsidiaries prior to the Effective Time, could have taken or refrained from taking. (e) The Surviving Corporation shall pay management bonuses of up to an aggregate of $600,000 for the fiscal year 1998, in accordance with past practices and pursuant to 32 the direction and discretion of Timothy R. Duke, to the extent that such bonuses have been accrued on the Company's unaudited interim financial statements for the nine-month period ended September 30, 1998. SECTION 6.7: DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. --------------------------------------------------------------------- (a) The Articles of Incorporation and By-Laws of the Surviving Corporation shall contain provisions no less favorable with respect to indemnification than are set forth in the Certificate of Incorporation and By- laws of the Company, which provisions shall not be amended, repealed or otherwise modified for a period of 6 years from the Effective Time in any manner that would adversely affect the rights thereunder of individuals who at or prior to the Effective Time were directors, officers or employees of the Company. (b) For 6 years after the Effective Time, the Surviving Corporation will indemnify and hold harmless each present and former director and officer of the Company (the "Indemnified Parties"), against any costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages or liabilities (collectively, "Costs") (but only to the extent such Costs are not otherwise covered by insurance and paid) incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative (collectively, "Claims"), arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent permitted under applicable law (and the Surviving Corporation will also advance expenses as incurred to the fullest extent permitted under applicable law provided the person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification). (c) Any Indemnified Party wishing to claim indemnification under Section 6.7(b), upon learning of any such Claim, shall promptly notify Parent thereof. (d) Parent shall, or shall cause, the Surviving Corporation to maintain the Company's existing officers' and directors' liability insurance ("D&O Insurance") for a period of 6 years after the Effective Time so long as the annual premium therefor is not in excess of twice the current premium (the "Maximum Premium"); provided, however, if the existing D&O Insurance expires, or -------- ------- is terminated or canceled by the insurance carrier during such period, the Surviving Corporation will use its reasonable best efforts to obtain as much D&O Insurance and, to the extent possible, covering substantially the same matters that were covered under the D&O Insurance as in effect on the date hereof, as can be obtained for the remainder of such period for a premium not in excess (on an annualized basis) of the Maximum Premium. (e) If the Surviving Corporation or Parent or any of their respective successors or assigns, (i) reorganizes or consolidates with or merges into any other person and is not the resulting, continuing or surviving corporation or entity of such consolidation or merger or (ii) liquidates, dissolves or transfers all or substantially all of its properties and assets to any person, then, and in each such case, prior to such action, proper provision will be made so that the successors and assigns of such party assume the obligations of Surviving Corporation or Parent hereunder, as applicable. 33 SECTION 6.8: NOMINATION OF TIMOTHY R. DUKE. Upon acceptance and payment ------------------------------------------- for the Shares in the Offer, Parent, acting through its Board of Directors, shall cause its Board of Directors to be expanded and shall appoint Timothy R. Duke to fill the vacancy created by such expansion. Thereafter, Parent shall cause Timothy R. Duke to be nominated as a director nominee for consideration by Parent's stockholders at the next regularly scheduled annual meeting of Parent's stockholders. SECTION 6.9: NOTIFICATION OF CERTAIN MATTERS. The Company shall give --------------------------------------------- prompt notice to Parent, and Parent shall give prompt notice to the Company, of the occurrence or non-occurrence of (i) any event the occurrence or non- occurrence of which would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect and (ii) any failure of the Company, Parent or Purchaser, as the case may be, to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 6.9 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. SECTION 6.10: FURTHER ACTION; REASONABLE BEST EFFORTS. ----------------------------------------------------- (a) Upon the terms and subject to the conditions hereof, each of the parties hereto shall use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement as soon as practicable, including but not limited to (i) cooperation in the preparation and filing of the Offer Documents, the Schedule 14D-9, the Proxy Statement, any required filings under the HSR Act and any amendments to any thereof, (ii) cooperation with respect to consummating the financing for the Offer and the Merger and (iii) using its reasonable best efforts to promptly make all required regulatory filings and applications including, without limitation, responding promptly to requests for further information and to obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with the Company and its subsidiaries and Parent and its subsidiaries as are necessary for the consummation of the transactions contemplated by this Agreement and to fulfill the conditions to the Offer and the Merger. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall use their reasonable best efforts to take all such necessary action. (b) The Company and Parent each shall keep the other reasonably apprised of the status of matters relating to completion of the transactions contemplated hereby, including promptly furnishing the other with copies of notices or other communications received by Parent or the Company, as the case may be, or any of their subsidiaries, from any governmental authority with respect to the Offer or the Merger or any of the other transactions contemplated by this Agreement. The parties hereto will consult and cooperate with one another, and consider in good faith the views of one another in connection with any analyses, appearances, presentations, 34 memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to the HSR Act or any other antitrust law. (c) Each party shall timely and promptly make all filings which are required under the HSR Act and Parent shall pay the filing fee. Each party will furnish to the other such necessary information and reasonable assistance as it may request in connection with its preparation of such filings. Each party will supply the other with copies of all correspondence, filings or communications between such party or its representatives and the Federal Trade Commission, the Antitrust Division of the United States Department of Justice or any other governmental agency or authority or members of their respective staffs with respect to this Agreement or the transactions contemplated hereby. SECTION 6.11: PUBLIC ANNOUNCEMENTS. The parties agree that the initial ----------------------------------- press release announcing the execution of this Agreement shall be a joint release approved by all parties. Parent and the Company shall consult with each other before issuing any press release or otherwise making any public statements with respect to the Offer or the Merger and shall not issue any such press release or make any such public statement prior to such consultation and prior to approval by Parent, except as may be required by law or any listing agreement with its securities exchange. SECTION 6.12: DISPOSITION OF LITIGATION. ---------------------------------------- (a) The Company shall not settle any litigation currently pending, or commenced after the date hereof, against the Company or any of its directors by any stockholder of the Company relating to the Offer or this Agreement, without the prior written consent of Parent (which shall not be unreasonably withheld). (b) The Company shall not voluntarily cooperate with any third party that has sought or may hereafter seek to restrain or prohibit or otherwise oppose the Offer or the Merger and shall cooperate with Parent and Purchaser to resist any such effort to restrain or prohibit or otherwise oppose the Offer or the Merger, unless the Board of Company, based upon the advice of outside legal counsel, determines that such cooperation is mandatory in order to comply with its fiduciary duties. SECTION 6.13: COMMITMENT LETTER. Parent covenants and agrees that, during -------------------------------- the period from the date hereof to the Effective Time, unless the Company shall otherwise agree in writing, it shall operate its business, and cause each of its subsidiaries and affiliates, including Purchaser, to operate their respective businesses, in a manner so as not to materially impact its ability to borrow the monies contemplated to be loaned to it or them as set forth in the Commitment Letter. By way of example, and not of limitation, Parent agrees that neither it, nor any of its subsidiaries or affiliates (including Purchaser) will (i) enter into any financing transaction (other than the sale of common equity for cash consideration resulting in gross proceeds per share equal to the fair market value of such common equity) or any merger, consolidation, or purchase or sale of a substantial portion of the equity or assets, with or of any other person or entity, or (ii) enter into any recapitalization, reorganization, liquidation or dissolution, to the extent that any such action 35 under clauses (i) or (ii) hereof would materially and adversely impact Parent's ability to borrow funds pursuant to the Commitment Letter. From and after the date hereof and continuing until completion of the Merger, or the earlier termination of this Agreement in accordance with its terms, Parent and Purchaser agree to use the funds currently available under Parent's existing revolving credit facility with First Union National Bank, as Agent, and Wachovia Bank of North Carolina, N.A., as co-Agent (the "Revolving Credit Facility"), solely to fund the purchase of Shares pursuant to the Offer and the payment of the Merger Consideration. Parent and Purchaser jointly and severally represent and warrant to the Company that, on the date hereof, there is at least $30,000,000 of availability under the Revolving Credit Facility. Additionally, Parent and Purchaser jointly and severally represent and warrant to the Company that, on the date hereof, Parent has unrestricted cash on its balance sheet of at least $20,000,000 (the "Minimum Cash Balance"), and covenants and agrees that the Minimum Cash Balance shall be used by Parent and Purchaser solely to fund the purchase of Shares pursuant to the Offer and the payment of the Merger Consideration. ARTICLE VII CONDITIONS OF MERGER SECTION 7.1: CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER. ------------------------------------------------------------------------- The respective obligations of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) If required by the DGCL, this Agreement shall have been adopted by the affirmative vote of the stockholders of the Company by the requisite vote in accordance with the Company's Certificate of Incorporation and the DGCL. (b) No statute, rule, regulation, executive order, decree, ruling, injunction or other order (whether temporary, preliminary or permanent) shall have been enacted, entered, promulgated or enforced by any United States, foreign, federal or state court or governmental authority that prohibits, restrains, enjoins or restricts the consummation of the Merger; provided, -------- however, that prior to invoking this condition each party agrees to comply with - ------- Section 6.10. (c) Purchaser shall have purchased all Shares validly tendered pursuant to the Offer (except that payment for all validly tendered Shares is not a condition to Parent's or Purchaser's obligation if Purchaser fails to accept for payment and pay for any Shares in violation of the terms of the Offer or this Agreement). (d) Any waiting period applicable to the Merger under the HSR Act shall have terminated or expired. 36 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER SECTION 8.1: TERMINATION. This Agreement may be terminated and the ------------------------- transactions contemplated herein may be terminated and abandoned at any time prior to the Effective Time, notwithstanding approval thereof by the stockholders of the Company: (a) By mutual written consent of Parent, Purchaser and the Company; (b) By either of Purchaser or Parent or of the Company if, by the Outside Date, any of the Offer Conditions (as defined in Annex A) has not been satisfied or (except with respect to the Minimum Condition) has not been waived by Purchaser; (c) By the Company prior to the purchase of Shares pursuant to the Offer, if (i) there has been a material breach of any representation, warranty, covenant or agreement on the part of Parent or Purchaser contained in this Agreement that materially adversely affects Parent's or Purchaser's ability to consummate (or materially delays commencement or consummation of) the Offer and that has not been cured prior to the earlier of (A) 10 business days following notice of such breach by the Company to Parent and Purchaser and (B) two business days prior to the Expiration Date or (ii) Purchaser has (x) terminated the Offer or (y) failed to pay for Shares pursuant to the Offer; (d) By the Company if, prior to the purchase of Shares pursuant to the Offer, any person has made a bona fide offer to acquire the Company (i) that the Board of Directors of the Company determines in its good faith judgment is more favorable to the Company's stockholders than the Offer and the Merger and (ii) as a result of which the Board of Directors determines in good faith, based upon the advice of outside counsel, that the failure to terminate this Agreement is reasonably likely to constitute a breach of the Board's fiduciary obligations under applicable law, provided that such termination under this paragraph shall -------- not be effective until the Company has made payment of the full fee and expense reimbursement required by Section 8.3; (e) By Parent prior to the purchase of Shares pursuant to the Offer, if (1) there has been a breach of any representation, warranty, covenant or agreement on the part of the Company contained in this Agreement that is likely to have a Material Adverse Effect and that has not been cured prior to the earlier of (A) 10 business days following notice of such breach and (B) two business days prior to the date on which the Offer expires; (2) the Board of Directors of the Company has (x) modified (including by amendment of the Schedule 14D-9) in a manner adverse to Purchaser or withdrawn its approval or recommendation of the Offer, this Agreement or the Merger, (y) approved or recommended another offer or transaction pursuant to, or otherwise knowingly and intentionally breached in a material manner the provisions of, Section 6.5, or (z) amended the Rights Agreement to facilitate an offer by any other person to acquire the Company, or has resolved to effect any of the foregoing; (3) there has been, solely as a result of the operation of the Rights Agreement, a material breach of any representation, warranty, covenant or agreement contained in Section 3.3 or Section 3.4, which material breach 37 has not been cured by the earlier of (X) the Outside Date or (Y) 20 days after receipt by the Company of notice of such breach from Parent or Purchaser; or (4) there has been a material breach of any representation, warranty, covenant or agreement contained in Section 3.5(c) or Section 5.2; or (f) By Parent or the Company, upon the entry or issuance of any order, preliminary or permanent injunction, decree, judgment or ruling in any action or proceeding before any court or governmental, administrative or regulatory authority or agency, or any statute, rule or regulation enacted, entered, enforced, promulgated, amended or issued that is applicable to Parent, Purchaser, the Company or any subsidiary or affiliate of Purchaser or the Company or the Offer or the Merger, by any legislative body, court, government or governmental, administrative or regulatory authority or agency that is likely to have the effect of: (i) making illegal or otherwise directly or indirectly restraining or prohibiting the making of the Offer in accordance with the terms of this Agreement, the acceptance for payment of, or payment for, some of or all the Shares by Purchaser or any of its affiliates or the consummation of the Merger; (ii) prohibiting the ownership or operation of the Company and its subsidiaries by Parent or any of Parent's subsidiaries, (iii) imposing material limitations on the ability of Parent, Purchaser or any of Parent's affiliates effectively to acquire or hold or to exercise in all material respects full rights of ownership of the Shares, including without limitation the right to vote any Shares acquired or owned by Parent or Purchaser or any of its affiliates on all matters properly presented to the stockholders of the Company, including, without limitation, the adoption of this Agreement or the right to vote any shares of capital stock of any subsidiary directly or indirectly owned by the Company; or (iv) requiring divestiture by Parent or Purchaser or any of their affiliates of any Shares. SECTION 8.2: EFFECT OF TERMINATION. In the event of the termination of ----------------------------------- this Agreement pursuant to Section 8.1, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto except as set forth in Section 8.3 and Section 9.1; provided, however, that the payment of -------- ------- the Termination Fee (as defined in Section 8.3(a) below) pursuant to Section 8.3(a)(i) shall be considered with respect to the calculation of any damages resulting from any such willful breach by the Company. Notwithstanding anything herein to the contrary, nothing in this Section 8.2 shall relieve any party from liability for fraud or breach of any covenant, agreement or any other term in this Agreement. If this Agreement is terminated by the Company and a Termination Fee is paid pursuant to Section 8.3(a)(i)(B) or Section 8.3(a)(ii), the Termination Fee shall be deemed to be liquidated damages rather than a penalty, and shall constitute the total damages and sole remedy of Parent and Purchaser upon any such termination. SECTION 8.3: FEES AND EXPENSES. ------------------------------- (a) If (i) the Company terminates this Agreement (A) pursuant to Section 8.1(d) or (B) in a manner or for a reason not expressly permitted by Section 8.1 or (ii) Parent terminates this Agreement pursuant to Section 8.1(e)(2), Section 8.1(e)(3) or Section 8.1(e)(4), then the Company shall pay to Parent, within three business days following termination of this Agreement a fee, in cash, of $5,000,000 (the "Termination Fee"). If, from and after July 20, 1998, and prior to the purchase of Shares pursuant to the Offer, (1) any other person has made a bona-fide offer to acquire at least 50% of the Shares or substantially all of the assets of the 38 Company, or otherwise to acquire the Company (the "Third-Party Offer"), at a price per Share (or the equivalent price per Share, in the case of an asset purchase) (x) that is higher on its face than the price per Share to be paid in the Offer or (y) that the Company determines, based upon the advice of its Financial Advisor, is higher than the price per Share to be paid in the Offer, (2) the Offer remains outstanding until the Outside Date but is not consummated solely as a result of the failure of the Minimum Condition and (3) the Third- Party Offer is consummated within 180 days of the termination of this Agreement, then the Company shall pay to Parent, within three business days following the consummation of the Third Party Offer, the Termination Fee. The Company in no event shall be obligated to pay more than one such fee with respect to all such agreements and occurrences. (b) Each party shall bear its own expenses in connection with this Agreement and the transactions contemplated hereby. SECTION 8.4: AMENDMENT. Subject to Section 6.3, this Agreement may be ----------------------- amended by the parties hereto by action taken by or on behalf of their respective Boards of Directors at any time prior to the Effective Time; provided, however, that, after adoption of the Agreement by the stockholders of the Company, no amendment may be made which would reduce the amount or change the type of consideration into which each Share shall be converted upon consummation of the Merger. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. SECTION 8.5: WAIVER. Subject to Section 6.3, at any time prior to the -------------------- Effective Time, any party hereto may (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby. ARTICLE IX GENERAL PROVISIONS SECTION 9.1: NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. ------------------------------------------------------------------------ The representations, warranties and agreements in this Agreement shall terminate at the Effective Time or upon the termination of this Agreement pursuant to Section 8.1, as the case may be, except that the agreements set forth in Article II, Section 6.6, Section 6.7, and Section 6.8 and Article IX shall survive the Effective Time and those set forth in Section 5.2, Section 6.4, Section 8.3 and Article IX, as well as the Parent Confidentiality Agreement, shall also survive termination of this Agreement. SECTION 9.2: NOTICES. All notices, requests, claims, demands and other --------------------- communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by telecopy or United States express mail (postage prepaid, 39 return receipt requested) or by overnight courier service guaranteeing next business day delivery (charges prepaid) to the respective parties at the following addresses (or at such other address for a party as shall be specified by like notice): if to Parent or Purchaser: Roanoke Electric Steel Corporation 102 Westside Blvd., N.W. P.O. Box 13948 Roanoke, Virginia 24038-3948 Attention: Donald G. Smith Telecopy: (540) 342-9437 with additional copies to: Woods, Rogers & Hazlegrove, P.L.C. First Union Tower, Suite 1400 10 South Jefferson Street P.O. Box 14125 Roanoke, Virginia 24038-4125 Attention: Heman A. Marshall, III, Esq. Telecopy: (540) 983-7711 if to the Company: Steel of West Virginia, Inc. P.O. Box 2547 Huntington, West Virginia 25726 Attention: Timothy R. Duke Telecopy: (304) 529-1479 with a copy to: Sierchio & Albert, P.C. 41 East 57th Street Floor 39 - At Madison Avenue, Penthouse A New York, New York 10022 Attention: Stephen A. Albert, Esq. Telecopy: (212) 446-9504 with a further copy to: Pepper Hamilton LLP 3000 Two Logan Square 18th & Arch Streets Philadelphia, Pennsylvania 19103 40 Attention: James D. Epstein, Esq. Telecopy: (215) 981-4750 SECTION 9.3: CERTAIN DEFINITIONS. For purposes of this Agreement, the --------------------------------- term: "affiliate" of a person means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned person; "beneficial owner" with respect to any Shares means a person who shall be deemed to be the beneficial owner of such Shares (i) which such person or any of its affiliates or associates beneficially owns, directly or indirectly, (ii) which such person or any of its affiliates or associates (as such term is defined in Rule 12b-2 of the Exchange Act) has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of consideration rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding or (iii) which are beneficially owned, directly or indirectly, by any other persons with whom such person or any of its affiliates or person with whom such person or any of its affiliates or associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares; provided, however, that no person nor any affiliate or associate of such person shall be deemed to be the beneficial owner of any securities by reason of a revocable proxy granted for a particular meeting of stockholders, pursuant to a public solicitation of proxies for such meeting, and with respect to which shares neither such person nor any such affiliate or associate is otherwise deemed the beneficial owner. "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management policies of a person, whether through the ownership of stock, as trustee or executor, by contract or credit arrangement or otherwise; "generally accepted accounting principles" shall mean the generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession in the United States, in each case applied on a basis consistent with the manner in which the audited financial statements for the fiscal year of the Company ended December 31, 1997 were prepared; 41 "person" means an individual, corporation, partnership, association, trust, unincorporated organization, other entity or group (as defined in Section 13(d)(3) of the Exchange Act); and "subsidiary" or "subsidiaries" of the Company, the Surviving Corporation, Parent or any other person means any corporation, partnership, joint venture or other legal entity of which the Company, the Surviving Corporation, Parent or such other person, as the case may be (either alone or through or together with any other subsidiary), owns, directly or indirectly, 50% or more of the stock or other equity interests the holder of which is generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. SECTION 9.4: SEVERABILITY. If any term or other provision of this -------------------------- Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible. SECTION 9.5: ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, together with ------------------------------------------ the other agreements referenced herein (including the Parent Confidentiality Agreement), constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. This Agreement shall not be assigned by operation of law or otherwise, except that Parent and Purchaser may assign all or any of their respective rights and obligations hereunder to any direct or indirect wholly owned subsidiary or subsidiaries of Parent, provided that no such assignment shall relieve the assigning party of its obligations. SECTION 9.6: PARTIES IN INTEREST. This Agreement shall be binding upon --------------------------------- and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, except for the provisions of Sections 6.6(c) and 6.7, is intended to or shall confer upon any other person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement. SECTION 9.7: GOVERNING LAW. This Agreement shall be governed by, and --------------------------- construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. SECTION 9.8: HEADINGS. The descriptive headings contained in this ---------------------- Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. 42 SECTION 9.9: COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be ------------------------------------------------ executed in one or more counterparts (including facsimile signatures), and by the different parties hereto in separate counterparts (including facsimile signatures), each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. SECTION 9.10: SPECIFIC PERFORMANCE. The parties agree that irreparable ---------------------------------- damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the U.S. District Court for the Western District of Virginia, Roanoke Division or the Circuit Court for the City of Roanoke, Virginia, this being in addition to any other remedy to which such party is entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit itself to the personal jurisdiction of such courts in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than a Federal or state court sitting in City of Roanoke, and (iv) consents to service being made through the notice procedures set forth in Section 9.2. [THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK] 43 IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. ROANOKE ELECTRIC STEEL CORPORATION By: /s/ Donald G. Smith ------------------------------- Name: Donald G. Smith Title: President SWVA ACQUISITION, INC. By: /s/ Donald G. Smith -------------------------------- Name: Title: STEEL OF WEST VIRGINIA, INC. By: /s/ Timothy R. Duke -------------------------------- Name: Timothy R. Duke Title: President 44 ANNEX A OFFER CONDITIONS The capitalized terms used in this Annex A have the meanings set forth in the attached Merger Agreement. Notwithstanding any other provision of the Offer, Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for any Shares tendered pursuant to the Offer, and Purchaser may postpone the acceptance for payment or payment for any Shares tendered pursuant to the Offer, and Purchaser may terminate the Offer (whether or not Purchaser has purchased or paid for any Shares) to the extent permitted by the Merger Agreement unless the following conditions (the "Offer Conditions") have been satisfied: (1) at the expiration of the Offer, a number of Shares that constitutes more than 50% of the voting power (determined on a fully- diluted basis) on the date of purchase of all the securities of the Company entitled to vote generally in the election of directors or in a merger has been validly tendered in the Offer and not properly withdrawn prior to the expiration of the Offer (the "Minimum Condition"); (2) all of the representations and warranties of the Company set forth in the Merger Agreement that are qualified by reference to a Material Adverse Effect are true and correct, and any such representations and warranties that are not so qualified are true and correct in all respects except in any respect that is not likely to have a Material Adverse Effect, in each case as if such representations and warranties were made at the time of such determination; or (3) At any time on or after the date of the Merger Agreement, none of the following events has occurred: (a) the entry or issuance of any order, preliminary or permanent injunction, decree, judgment or ruling in any action or proceeding before any court or governmental, administrative or regulatory authority or agency, or any statute, rule or regulation enacted, entered, enforced, promulgated, amended or issued that is applicable to Parent, Purchaser, the Company or any subsidiary or affiliate of Purchaser or the Company or the Offer or the Merger, by any legislative body, court, government or governmental, administrative or regulatory authority or agency that is likely to have the effect of: (i) making illegal or otherwise directly or indirectly restraining or prohibiting the making of the Offer in accordance with the terms of the Merger Agreement, the acceptance for payment of, or payment for, some of or all the Shares by Purchaser or any of its affiliates or the consummation of the Merger; (ii) prohibiting the ownership or operation of the Company and its subsidiaries by Parent or any of Parent's 45 subsidiaries, (iii) imposing material limitations on the ability of Parent, Purchaser or any of Parent's affiliates effectively to acquire or hold or to exercise in all material respects full rights of ownership of the Shares, including without limitation the right to vote any Shares acquired or owned by Parent or Purchaser or any of its affiliates on all matters properly presented to the stockholders of the Company, including, without limitation, the adoption of the Merger Agreement or the right to vote any shares of capital stock of any subsidiary directly or indirectly owned by the Company; or (iv) requiring divestiture by Parent or Purchaser or any of their affiliates of any Shares; (b) (i) any general suspension of trading in, or limitation on prices (other than suspensions or limitations triggered on NASDAQ by price fluctuations on a trading day) for, securities on any national securities exchange, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) a commencement of a war or material armed hostilities or other material national calamity directly involving the entire United States or materially adversely affecting the consummation of the Offer or (v) in the case of any of the foregoing existing at the time of commencement of the Offer, a material acceleration or worsening thereof; (c) (i) the Board of Directors of the Company or any committee thereof has withdrawn or modified in a manner adverse to Parent or Purchaser the approval or recommendation of the Offer, the Merger or the Merger Agreement, or approved or recommended any takeover proposal or any other acquisition of Shares other than the Offer, (ii) any such person or group has entered into a definitive agreement or an agreement in principle with the Company with respect to a tender offer or exchange offer for any Shares or a merger, consolidation or other business combination with or involving the Company or any of its subsidiaries, or (iii) the Board of Directors of the Company or any committee thereof has resolved to do any of the foregoing; (d) the Company fails to perform in any material respect any material obligation or to comply in any material respect with any material agreement or material covenant of the Company to be performed or complied with by it under the Merger Agreement; (e) the Merger Agreement has been terminated in accordance with its terms or the Offer has been terminated with the consent of the Company; or (f) any waiting periods under the HSR Act applicable to the purchase of Shares pursuant to the Offer or the Merger have not expired or been terminated; 46 and, upon the failure of any of the conditions set forth in Sections 2 or 3 of this Annex A, Purchaser determines, in its reasonable judgment, that it is inadvisable for Purchaser to proceed with the Offer or with the acceptance for payment of or payment for Shares. The Offer Conditions (other than the Minimum Condition) are for the sole benefit of Purchaser and may be waived by Purchaser in writing in whole or in part at any time and from time to time in its sole discretion. 47 EX-99.C2 14 STOCK OPTION AGREEMENT DATED 11/10/98 Exhibit (c)(2) Stock Option Agreement, dated as of November 10, 1998, between Steel of West Virginia, Inc., and SWVA Acquisition, Inc. STOCK OPTION AGREEMENT ---------------------- STOCK OPTION AGREEMENT, dated as of November 10, 1998, between Steel of West Virginia, Inc., a Delaware corporation ("Company"), and SWVA Acquisition, ------- Inc., a Virginia corporation ("Purchaser"). --------- WITNESSETH: ----------- WHEREAS, Purchaser, Roanoke Electric Steel Corporation, a Virginia corporation of which Purchaser is a wholly owned subsidiary ("Parent"), and ------ Company, propose to enter into an Agreement and Plan of Merger (the "Merger ------ Agreement"), which would provide, among other things, that Purchaser, upon the - --------- terms and subject to the conditions thereof, would make a cash tender offer (the "Offer") for all outstanding shares of common stock, par value $0.01 per share, of Company (the "Shares") and thereafter Purchaser would merge with Company (the ------ "Merger"); and WHEREAS, as a condition to their willingness to enter into the Merger Agreement, Parent and Purchaser have requested that Company agree, and Company has agreed, as set forth herein, to grant to Purchaser an option to purchase authorized but unissued Shares. NOW, THEREFORE, to induce Parent and Purchaser to enter into the Merger Agreement and in consideration of the mutual covenants and agreements set forth herein and therein, the parties agree as follows: 1. Grant of Option. Company hereby grants to Purchaser an irrevocable --------------- option, exercisable as provided herein (the "Option"), to purchase up to an ------ aggregate of 1,196,148 authorized but unissued Shares (the "Option Shares") for ------------- an exercise price (the "Exercise Price") equal to the closing bid price per -------------- Share, as reported by The Nasdaq Stock Market, on the date following the date of the first joint public announcement of the Merger by Company and Parent; provided, however, that the number of Option Shares shall not exceed 19.9% of issued and outstanding Shares (not counting the Option Shares) and shall be subject to adjustments as set forth in Section 7 below. In the event that after the date hereof any additional Shares (other than the Option Shares) are either (i) issued or become outstanding, or (ii) redeemed, repurchased, retired or otherwise cease to be outstanding, the number of Option Shares shall be increased or decreased, as appropriate, so that, after such issuance, such number equals 19.9% of the number of Shares then issued and outstanding (not counting the Option Shares). 2. Exercise of Option. The Option may be exercised by Purchaser at any ------------------ time or from time to time following the occurrence of a Triggering Event (as hereinafter defined), in whole or in part, until the 180th day following the termination of the Merger Agreement. If Purchaser wishes to exercise the Option, Purchaser shall give written notice to Company of its intention to exercise the Option, specifying the number of Option Shares it will purchase and a place, time and date not earlier than one day and not later than 20 days from the date such notice is given for the closing of such purchase (the "Closing"). Each ------- Closing shall be held on the date specified in such notice unless, on such date, there shall be any preliminary or permanent injunction or other order by any court of competent jurisdiction or any other legal restraint or prohibition preventing the consummation of such purchase, in which event such Closing shall be held as soon as practicable following the lifting, termination or suspension of such injunction, order, restraint or prohibition (each party agreeing to use its commercially reasonable efforts to have such injunction, order, restraint or prohibition lifted, terminated or suspended). Company's obligation to issue Option Shares upon exercise of the Option is subject to the conditions that (i) any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), applicable to the purchase of the Option Shares shall have expired ------- or been terminated and (ii) there shall be no preliminary or permanent injunction or other order preventing or restricting the issuance of the Option Shares. Purchaser and Company shall each promptly make such filings and provide such information as may be required under the HSR Act with respect to the purchase of the Option Shares. Notwithstanding the termination of the Option, purchaser will be entitled to exercise its rights under this Section 2 if it has exercised such rights in accordance with the terms hereof prior to the termination of the Option. The term "Triggering Event" shall mean the occurrence of (a) the termination of the Merger Agreement under circumstances that caused a Termination Fee (as defined in the Merger Agreement) to become payable by Company to Parent, (b) the occurrence of all of the events set forth in clauses (1), (2) and (3) of the second sentence of Section 8.3(a) of the Merger Agreement or (c) the purchase by Purchaser of Shares pursuant to the Offer following satisfaction of the Minimum Condition (as defined in Annex A to the Merger Agreement). Company shall promptly notify Purchaser and Parent in writing of the occurrence of any Triggering Event (which notice is not a condition to the exercise of the Option). 3. Payment and Delivery of Certificates. At any Closing hereunder (a) ------------------------------------ Purchaser shall make payment to Company of the aggregate purchase price for the Option Shares so purchased in immediately available funds by certified or official bank check or by wire transfer to a bank account designated by Company to Purchaser prior to such Closing and (b) Company shall deliver or cause to be delivered to Purchaser a certificate or certificates, duly executed by Company and registered in the name of Purchaser, representing the number of Option Shares so purchased. 4. Payment in Lieu of Exercise. If, after the occurrence of a Triggering --------------------------- Event but prior to the expiration of the Option, any Third Party (a) acquires beneficial ownership of more than 50 percent of the then outstanding Shares or (b) enters into an agreement with Company to acquire Company, by merger, consolidation or purchase of all or substantially all of its assets or other similar business combination, reorganization or recapitalization, then Purchaser may, in lieu of exercising the Option, surrender the Option to Company and Company shall pay to Purchaser upon Purchaser's written demand, an amount in cash for each of the Option Shares equal to the excess of (a) the highest price per Share paid or to be paid by such Third Party pursuant to such transaction (or such consideration paid to Company, in the case of an asset acquisition or similar transaction, divided by the number of Shares outstanding on a fully-diluted basis (after taking into consideration the exercise of all outstanding options, warrants, rights -2- (other than rights issued pursuant to that certain Rights Agreement between Company and Continental Stock Transfer & Trust Company, as Rights Agent, dated March 19, 1997, as amended to date), convertible securities or exchangeable securities issued by Company), excluding Shares issuable pursuant to this Agreement) over (b) the Exercise Price. In the event the price per Share paid or to be paid by such Third Party pursuant to such transaction includes both cash and non-cash consideration, the value of such non-cash consideration shall be determined by an investment banking firm acceptable to Company and Purchaser (it being understood that the firm retained by Company to render financial advisory services in connection with the Offer and Merger is acceptable to Company and Purchaser for such purpose). Upon but not until (i) the surrender by Purchaser of the Option and its demand for cash pursuant to this Section 4 and (ii) Purchaser's receipt of the full amount of such cash, any and all obligations of Purchaser to make payment and the obligations of Company to deliver certificates for Option Shares pursuant to Section 3 hereof shall terminate. 5. Representations and Warranties of Company. Company hereby represents ----------------------------------------- and warrants to Purchaser as follows: a. Due Authorization, Etc. This Agreement has been duly authorized by ----------------------- all necessary corporate action on the part of Company and has been duly executed and delivered by a duly authorized officer of Company. Prior to the execution and delivery of this Agreement and the issuance of the Option, the Board of Directors of Company (at a meeting duly called and held) has duly and validly approved this Agreement and the transactions contemplated hereby and by the Merger Agreement, including the Offer and the Merger and the acquisitions of Shares contemplated hereby and thereby, and for purposes of (S)203 of the Delaware General Corporation Law, such approval occurring prior to the time Purchaser became an "interested stockholder", as that term is defined in (S).203. b. Option Shares. Company has taken all necessary corporate action to -------------- authorize and reserve for issuance, upon exercises of the Option, the number of Option Shares and will take all necessary corporate action to authorize and reserve for issuance all additional Shares or other securities that may be issued as a result of Section 7 hereof upon exercise of the Option. The Shares (or such other securities) to be issued upon due exercise, in whole or in part, of the Option, when paid for as provided herein, will be duly authorized, validly issued, fully paid and nonassessable and free of preemptive rights, without liability attaching to the ownership thereof, and will be delivered free add clear of all claims, liens, encumbrances and security interests of any kind whatsoever. c. Conflicting Instruments. Neither the execution and delivery of this ------------------------ Agreement by Company nor the consummation by Company of the transactions contemplated hereby will violate or result in any violation of, or be in conflict with or constitute a default under, or require the consent of any person under, (i) the Certificate of Incorporation or By-Laws of Company or (ii) any agreement, instrument, indenture, judgment, decree, order, statute, rule or governmental regulation applicable to or binding upon Company except, in the case of clause (ii), -3- for violations, breaches or defaults which (x) are not in the aggregate material to the business, results of operations or financial condition of Company and its subsidiaries taken as a whole, (y) will not prevent or delay the consummation of the transactions contemplated hereby and (z) would not prevent or restrict Purchaser from exercising full rights of ownership over the Option Shares. Except for any filing that may be required under the HSR Act, the Exchange Act or the Securities Act of 1933 (the "Securities Act"), no consent, approval, -------------- order or authorization of, or registration, declaration or filing with, any government authority is required in connection with the execution and delivery of this Agreement by Company or the performance by Company of its obligations hereunder. 6. Representations and Warranties of Purchaser. Purchaser hereby ------------------------------------------- represents and warrants to Company as follows: a. Due Authorization, Etc. This Agreement has been duly authorized by ---------------------- all necessary corporate action on the part of Purchaser and has been duly executed and delivered by a duly authorized officer of Purchaser. b. No Distribution. Purchaser is acquiring the Option, and will --------------- acquire the Option Shares issuable upon exercise of the Option, for its own account and not with a view to or for sale in connection with any distribution thereof, and Purchaser will not sell or otherwise dispose of the Option, or any Option Shares, except in each case in compliance with the Securities Act and the rules and regulations thereunder. 7. Adjustment Upon Changes in Capitalization. In the event of any change ----------------------------------------- in the Shares by reason of any stock dividend, extraordinary dividend or distribution, split-up, recapitalization, combination, exchange of shares or the like, the number of Option Shares subject to the Option, the Exercise Price and the price per Option Share to be paid by Company upon surrender of the Option pursuant to Section 4 hereof shall be appropriately adjusted. 8. Registration Under the Securities Act. If the Option is exercised and ------------------------------------- Purchaser so requests, Company shall file and use its commercially reasonable efforts to register the Option Shares for sale as promptly as practicable after receiving such request, but only after the termination of the Merger Agreement in accordance with its terms, under the Securities Act and any applicable state securities law. Purchaser shall pay all fees and expenses in connection with such registration, including the reasonable fees and expenses of counsel and accountants of Parent, Purchaser and Company, including underwriting discounts and commissions to brokers or dealers. 9. Listing. If the Shares or any other securities to be acquired upon ------- exercise of the Option are then listed on the National Association of Securities Dealers Automated Quotation System (the "NASDAQ") (or any other national securities quotation system or national securities exchange), the Company, upon the request of the Purchaser, will promptly file an application to list the Shares or other securities to be acquired upon exercise of the Option on the -4- NASDAQ (and any other national securities quotation system or national securities exchange) and will use commercially reasonable efforts to obtain approval of such listing as promptly as practicable. The Purchaser shall pay all fees and expenses in connection with such listing. 10. Further Assurances. From time to time, at the other party's ------------------ request and without further consideration, each party hereto shall execute and deliver such additional documents and take all such further lawful action as may be necessary or desirable to consummate and make effective the transactions contemplated by this Agreement in accordance with the terms and conditions hereof. 11. Specific Performance. The parties hereto acknowledge and agree -------------------- that if any of the provisions of this Agreement were not performed by Company in accordance with their specific terms or were otherwise breached, Purchaser would not have an adequate remedy at law and would be harmed irreparably and that the damages therefor would be difficult to determine. Accordingly, it is agreed that Purchaser shall be entitled to injunctive relief to prevent breaches of this Agreement by Company and specifically to enforce the terms and provisions hereof, in addition to any other remedy to which it may be entitled, at law or in equity. 12. Miscellaneous. ------------- a. Assignment. This Agreement shall not be assigned, by operation ---------- of law or otherwise, except that Purchaser may assign its rights and obligations, in whole or in part, to Parent or to another wholly owned subsidiary of Parent, but no such assignment shall relieve Purchaser of its obligations hereunder if such assignee does not perform such obligations. b. Amendments. This Agreement may not be modified, amended, ---------- altered or supplemented except upon the execution and delivery of a written agreement executed by the parties hereto. c. Notices. All notices, requests, claims, demands and other ------- communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly received upon receipt) in accordance with the terms of the Merger Agreement. d. Governing Law. This Agreement shall be governed by and ------------- construed and enforced in accordance with the laws of the State of Delaware, without regard to its conflicts of law rules. e. Counterparts; Facsimile Signatures. This Agreement may be ---------------------------------- executed in several counterparts (including by facsimile signature), each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. f. Effect of Headings. The headings herein are for reference ------------------ purposes only and shall not in any way affect the meaning or interpretation hereof. -5- g. Entire Agreement. This Agreement and the Merger Agreement ---------------- contain the entire understanding of the parties with respect to their subject matter and supersede all prior agreements or understandings among the parties with respect to such subject matter. Company will not revoke the approvals contemplated by Section 5(a) hereof. h. Governing Law; Jurisdiction; and Consent to Service. Except as --------------------------------------------------- expressly set forth below, this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. In addition, each of Purchaser and Company hereby agree that any dispute arising out of this Agreement, the Offer or the Merger shall be heard in the Court of Chancery of the State of Delaware or in the United States District Court for the District of Delaware and, in connection therewith, each party to this Agreement hereby consents to the jurisdiction of such courts and agrees that any service of process in connection with any dispute arising out of this Agreement, the Offer or the Merger may be given to any other party hereto in accordance with subsection (c) above. i. Severability. Any term or provision of this Agreement which is ------------ invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable. j. Third Party Beneficiaries. Nothing in this Agreement, expressed ------------------------- or implied, shall be construed to give any person other than the parties hereto any legal or equitable right, remedy or claim under or by reason of this Agreement or any provision contained herein. k. Expenses. Each party shall pay its own costs and expenses -------- incurred in connection with the negotiation, execution, delivery, interpretation and enforcement of this Agreement (including the fees and disbursements of its accountants and advisors), except that in the event any legal proceeding is commenced by any party to this Agreement to enforce or recover damages for any breach of the provisions hereof, the prevailing party in such legal proceeding shall be entitled to recover in such legal proceeding from the losing party such prevailing party's costs and expenses incurred in connection with such legal proceedings, including reasonable attorneys fees. l. No Waiver. The failure of any party hereto to exercise any --------- right, power or remedy provided under this Agreement or otherwise or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, shall not constitute a waiver by such party of its right to exercise -6- any such or other right, power or remedy or to demand such compliance, either with respect to the particular instance or future instances. IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by Company and Purchaser on the date first above written. STEEL OF WEST VIRGINIA, INC. By: /s/ Timothy R. Duke ------------------------------ SWVA ACQUISITION, INC. By: /s/ Donald G. Smith ------------------------------ -7- EX-99.C3 15 FORM OF STOCK TENDER AND VOTING AGREEMENT DATED 11/10/98 Exhibit (c)(3) Form of Stock Tender and Voting Agreement, dated as of November 10, 1998, by and among Roanoke Electric Steel Corporation, SWVA Acquisition, Inc., and certain stockholders of the Company. FORM OF STOCK TENDER AND VOTING AGREEMENT --------------------------------- STOCK TENDER AND VOTING AGREEMENT (this "Agreement"), dated as of November 10, 1998 by and among _____________ ("Shareholder"), Roanoke Electric Steel Corporation, a Virginia corporation ("Parent"), and SWVA Acquisition, ------ Inc., a Virginia corporation and a wholly-owned subsidiary of Parent ("Purchaser"). --------- W I T N E S S E T H: ------------------- WHEREAS, concurrently herewith, Parent, Purchaser and Steel of West Virginia, Inc., a Delaware corporation ("Company"), are entering into an ------- Agreement and Plan of Merger of even date herewith (the "Merger Agreement"), ---------------- pursuant to which Purchaser agrees to make a tender offer (the "Offer") for all ----- outstanding shares of common stock, $.01 par value per share (the "Common ------ Stock"), of the Company, at $10.75 in cash, to be followed by a merger (the - ----- "Merger") of Purchaser with the Company; ------ WHEREAS, Shareholder beneficially owns (as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange -------- Act")), as of the date hereof, ______ shares of Common Stock (the "Existing - --- -------- Shares", together with any shares of Common Stock beneficial ownership of which - ------ is acquired by Shareholder after the date hereof and prior to the termination hereof, hereinafter collectively referred to as the "Shares"); ------ WHEREAS, as a condition to their willingness to enter into the Merger Agreement, Parent and Purchaser have requested that Shareholder agree, and Shareholder has agreed, to enter into this Agreement; and WHEREAS, Parent and Purchaser have entered into the Merger Agreement in reliance on Shareholder's representations, warranties, covenants and agreements hereunder; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other, good and valuable consideration, and intending to be legally bound hereby, it is agreed as follows: 1. Agreement to Tender and Vote. ---------------------------- 1.1. Tender. Shareholder agrees to validly tender all Shares ------ beneficially owned by it (which, for purposes of this Section 1.1 shall be determined with reference to Rule 13d-3(a)(2) promulgated under the Exchange Act pursuant to the Offer within ten business days of commencement of the Offer and not withdraw any such Shares, except to the extent that the tender of shares (excluding Shares acquired after the date hereof) pursuant to the Offer could subject Shareholder to liability under Section 16(b) of the Exchange Act. 1.2. Voting. Shareholder hereby agrees that, during the time this ------ Agreement is in effect, at any meeting of the shareholders of Company, however called, and in any action by consent of the stockholders of Company, Shareholder shall vote all Shares beneficially owned by it (which, for purposes of this Section 1.2 shall be determined with reference to Rule 13d-3(a)(1) promulgated under the Exchange Act) (a) in favor of the Merger and (b) against any action or agreement that would impede, interfere with, delay, postpone or attempt to discourage the Merger or the Offer including, but not limited to, (i) any extraordinary corporate transaction (other than the Merger), such as a merger, other business combination, reorganization, consolidation, recapitalization, dissolution or liquidation (each, an "Extraordinary Transaction") involving Company, (ii) a ------------------------- sale or transfer of a material amount of assets of Company or any of its subsidiaries, (iii) any change in the board of directors of Company or (iv) any material change in the capitalization of the Company. Shareholder acknowledges receipt and review of a copy of the Merger Agreement. 2. Representations and Warranties of Shareholder. Shareholder represents --------------------------------------------- and warrants to Parent and purchaser as follows: 2.1. Ownership of Shares. On the date hereof the Existing Shares are ------------------- all of the Shares currently beneficially owned by Shareholder. On the Closing Date, the Shares will constitute all of the shares of Common Stock owned beneficially by Shareholder. Shareholder does not have any rights to acquire any additional shares of Common Stock other than pursuant to Options (as defined in the Merger Agreement). Shareholder currently has with respect to the Existing Shares, and at Closing will have with respect to the Shares, good, valid and marketable title, free and clear of all liens, encumbrances, restrictions, options, warrants, rights to purchase, voting agreements or voting trusts, and claims of every kind (other than the encumbrances created by this Agreement and other than restrictions on transfer under applicable Federal and State securities laws). 2.2. Power; Binding Agreement. Shareholder has the full legal ------------------------ capacity, right, power and authority to enter into and perform all of Shareholder's obligations under this Agreement. The execution and delivery of this Agreement by Shareholder will not violate any other agreement to which Shareholder is a party including, without limitation, any voting agreement, shareholders agreement or voting trust. This Agreement has been duly executed and delivered by Shareholder and constitutes a legal, valid and binding agreement of Shareholder, enforceable in accordance with its terms. Neither the execution or delivery of this Agreement nor the consummation by Shareholder of the transactions contemplated hereby will (a) other than filings required under the federal or state securities laws, require any consent or approval of or filing with any governmental or other regulatory body, or (b) constitute a violation of, conflict with or constitute a default under, any contract, commitment, agreement, understanding, arrangement or other restriction of any kind to which Shareholder is a party or by which Shareholder is bound. 2.3. Finder's Fees. No person is, or will be, entitled to any ------------- commission or finder's fees from Shareholder in connection with this Agreement or the transactions -2- contemplated hereby exclusive of any commission or finder's fees referred to in the Merger Agreement. 3. Representations and Warranties of Parent and Purchaser. Parent and ------------------------------------------------------ Purchaser, jointly and severally, represent and warrant to Shareholder as follows: 3.1. Authority. Each of Parent and Purchaser has full legal right, --------- power and authority to enter into and perform all of its obligations under this Agreement. The execution and delivery of this Agreement by Parent and Purchaser will not violate any other agreement to which Parent or Purchaser is a party. This Agreement has been duly executed and delivered by each of Parent and Purchaser and constitutes a legal, valid and binding agreement of Parent and Purchaser, enforceable in accordance with its terms. Neither the execution of this Agreement nor the consummation by Parent or Purchaser of the transactions contemplated hereby will (a) require any consent or approval of or filing with any governmental or other regulatory body, or (b) constitute a violation of, conflict with or constitute a default under, any contract, commitment, agreement, understanding, arrangement or other restriction of any kind to which Parent or Purchaser is a party or by which it is bound. 3.2. Finder's Fees. No person is, or will be, entitled to any ------------- commission or finder's fee from Parent or Purchaser in connection with this Agreement or the transactions contemplated hereby exclusive of any commission or finder's fees referred to in the Merger Agreement. 4. Termination. This Agreement (other than the provisions of Sections 5, 6 ----------- and 7), shall terminate on the earliest to occur of (a) the date on which Purchaser accepts for payment the Shares tendered in the Offer, so long as the Shares are so tendered and not withdrawn, (b) the Effective Time (as defined in the Merger Agreement), and (c) the date immediately following the date on which the Merger Agreement is terminated. 5. Expenses. Except as provided in Section 19, each party hereto will pay -------- all of its expenses in connection with the transactions contemplated by this Agreement, including, without limitation, the fees and expenses of its counsel and other advisers. 6. Confidentiality. Shareholder recognizes that successful consummation of --------------- the transactions contemplated by this Agreement may be dependent upon confidentiality with respect to these matters. In this connection, pending public disclosure, Shareholder agrees that he will not disclose or discuss these matters with anyone (other than officers, directors, legal counsel and advisors of Shareholder or the Company, if any) not a party to this Agreement, without prior written consent of Parent, except for filings required pursuant to the Exchange Act, and the rules and regulations thereunder or disclosures Shareholder's legal counsel advises in writing are necessary in order to fulfill Shareholder's obligations imposed by law, in which event Shareholder shall give prompt prior notice of such disclosure to Parent. -3- 7. Indemnification. In the event Shareholder is sued for a breach of his --------------- fiduciary duty as an officer or director of the Company by reason of Shareholder's execution, delivery or performance of this Agreement, Shareholder shall be entitled to indemnification and advancement of expenses in respect of such claim to the same extent as an Indemnified Party (as defined in the Merger Agreement) is entitled to the indemnification and advancement of expenses set forth in Section 6.7 of the Merger Agreement as fully as if such Shareholder had been named therein. 8. Certain Covenants of Shareholder. -------------------------------- 8.1. Except in accordance with the provisions of this Agreement, Shareholder agrees, while this Agreement is in effect, not to, directly or indirectly: (a) sell, transfer, pledge, encumber, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, pledge, encumbrance, assignment or other disposition of, any of the Shares; (b) grant any proxies, deposit any Shares into a voting trust or enter into a voting agreement with respect to any Shares; or (c) (i) take any action to encourage, initiate or solicit any inquiries or the making of any proposal with respect to (A) any Extraordinary Transaction involving, or (B) any purchase of all or any significant portion of the assets of, or any significant equity interest in, the Company or any of its subsidiaries (either of clauses (A) and (B) being an "Acquisition Proposal") or, (ii) except to the extent required for Shareholder, in his capacity as an officer or director of Company, to discharge its fiduciary duties as advised by counsel, (A) engage in any negotiations concerning, provide any confidential information or data to, or have any discussions with, any person relating to an Acquisition Proposal or (B) otherwise assist or facilitate any effort or attempt by any person or entity (other than Parent and Purchaser, or their officers, directors, representatives, agents, affiliates or associates) to make or implement an Acquisition Proposal; Shareholder will immediately cease and cause to be terminated any existing activities, discussions or negotiations on his part with any parties conducted heretofore with respect to any of the foregoing, and, except to the extent required for Shareholder, in his capacity as an officer or director of the Company, to discharge his fiduciary duties as advised by counsel, will notify Purchaser and Parent promptly if he becomes aware of any such inquiries or that any proposals are received by, any such information is requested from, or any such negotiations or discussions are sought to be instituted or continued with, the Company (or its officers, directors, representatives, agents, affiliates or associates), such notice to include the material terms communicated. 8.2. Shareholder agrees, while this Agreement is in effect, to notify Parent promptly of the number of any shares of Common Stock beneficial ownership of which is acquired by Shareholder after the date hereof. -4- 9. Survival of Representations and Warranties. None of the representations, ------------------------------------------ warranties, covenants and agreements made by Shareholder, Parent or Purchaser in this Agreement shall survive the Closing hereunder. 10. Notices. All notices or other communications required or permitted ------- hereunder shall be in writing (except as otherwise provided herein) and shall be deemed duly given when received, addressed as follows: If to Parent or Purchaser: Roanoke Electric Steel Corporation 102 Westside Boulevard, N.W. P.O. Box 13948 Roanoke, VA 24038-3948 Attention: Donald G. Smith Telephone: (540) 342-1831 Facsimile: (540) 342-9437 With copies to: Heaman A. Marshall, Esq. Woods, Rogers & Hazlegrove, P.L.C. First Union Tower, Suite 1400 10 South Jefferson Street Roanoke, VA 24011 Telephone: (540) 983-7654 Facsimile: (540) 983-7711 If to Shareholder: ---------------- ---------------- ---------------- Telephone: --------------- Facsimile: --------------- -5- With copies to: James D. Epstein, Esq. Pepper Hamilton LLP 3000 Two Logan Square 18th and Arch Streets Philadelphia, PA 19103-2799 Telephone: (215) 981-4368 Facsimile: (215) 981-4750 and Stephen A. Albert Sierchio & Albert, P.C. 41 E. 57th Street, 39th Floor New York, NY 10022 Telephone: (212) 446-9500 Facsimile: (212) 446-9504 11. Entire Agreement; Amendment. This Agreement, together with the --------------------------- documents expressly referred to herein, constitute the entire agreement among the parties hereto with respect to the subject matter contained herein and supersede all prior agreements and understandings among the parties with respect to such subject matter. This Agreement may not be modified, amended, altered or supplemented except by an agreement in writing executed by the party against whom such modification, amendment, alteration or supplement is sought to be enforced. 12. Assigns. This Agreement shall be binding upon and inure to the benefit ------- of the parties hereto and their respective successors, assigns and personal representatives, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties, except that Purchaser may assign, any or all of its rights and obligations hereunder to Parent or any direct or indirect wholly-owned subsidiary of Parent without the consent of Shareholder or Company, but no such transfer shall relieve Purchaser of its obligations under this Agreement if such subsidiary does not perform the obligations of Purchaser hereunder. 13. Governing Law; Jurisdiction; and Consent to Service. Except as --------------------------------------------------- expressly set forth below, this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. In addition, each of the Company, Purchaser and Parent hereby agree that any dispute arising out of this Agreement, the Offer or the Merger shall be heard in the Court of Chancery of the State of Delaware or in the United States District Court for the District of Delaware and, in connection therewith, each party to this Agreement hereby -6- consents to the jurisdiction of such courts and agrees that any service of process in connection with any dispute arising out of this Agreement, the Offer or the Merger may be given to any other party hereto by certified mail, return receipt requested, at the respective addresses set forth in Section 12 above. 14. Injunctive Relief. The parties agree that in the event of a breach of ----------------- any provision of this Agreement, the aggrieved party may be without an adequate remedy at law. The parties therefore agree that in the event of a breach of any provision of this Agreement, the aggrieved party shall be entitled to obtain in any court of competent jurisdiction a decree of specific performance or to enjoin the continuing breach of such provision, in each case without the requirement that a bond be posted, as well as to obtain damages for breach of this Agreement. By seeking or obtaining such relief, the aggrieved party will not be precluded from seeking or obtaining any other relief to which it may be entitled. 15. Counterparts; Facsimile Signatures. This Agreement may be executed in ---------------------------------- any number of counterparts (including by facsimile signature), each of which shall be deemed to be an original and all of which together shall constitute one and the same documents. 16. Severability. Any term or provision of this Agreement which is invalid ------------ or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable. 17. Further Assurances. Each party hereto shall execute and deliver such ------------------ additional documents as may be necessary or desirable to consummate the transactions contemplated by this Agreement. 18. Third Party Beneficiaries. Nothing in this Agreement, expressed or ------------------------- implied, shall be construed to give any person other than the parties hereto any legal or equitable right, remedy or claim under or by reason of this Agreement or any provision contained herein. 19. Legal Expenses. In the event any legal proceeding is commenced by any -------------- party to this Agreement to enforce or recover damages for any breach of the provisions hereof, the prevailing party in such legal proceeding shall be entitled to recover in such legal proceeding from the losing party such prevailing party's costs and expenses incurred in connection with such legal proceedings, including reasonable attorneys fees. 20. Amendment and Modification. This Agreement may be amended, modified and -------------------------- supplemented by a written document executed by Parent, Purchaser and Shareholder. -7- 21. Parent Guarantee. Parent hereby guarantees Purchaser's performance of ---------------- its obligations to Shareholder under and pursuant to this Agreement. IN WITNESS WHEREOF, Parent and Purchaser have caused this Agreement to be executed by their duly authorized officers, and Shareholder has duly executed this Agreement, as of the date and year first above written. SHAREHOLDER: --------------------------------- Name: ROANOKE ELECTRIC STEEL CORPORATION By: ----------------------------- SWVA ACQUISITION, INC. By: ------------------------------ -8- EX-99.C4 16 EMPLOYMENT AGREEMENT DATED 11/10/98 Exhibit (c)(4) Employment Agreement, dated November 10, 1998, by and between Steel of West Virginia, Inc., and Timothy R. Duke. EMPLOYMENT AGREEMENT AGREEMENT, dated this 10th day of November, 1998, by and between Steel of West Virginia, Inc. (the "Company") and Timothy R. Duke ("Executive"). WITNESSETH: WHEREAS, the Company is engaged in the business of manufacturing steel and steel products, fabricating steel components, truck trailers, off-highway construction equipment, industrial lift trucks, accessories for the mining industry and related services (the "Business"); WHEREAS, Executive is and has been employed by the Company in the capacities of President and Chief Executive Officer; WHEREAS, the Company is entering into an Agreement and Plan of Merger dated November 10, 1998 by and among Roanoke Electric Steel Corporation ("Parent"), SWVA Acquisition, Inc. ("Acquisition") and the Company (the "Merger Agreement") pursuant to which, among other things, Acquisition will make a tender offer for the shares of Company (the "Offer"), and Acquisition will be merged into the Company (the "Merger"); and WHEREAS, pursuant to and simultaneous with the acceptance and payment for the Shares in the Offer, the Company wishes to retain the services of Executive as the President and CEO of the Company; and Executive wishes to assume the position of President and CEO of the Company; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the Company and Executive agree as follows: 1. Employment and Other Positions: (a) The Company hereby agrees to employ Executive, and Executive hereby agrees to serve, subject to the provisions of this Agreement, as an employee of Company in accordance with the terms of this Agreement. Executive agrees to devote all of his business time, attention and energies to the performance of the duties assigned to him hereunder, and to perform such duties faithfully, diligently and to the best of his abilities and subject to such laws, rules, regulations and policies from time to time applicable to the Company's employees. Except as otherwise provided herein, Executive is permitted to pursue outside interests, including, but not limited to charitable work, membership in trade associations, industry boards, and on the boards of directors of other companies, provided that such outside interests do not interfere with the performance of his duties and obligations hereunder, and further provided that Executive receives the prior consent of the Board of Directors of the Company which consent will not be -1- unreasonably withheld. Executive agrees to refrain from engaging in any activity that does, will or could reasonably be deemed to conflict with the best interests of the Company. Without limiting the generality of the foregoing, Executive shall perform the duties associated with the positions of President and CEO, and such other duties and responsibilities as are from time to time assigned to Executive by the Board of Directors of the Company consistent with such positions, at his current office location, or in such other capacity or at such other locations as may be mutually agreed by Company and Executive. (b) In addition to the employment specified above, in accordance with Section 6.8 of the Merger Agreement, Executive shall be appointed to the Board of Parent and thereafter nominated for such position at the next annual meeting of stockholders of Parent, and Parent will appoint Executive as a director of the Company for such terms as he shall serve as a director of Parent during the term of this Agreement. 2. Term: This Agreement shall commence upon acceptance and payment for the Shares in the Offer , as set forth in the Merger Agreement, and shall expire on the third (3rd) anniversary thereof (the "Term"), unless sooner terminated in accordance with Section 7 hereof; except that, if the Effective Time of the Merger shall not occur within one hundred and twenty (120) days of the Outside Date for the Offer, all as defined in the Merger Agreement, Company or Parent may declare the Agreement null and void, and other than for any amounts payable by reason of Section 8(b) hereof, and, notwithstanding anything herein otherwise to the contrary, neither Company nor Parent shall have any further responsibility for any payments of any amounts or for the provision of any benefits to Executive under this Agreement. 3. Compensation: (a) Base Salary: Executive's base salary shall be at the annual rate of Two Hundred and Twenty-Five Thousand Dollars ($225,000) (the "Annual Base Salary") during the Term, payable in accordance with the Company's regular payroll practices. All applicable withholding taxes shall be deducted from such payments. Annual Base Salary may be increased (but not decreased), from time to time during the Term, in the exercise of the good faith discretion of the Company's Board of Directors. (b) Incentive Plan: Executive shall receive additional compensation, if and as provided in any incentive compensation plan applicable to Executive, adopted, in the sole discretion of the Board of Directors of the Company, from time to time (herein referred to as the "Incentive Amount"). The current Incentive Plan applicable to Executive is described in Schedule 1 attached hereto and incorporated herein by reference. 4. Benefits: Executive shall be eligible to participate in such benefit plans, including but not limited to stock option and similar plans and officers' and directors' liability insurance, as are, or from time-to-time hereafter may be, provided by the Company or Parent for executive employees and/or directors (except salary Incentive Plans or similar incentive -2- compensation plans, other than stock option plans of Parent or any other subsidiary of Parent, except as described in Section 3(b) above and as set forth in the Merger Agreement), and as permitted by the terms of such plans Where different plans covering substantially similar benefits are provided by each of the Company and Parent, Executive shall participate, if permitted by the terms of the plan, in the plan that provides the higher level of benefits (except that Executive shall not be entitled to simultaneously participate in plans of both of the Company and Parent covering the same or substantially similar benefits). All benefits shall be provided to Executive in accordance with the terms and conditions of such benefit plans and programs as are maintained by the Company or Parent, as such plans are amended from time to time. 5. Reimbursement of Expenses: The Company shall reimburse Executive for reasonable and necessary business expenses of Executive for travel, meals and similar items incurred in connection with the performance of Executive's duties, and which are consistent with such guidelines as the Board of Directors of the Company may from time to time establish. All payments for reimbursement of such expenses shall be made to the Executive only upon the presentation to the Company of appropriate vouchers or receipts, if, and in such form as may be, required by such guidelines, from time to time. 6. Confidentiality, Non-Competition, Etc.: (a) Executive acknowledges that: (i) the Business is highly competitive and that Executive's employment by the Company will require that Executive have access to and knowledge of confidential information of the Company which may include, but shall not be limited to, the identity of the Company's customers, the identity of the representatives of customers with whom the Company has dealt, the kinds of products and services provided by the Company to customers and offered to potential customers, the manner in which such products are manufactured and such services are performed or offered to be manufactured or performed, the needs of actual or prospective customers, pricing information, information concerning the creation, acquisition or disposition of products and services, computer software applications and other programs, personnel information and other trade secrets not generally known to the public (the "Confidential Information"); (ii) the direct and indirect disclosure of any such Confidential Information to existing or potential competitors of the Company would place the Company at a competitive disadvantage and would do damage, monetary or otherwise, to the Company's business; and (iii) the engaging by Executive in any of the activities prohibited by this Section 8 would constitute improper appropriation and/or use of such Confidential Information. Executive expressly acknowledges the trade secret status of the Confidential Information and that the Confidential Information constitutes a protectible business interest of the Company. (b) For purposes of this Section 6, the "Company" shall be construed to include the Company and its parents, subsidiaries and affiliated companies of each engaged in the Business, including any divisions or subsidiaries managed by Executive. -3- (c) During Executive's Term of employment, and at all times after the termination of Executive's employment, by expiration of the Term or otherwise, Executive shall not, directly or indirectly, whether individually, as a director, stockholder, owner, partner, employee, principal or agent of any business, or in any other capacity, make known, disclose, furnish, make available or utilize any of the Confidential Information, other than in the proper performance of the duties contemplated herein, or as expressly permitted herein, or as required by a court of competent jurisdiction or other administrative or legislative body; provided that, prior to disclosing any of the Confidential Information as required by a court or other administrative or legislative body, Executive shall promptly notify the Company so that the Company may seek a protective order or other appropriate remedy. Executive agrees to return all Confidential Information, including all photocopies, extracts and summaries thereof, and any such information stored electronically on tapes, computer disks or in any other manner to the Company at any time upon request by the Company and upon the termination of his employment for any reason. (d) During Executive's employment hereunder, Executive shall not engage in "Competition" with the Company. For purposes of this Agreement, "Competition" by Executive shall mean Executive's engaging in, or otherwise directly or indirectly being employed by or acting as a consultant or lender to, or being a director, officer, employee, principal, agent, stockholder, member, owner or partner of, or permitting his name to be used in connection with the activities of any other business or organization anywhere in the United States which competes, directly or indirectly, with the Business of the Company. This provision shall not, however, prevent Executive from owning 19.9% or less of any publicly traded company which may compete with the Company, provided Executive has no active participation with such company, including but not limited to serving on such company's board of directors. (e) Executive acknowledges that the services to be rendered by him to the Company are of a special and unique character, which gives this Agreement a peculiar value to the Company, the loss of which may not be reasonably or adequately compensated for by damages in an action at law; and that a material breach or threatened breach by him of any of the provisions contained in this Section 6 will cause the Company irreparable injury. Executive therefore agrees that the Company shall be entitled, in addition to any other right or remedy, to a temporary, preliminary and permanent injunction, without the necessity of proving the inadequacy of monetary damages or the posting of any bond or security, enjoining or restraining Executive from any such violation or threatened violations. (f) Executive further acknowledges and agrees that, due to the uniqueness of his services and confidential nature of the information he will possess, the covenants set forth herein are reasonable and necessary for the protection of the Business and goodwill of the Company. (g) Should a court of competent jurisdiction determine that any of the restrictions set forth in this Section 6, including those as regards the scope of Executive's -4- activities restricted, the duration of the restriction or the geographic scope of the restriction, is overly broad or unenforceable as written, the parties agree that this Agreement shall be deemed amended to reduce any or all of such restrictions to those deemed appropriate and enforceable by such court. 7. Termination: (a) The employment of Executive hereunder shall terminate on the first to occur of the following: (i) the date of Executive's death, adjudicated incompetency or adjudicated bankruptcy; (ii) the date on which Executive shall have experienced a Disability (as defined below), and the Board of Directors of the Company gives Executive notice of termination on account of Disability; (iii) the date on which Executive shall have engaged in conduct which constitutes Cause (as defined below), and the Board of Directors of the Company gives Executive notice of termination for Cause; (iv) the date on which Executive gives the Company notice of termination for Good Reason (as defined below); or, (v) expiration of the Term. (b) For purposes of this Agreement, "Disability" shall mean an illness, injury or other incapacitating condition as a result of which Executive is unable to perform the services required to be performed under this Agreement for a period of one hundred eighty (180) consecutive days during the Term; provided, however, that if long term disability insurance benefits payable to Executive pursuant to any policy of disability insurance then maintained by the Company or Parent for the benefit of employees commences during such 180-day period, the amount payable to Executive for such benefits shall be deducted from the Annual Base Salary payable to Executive for as long as such benefits are payable. Executive agrees to submit to such medical examinations as may be necessary to determine whether a Disability exists, pursuant to such reasonable requests made by the Board of Directors of the Company, from time to time. (c) For purposes of this Agreement, "Cause" shall mean the occurrence of any of the following: (i) Executive's willful and continued failure to substantially perform his duties with the Company, other than by reason of physical or mental illness; -5- (ii) Executive's conviction of, guilty plea, to plea of nolo contendere or confession to, a felony or misdemeanor involving fraud, theft or other Class 1 or Class 2 misdemeanor; (iii) Executive willfully or negligently engaging in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise; (iv) Any attempt of Executive to obtain any personal profit from any transactions in which the Executive has an interest which is adverse to the Company unless Executive shall first obtain the consent of the Company's Board of Directors; or, (v) Executive's breach of any material term of this Agreement. Notwithstanding the foregoing, Cause shall not be deemed to have occurred in the case of Section 7(c)(i), (iii), (iv) or (v) until Company shall have given Executive notice of the facts that constitute Cause and Executive shall have failed to cure such Cause within ten (10) business days. (d) For purposes of this Agreement, "Good Reason" shall mean the occurrence of any of the following: (i) Company's failure to maintain Executive's job privileges and responsibilities in a manner generally consistent with and reasonable for the position of President and CEO of the Company; (ii) Company's breach of any of the material terms of this Agreement; (iii) Relocation of Executive's principal office outside of the Huntington, West Virginia area, without Executive's prior consent; or (iv) The occurrence of a Change in Control, meaning: a change in control of Parent of a nature that would be required to be reported (assuming such event has not been "previously reported") in response to Item 1(a) of the Current Report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that, without limitation, such a Change in Control shall be deemed to have occurred at such time as (i) any Person is or becomes the "beneficial owner" (as defined in Rule 13d-3 or Rule 13d-5 under the Exchange Act as in effect on January 1, 1996), directly or indirectly, of 20% or more of the combined voting power of Parent's voting securities; (ii) the Incumbent Board of Parent ceases for any reason to constitute at least the majority of the Board; provided, however, that any person becoming a director subsequent to the date hereof whose election, or nomination for election by Parent's shareholders was approved by a vote of at least 75% of the directors comprising the Incumbent Board (either by a specific vote or by -6- approval of the proxy statement of Parent in which such person is named as a nominee for director, without objection to such nomination) shall be, for purposes of this clause (ii), considered as though such person were a member of the Incumbent Board; (iii) all or substantially all of the assets of Parent are sold, transferred or conveyed if the transferee is not controlled by Parent (control meaning the ownership of more than 50% of the combined voting power of such entity's voting securities); or (iv) Parent is merged or consolidated with another corporation or entity and, as a result of such merger or consolidation, less than 75% of the outstanding voting securities of the surviving or resulting corporation or entity shall be owned in the aggregate by the former shareholders of Parent. Notwithstanding anything in the foregoing to the contrary, no Change in Control shall be deemed to have occurred for purposes of this Agreement by virtue of any transaction (i) which results in the Executive or a group of Persons which includes the Executive, acquiring, directly or indirectly, 20% or more of the combined voting power of Parent's voting securities; or (ii) which results in Parent, any subsidiary of Parent or any profit- sharing plan, employee stock ownership plan or employee benefit plan of the Company or Parent or any of Parent's subsidiaries (or any trustee of or fiduciary with respect to any such plan acting in such capacity) acquiring, directly or indirectly, 20% or more of the combined voting power of Parent's voting securities. Notwithstanding the foregoing, Good Reason shall not be deemed to have occurred in the case of Section 7(d)(i) or (ii) until Executive shall have given Company notice of the facts that constitute Good Reason and Company shall have failed to cure such Good Reason within ten (10) business days. 8. Compensation in Event of Termination; Survival: (a) Upon termination of Executive's employment for any reason, this Agreement shall terminate and the Company shall have no further obligation to Executive except as set forth in this Section 8; provided that, the provisions set forth in Sections 6 (with the exception of Section 6(d)), 11 and 12 hereof shall remain in full force and effect after the termination of Executive's employment. (b) In the event Executive's employment is terminated pursuant to Sections 7(a)(i) through (iii) or (v) prior to the expiration of the Term, Executive or his estate, conservator or designated beneficiary, as the case may be, shall be entitled to payment of any accrued but unpaid Annual Base Salary, accrued but unpaid Incentive Amount, and reimbursement of incurred business expenses (upon the conditions set forth in Section 5 hereof), all through the date of termination, subject, however, to the Company's right to pursue any claims for any damages which it may incur by reason of termination in accordance with Section 7(a)(iii). Following any such termination, neither Executive nor his estate, conservator or designated beneficiary shall be entitled to receive any other salary or other payment provided for hereunder -7- with respect to any period after such termination, except as Executive may otherwise be entitled pursuant to any employee benefit plan. (c) In the event Executive's employment is terminated pursuant to Section 7(a)(iv) , in addition to the payment of amounts payable under Section 8(b) above, Executive shall be entitled to receive, as his sole and exclusive remedy, the Annual Base Salary, payable for the remainder of the Term, payable in installments in accordance with the Company's regular payroll practices, after deduction of all applicable withholding taxes and similar payments, which sum shall not be offset by any amounts otherwise earned by Executive during such period, and Executive shall have no duty to seek other employment during such period. 9. Assignment: The duties assumed hereunder by Executive shall not be assignable by Executive. It is further agreed that neither Executive or any beneficiary of any amount hereunder shall have any right to commute, sell, assign, transfer or otherwise convey the right to receive any payment hereunder, except as expressly provided herein or in the applicable plan, etc., which payments and the right thereto are expressly declared to be non-assignable and non-transferable, and in the event of any attempted assignment or transfer, Company shall have no further liability hereunder. Company may only assign this Agreement as contemplated in Paragraph 10 hereof. 10. Successors and Assigns; Binding Agreement: This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective heirs, administrators, executors, successors and assigns, and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company's assets and Business. 11. Return of Company Property: Executive agrees that, promptly following the termination of his employment for any reason, he shall return all property of the Company, its subsidiaries, affiliates and any divisions thereof which is then in or thereafter comes into his possession, including, but not limited to, documents, contracts, agreements, plans, photographs, books, notes, electronically stored data and all copies of the foregoing, as well as any materials or equipment supplied by the Company to Executive. 12. Resignation as Director: Executive shall, promptly following the termination of his employment for any reason, resign as a director of Parent and as a director of Company, respectively, to the extent that he is serving in either of those capacities at the time of termination. 13. Entire Agreement: This Agreement sets forth the entire agreement between the parties with respect to its subject matter and merges and supersedes all prior discussions, agreements and understandings of every kind and nature between them, including any prior employment agreement, whether written or oral, between the Company and Executive as of the effective date of the Term, and neither party shall be bound by any term or condition with respect -8- to the subject matter of this Agreement other than as expressly set forth or provided for herein. This Agreement may not be changed or modified except by an agreement in writing, signed by the parties hereto. 14. Each Party the Drafter: This Agreement and the provisions contained in it shall not be construed or interpreted for or against any party to this Agreement because that party drafted or caused that party's legal representative to draft any of its provisions. 15. Waiver: The failure of either party to this Agreement to enforce any of its terms, provisions or covenants shall not be construed as a waiver of the same or of the right of such party to enforce the same. Waiver by either party hereto of any breach or default by the other party of any term or provision of this Agreement shall not operate as a waiver of any other breach or default. 16. Severability: In the event that any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remainder of the Agreement shall not in any way be affected or impaired thereby. Moreover, if any one or more of the provisions contained in this Agreement shall be held to be excessively broad as to duration, activity or subject, such provisions shall be construed by limiting and reducing them so as to be enforceable to the maximum extent allowed by applicable law. 17. Arbitration: Any controversy or claim arising out of or related to this Agreement or the breach thereof shall be settled by arbitration to be conducted in Roanoke, Virginia, in accordance with the rules of American Arbitration Association. The decision of the arbitrator shall be final and binding and judgment upon the award rendered thereby may be entered in any court having competent jurisdiction thereof. The expenses of the arbitration shall be shared equally by the Company and Executive; except that each of the parties hereto shall be individually responsible for any and all attorneys, accountants, consultants or other expert witness fees and expenses incurred by such party in relation to such arbitration. 18. Governing Law: This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, without regard to its conflict of law rules. 19. Descriptive Headings: The paragraph headings and recitals contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 20. Counterparts: This Agreement may be executed in one or more counterparts, which, together, shall constitute one and the same agreement. -9- 21. Guarantee: Parent hereby joins in this Agreement to guarantee the performance of the covenants and agreements herein made by the Company. -10- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. THE COMPANY EXECUTIVE By: /s/ Mark G. Meikle /s/ Timothy R. Duke ---------------------------- ---------------------- Its: Vice President and Chief Financial Officer PARENT By: /s/ Donald G. Smith ----------------------------- Its: Chairman of the Board, President, Treasurer and Chief Executive Officer -11- SCHEDULE A CURRENT INCENTIVE PLAN From the Effective Date of the Employment Agreement and for fiscal year 1998-1999, the Incentive Compensation Plan applicable to the Agreement pursuant to Section 3(b) shall be as follows: Employee shall be paid, in addition to Annual Base Compensation, on a monthly basis, an amount equal to two percent (2%) of the monthly gross profits of the Company (exclusive of profits of Parent or subsidiaries of Parent than SWVA, Inc., Marshall Steel, Inc., and Steel Ventures, Inc.), if any, before profit sharing contributions and taxes, but after deduction of only such interest expense as would have been attributable to the financing in place for the Company immediately prior to acceptance and payment for the Shares in the Offer, as set forth in the Merger Agreement, all as determined by the Company's certified public accountants (the "Incentive Amount"). Beginning in fiscal year 1999-2000, and thereafter, the Incentive Plan applicable to the Agreement shall be such Incentive Plan as is, from time to time, determined by the Board of the Company. -12- EX-99.C5 17 CONFIDENTIALITY LETTER AGREEMENT DATED JULY 20, 1998 Exhibit (c)(5) Confidentiality Letter Agreement dated July 20, 1998, between Roanoke Electric Steel Corporation and Janney Montgomery Scott, Inc. [LETTERHEAD OF JANNEY MONTGOMERY SCOTT APPEARS HERE] July 20, 1998 PRIVATE AND CONFIDENTIAL - ------------------------ Donald G. Smith President & CEO Roanoke Electric Steel Corporation 102 Westside Boulevard, N.W. Roanoke, VA 24017 Dear Mr. Smith: In order to allow Roanoke Electric Steel Corporation ("Roanoke") to evaluate a possible transaction with Steel of West Virginia, Inc. (the "Company"), the Company or its Representatives (as defined below) will deliver to Roanoke, upon Roanoke's execution and delivery to us of this letter of agreement, certain information (the "Confidential Information") about the properties and operations of the Company that is either non-public, confidential or proprietary. Roanoke agrees to treat as confidential and, except as required by applicable law, legal process or stock exchange rule, to reveal to no one, except to its respective directors, officers, employees, financing sources, agents or advisors (including without limitation attorneys, accountants, consultants, brokers and financial advisors) (collectively, "Representatives") to the extent permitted below, (i) the fact that Roanoke is having discussions in this regard and (ii) any Confidential Information that the Company or its Representatives may furnish Roanoke about the Company. The term "Confidential Information" means all the information about the Company, whether written or oral, that is provided to Roanoke (including any information provided before the execution of this agreement), and all reports, analyses, compilations, data, studies, or other documents prepared by Roanoke or its Representatives containing or based, in whole or in part, on any such furnished information or, to the extent that it contains Confidential Information, reflecting Roanoke's review of, or interest in, the Company. The term "Confidential Information" does not include information which (i) is or becomes general public knowledge other than as a result of a disclosure by Roanoke or its Representatives in breach of this Agreement, (ii) was within Roanoke's possession prior to its being furnished to Roanoke by the Company, provided that the source of such information was not bound by an obligation of confidentiality to the Company, or (iii) becomes available to Roanoke on a non-confidential basis from a source other than the Company or any of its Representatives, provided that, such other source is not bound by an obligation of confidentiality to the Company. [LETTERHEAD OF JANNEY MONTGOMERY SCOTT APPEARS HERE] Roanoke Electric Steel Company July 20,1998 Page 2 of 4 Roanoke will hold the Confidential Information in confidence, will use the Confidential Information only to assist Roanoke in its evaluation of an investment in the Company or any proposed transaction with respect thereto, shall not otherwise use the Confidential Information for its own or anyone else's benefit, and will not disclose any of the Confidential Information except (i) to Roanoke's directors, officers, employees and Representatives (including outside attorneys, accountants and consultants) who need such information for the purpose of such evaluation (and Roanoke shall inform such persons of the confidential nature of the material, and shall take reasonable measures to enforce confidentiality and prevent unauthorized use or disclosure of Confidential Information), or (ii) as may be required by law, legal process or stock exchange rule. If any person, listed in clause (i) discloses Confidential Information in breach of this Agreement, Roanoke shall be strictly liable for such disclosure (regardless of any measures taken by Roanoke to prevent disclosure). In the event of proposed disclosure under clause (ii), Roanoke will provide the Company with prior notice so that the Company may seek a protective order or other appropriate remedy, and Roanoke will not oppose action by the Company to obtain such order or remedy. Upon termination of Roanoke's evaluation of the proposed investment, or at any earlier time, Roanoke shall return to the Company all documents furnished to Roanoke by or on behalf of the Company containing Confidential Information. Any notes and other documents prepared by Roanoke containing or based upon Confidential Information will be held subject to the terms of this agreement or destroyed. Roanoke understands that the Company will endeavor to include in the Confidential Information materials that may be relevent to Roanoke's evaluation, but Roanoke acknowledges that the Company and its Representatives make no representation or warranty (express or implied) as to the accuracy or completeness of the Confidential Information. Roanoke agrees that the Company and its Representatives shall have no liability to Roanoke or to any of its Representatives, it being understood that only those particular representations and warranties that may be made in a definitive agreement, when, as and if it is executed, and subject to such limitations and restrictions as may be specified in such definitive agreement, including restrictions on survival, shall have any legal effect. [LETTERHEAD JANNEY MONTGOMERY SCOTT APPEARS HERE] Roanoke Electric Steel Company July 20, 1998 Page 3 of 4 Roanoke further agrees that for a period of two years from the date hereof, neither Roanoke nor any of its Representatives will knowingly solicit as employees or consultants any of the current officers or employees of the Company, without obtaining the prior written consent of the Company. The foregoing, however, shall not prohibit general solicitations for employees including through newspapers or similar advertisements or through search firms, provided that such solicitations are not directed at the Company's employees. Roanoke also agrees that neither Roanoke nor any of its Representatives will contact any employees of the Company in connection with Roanoke's evaluation of the Company without prior approval. Roanoke agrees that the intention of the parties is to prevent absolutely the disclosure or use by Roanoke or its Representatives (except for purposes of evaluating a proposed investment in the Company) of any Confidential Information obtained by Roanoke from the Company or its Representatives. The Company and Roanoke agree that for all purposes this agreement will be construed to accomplish that result. This Confidentiality Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective successors and assigns, and shall be strictly adhered to by all of Roanoke's Representatives. By making any Confidential Information available to any such person, Roanoke agrees that it will be held strictly and fully responsible for any damages suffered by the Company as a result of disclosure by such person, regardless of Roanoke's fault. Roanoke agrees that disclosure of any Confidential Information could irreparably injure the Company's business and its relationship with its employees, its customers and others, and the Company shall be entitled to equitable relief in the event of any breach or threatened breach of this agreement. Such remedies shall not be exclusive. Any breach or threatened breach of this agreement by Roanoke shall entitle the Company to apply to any court of competent jurisdiction to enjoin the violation, threatened or actual, of this agreement, without the necessity of posting surety or injunction bond and regardless of the existence or absence of any legal remedies or the sufficiency thereof. Roanoke, and its successors and assigns, hereby waive any right to assert any contention that the remedy at law for any breach or threatened breach of this agreement is sufficient and consent to non-exclusive personal jurisdiction and venue in the state and federal courts with jurisdiction in West Virginia. Roanoke shall indemnify and hold harmless the Company and its Representatives from any and all claims, injuries, losses, damages or expenses (including attorneys' fees and costs) arising out of a breach by Roanoke or its Representatives of any provision of this agreement. JANNEY MONTGOMERY SCOTT INVESTMENT BANKING Established 1832 Roanoke Electric Steel Company July 20, 1998 Page 4 of 4 This agreement sets forth the entire understanding and agreement of the parties and related persons with regard to the subject matter hereof and supersedes all prior and contemporancous agreements, arrangements and understandings related thereto. In the event of any inconsistency between this agreement and any statement contained in or transmitted with the Confidential Information this agreement shall control. This agreement may be amended, superseded or canceled only by a written instrument which specifically states that it amends, supersedes or cancels this agreement, executed and delivered by an authorized officer of each entity to be bound thereby. Very truly yours, Janney Montgomery Scott, Inc. Authorized Agent of the Company, on behalf of the Company By: /s/ Michael J. Mufson --------------------------- Michael J. Mufson Senior Vice President Co-Director-Investment Banking Accepted and Agreed as of the date first written above: Roanoke Electric Steel Corporation By: /s/ Donald G. Smith --------------------------- Donald G. Smith President and CEO -----END PRIVACY-ENHANCED MESSAGE-----