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
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STOCK OPTION AGREEMENT, dated as of November 10, 1998, between Steel of
West Virginia, Inc., a Delaware corporation ("Company"), and SWVA Acquisition,
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Inc., a Virginia corporation ("Purchaser").
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WITNESSETH:
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WHEREAS, Purchaser, Roanoke Electric Steel Corporation, a Virginia
corporation of which Purchaser is a wholly owned subsidiary ("Parent"), and
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Company, propose to enter into an Agreement and Plan of Merger (the "Merger
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Agreement"), which would provide, among other things, that Purchaser, upon the
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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
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"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
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option, exercisable as provided herein (the "Option"), to purchase up to an
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aggregate of 1,196,148 authorized but unissued Shares (the "Option Shares") for
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an exercise price (the "Exercise Price") equal to the closing bid price per
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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
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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
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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 Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), applicable to the purchase of the Option Shares shall have expired
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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)
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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
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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
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(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
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and warrants to Purchaser as follows:
a. Due Authorization, Etc. This Agreement has been duly authorized by
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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
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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
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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),
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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,
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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
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represents and warrants to Company as follows:
a. Due Authorization, Etc. This Agreement has been duly authorized by
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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
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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
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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
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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
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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
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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
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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
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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.
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a. Assignment. This Agreement shall not be assigned, by operation
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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,
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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
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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
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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
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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
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purposes only and shall not in any way affect the meaning or interpretation
hereof.
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g. Entire Agreement. This Agreement and the Merger Agreement
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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
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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
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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
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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
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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
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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
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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/ Xxxxxxx X. Xxxx
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SWVA ACQUISITION, INC.
By: /s/ Xxxxxx X. Xxxxx
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