FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 333-04254
BAR TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3753384
(State or other (IRS Employer
jurisdiction of Identification
incorporation or Number)
organization)
227 Franklin Street,
Suite 300
Johnstown, PA 15901
(Address of Principal
Executive Offices)
Registrant's Telephone (814) 533-7200
Number
Not Applicable
(Former name, former
address and fiscal
year, if changed since
last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes . No X .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-X is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
<PAGE>
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class A Common Stock, $0.001 196,410 shares
par value outstanding @ September 30, 1996
Class B Common Stock, $0.001 536,829 shares
par value outstanding @ September 30, 1996
DOCUMENTS INCORPORATED BY REFERENCE
[None]
<PAGE>
PART I
Item 1. Business
General
Bar Technologies Inc., a Delaware corporation ("BarTech" or the
"Company"), produces and markets hot rolled engineered and cold finished steel
bar products direct to the automotive, machinery, industrial equipment, and
tool industries, and to cold finished bar producers, independent forgers and
steel service centers.
BarTech acquired certain steelmaking and bar rolling assets (the "BRW
Assets") from the former Bar, Rod & Wire Division (the "Bethlehem BRW
Division") of Bethlehem Steel Corporation ("Bethlehem") in September, 1994.
The Bethlehem BRW Division was a leading manufacturer of high quality
engineered bar, rod and wire products prior to its shutdown in December, 1992.
In conjunction with the acquisition, the Company (i) negotiated a new five-year
labor agreement which it believes provides significant cost advantages over its
competitors and the historical labor costs of the Bethlehem BRW Division, (ii)
developed and is implementing a major modernization and expansion plan that it
expects will reduce its per ton operating costs significantly below Bethlehem's
costs of operating the Bethlehem BRW Division. BarTech restarted the
Lackawanna rolling mill facility in February, 1996 and began producing and
shipping hot rolled bar products. BarTech commenced commercial steelmaking
operations at the Johnstown steelmaking facility in August, 1996 in conjunction
with the commissioning of its continuous caster.
On April 2, 1996, the Company acquired (the "B&L Acquisition") Bliss &
Laughlin Industries Inc. ("B&L"), the second largest processor of cold finished
steel bar products in North America. The Company expects to realize a number
of strategic benefits from the B&L Acquisition, including (i) providing BarTech
with a wholly owned consumer of hot rolled engineered bar products, (ii)
providing BarTech and B&L with an expanded breadth and scope of product
offerings and opportunities for enhanced distribution of their products, and
(iii) providing B&L with a more reliable, long-term source of supply of
engineered bar products that it expects will enable it to bid more effectively
for new business.
Industry Overview
Hot Rolled Engineered Bar Market. The production of steel bar products is a
segment of the overall steel market, of which the production of flat rolled
products is the largest segment. The bar products segment is further divided
into three main categories which are delineated by the quality and the end use
of the bar products: (i) reinforcing bar, which products have the least
restrictive applications of all bar products and are used mostly as
reinforcement for concrete in building foundations, road beds and other
construction applications, (ii) merchant quality bar, which products generally
are used for small structural shapes, such as channels and angles, that are
used mostly in light construction and steel fabrication applications, and (iii)
hot rolled engineered bar, which is the highest quality segment of the bar
products market.
Hot rolled engineered bar products are carbon and alloy steel bars
that are manufactured to meet rigorous end user requirements for surface
quality, strength, hardenability, machinability, toughness and other
engineering objectives, and specific practices must be followed in their
production in order to meet these rigorous end user quality specifications.
The production of hot rolled engineered bar products requires special
manufacturing techniques and equipment, including processes such as ladle
refining and vacuum degassing to eliminate internal impurities and surface
defects, as well as specialized metallurgical knowledge and experienced
processing personnel.
The engineered bar products market is characterized by customers that
further process bars into specific shapes utilizing two major types of
processes: (i) "machining" the bar by removing metal from the bar to
manufacture the end product and (ii) "forming" the bar through various hot and
cold processes. Hot rolled engineered bar products generally are used in
businesses such as the automotive, heavy equipment and industrial machinery
industries for critical applications such as cam shafts, axles, roller
bearings, hydraulic fittings, ordnance, valves and fittings, and wheel hubs and
spindles, where product strength, integrity and durability are imperative
considerations.
Cold Finished Bar Market. Cold finished bars are high quality processed steel
bars used in machined and shafting products that require superior straightness,
tolerance, finish and mechanical properties. Cold finished bars are processed
from hot rolled bars, by a process that cleans (descales), draws and
straightens the raw material and cuts it to specific lengths. There are five
characteristics of cold finished bars that distinguish the product from other
bar products: (i) a smooth and shiny surface or finish, (ii) uniform shape,
with close size tolerance, (iii) mechanical properties, (iv) superior strength,
and (v) machinability.
The end users of cold finished bars incorporate them in a wide range
of products used in a broad spectrum of the economy. These products are found
in electrical and non-electrical machinery of all types and are used in the
manufacture of automobiles, trucks, tractors, off-road vehicles and
agricultural equipment.
Products
Hot Rolled Products. The Company produces various grades and sizes of finished
hot rolled engineered bar products. The Company plans to specialize in the
higher quality product end of the hot rolled engineered bar market. These
products require special engineering and processing to meet complex and
demanding customer specifications. The semi-finished billets produced by the
Johnstown facility will be produced to specified chemical composition and
quality.
The Company's hot rolled engineered bar products are expected to
include rounds, squares and hexagons in both cut lengths and coils. As a result
of the completion of phase one ("Phase One") of the Company's modernization and
expansion plan for the Johnstown facility, the Company has the capability of
producing hot rolled engineered bar products up to 3 1/4" in diameter, which
products are used in applications such as automotive suspension parts, large
fasteners, hydraulic hose fittings, military ordnance such as projectiles,
transmission gears, and forged hand tools.
Cold Finished Products. Cold finished bar products generally are classified by
finish, with subclassifications based on shape and size. The Company believes
that it offers one of the widest ranges of sizes and shapes in the cold
finished bar industry. Its products include round bars from 3/16" to 6" in
diameter, square bars from 1/4" to 6" square, flat bars from 3/8" to 4" thick
and from 1" to 14 5/8" wide, and hexagonal bars from 1/4" to 4" thick. The four
basic cold finishing processes are (i) cold drawn, (ii) turned and polished,
(iii) turned, ground and polished, and (iv) drawn, turned, ground and polished.
Set forth below is a description of the cold finished bar processes utilized by
the Company, along with the typical uses of cold finished bars produced in such
processes:
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PROCESS DESCRIPTION
Cold Drawn . . . . . . . . . . . . . Hot rolled bars that have been
descaled by bombarding the surface
with hardened steel shot ("shot
blasting") are drawn (pulled) through
a tungsten carbide die (which
compresses the surface, elongates the
bar and renders it smooth and shiny),
straightened and cut to length.
Typical uses of these bars include
machining applications, automotive
and appliance shafts, screw machine
parts and machinery guides.
Turned and Polished . . . . . . . . . Produced by removing the surface of
hot rolled bars with a revolving
cutting tool (the turning process),
then rotating the turned bar through
rollers that polish the surface and
straighten the bar. These bars
typically are used in induction
hardened parts and spline shafts.
Turned, Ground and Polished . . . . . Produced in the same manner as turned
and polished bars, with the addition
of a grinding process that yields
very close tolerances. These bars
principally are used in precision
shafting.
Drawn, Turned, Ground and Polished . Produced in the same manner as
turned, ground and polished bars,
with the addition of a drawing
process to add physical strength and
machinability. These bars typically
are used in chrome-plated hydraulic
cylinder shafts.
The Company also thermally treats both hot rolled and cold finished
bars. The Company's thermally treated steel products include stress relieved,
carbon restored, normalized or annealed (lamellar-pearlitic or spheroidized)
products, all of which offer high strength combined with machinability.
Modernization and Expansion Plan
Historically, the Bethlehem BRW Division's Johnstown, Pennsylvania
facilities were capable of producing high quality steel products, but used a
low efficiency ingot based steelmaking process. The ingot process had many
costly and labor intensive intermediate processing steps between the melting of
scrap into liquid steel in the electric arc furnaces and the shipment of
semi-finished billet products, including pouring of individual ingots,
reheating and rolling of ingots into blooms, cropping and scarfing of blooms,
rolling of blooms into billets, and inspection and conditioning of the majority
<PAGE>
of the semi-finished billets due to the inherent quality inconsistencies
associated with the ingot process.
The Company has developed a two phase plan to modernize and expand its
processes and equipment at the Johnstown facility to take advantage of proven
steelmaking technologies. Phase One of the Company's modernization and
expansion plan involved replacing the existing ingot based process at the
Johnstown facility with a continuous casting process. After the completion of
Phase One, the Johnstown facility commenced steelmaking in August, 1996.
The installation of the caster and related equipment will provide the
Company with several advantages over the ingot based process, such as (i)
improved product quality and consistency, (ii) higher overall process yields
with less scrap generated in the manufacturing process, (iii) improved labor
productivity through a significant reduction in crew sizes with the elimination
of intermediate processes, (iv) lower energy costs with the elimination of
equipment such as soaking pits and primary mills, (v) lower inventory levels
due to a shorter lead time between receipt of purchase orders and shipments due
to the more efficient continuous casting process, and (vi) expected increased
market penetration due to customer preferences for continuous cast steel, which
generally is a more consistent, uniform product in terms of its surface and
internal properties. The continuous casting process consists of far fewer
intermediate process steps than the ingot based process, as liquid steel is
introduced directly into the caster molds and, after solidifying, the cast
steel is automatically cut into individual lengths as required for further
processing. The Company expects that the average time of the continuous
casting process, from the melting of scrap metal to semi-finished billet
products, will be several hours as compared with several days in the ingot
based process.
The Company plans to further broaden its product range in phase two
("Phase Two") of its modernization and expansion plan. The completion of Phase
Two is expected to give the Company expanded bloom processing capability and
increased hot rolled engineered bar product diversification and quality, in
addition to providing additional production cost savings pursuant to process
improvements.
At the present time, management priorities are focused on the start-up
operations, qualifications process and marketing the full capabilities of the
continuous caster. New management has temporarily deferred Phase Two to review
the capability of the existing caster to be converted to a bloom caster and
also is studying the possibility of acquiring existing capacity and joint
ventures or strategic alliances for developing existing or new capacity.
Management continues to believe bloom cast product is a competitive necessity
to achieve its long term profit objectives.
Sales and Marketing
The Company's marketing strategy for its hot rolled products has been
to initially target customers of engineered bar products used in less stringent
applications and with little or no pre-qualification requirements in order to
enable its facilities to operate efficiently with significant volumes as soon
as possible after the Company's start-up of operations. This strategy is
expected to initially result in lower margins. The Company then plans to
selectively market higher quality, critical application hot rolled engineered
bar products. Many customers in these targeted market segments require higher
quality hot rolled engineered bar products for use in hot and cold metal
<PAGE>
forming operations, such as cold forge/extrusion, warm forge, hot forge and
hot/cold coiling processes, rather than traditional machining processes.
As part of its initial hot rolled product strategy, the Company
restarted operations on a limited basis at the Lackawanna Facility on February
9, 1996, utilizing semi-finished billets from other steelmakers to produce and
ship hot rolled bar products for the lower quality segment of the engineered
bar market. The Company adopted this strategy in order to re-establish itself
as a supplier in the hot rolled engineered bar market and, more importantly, to
facilitate its transition into full steelmaking and bar rolling operations by
not having simultaneous start-ups of its steelmaking and bar rolling
facilities.
In addition to its commercial production, the Company will produce
trial heats of engineered bar products to be shipped to customers for testing
and analysis in connection with pre-qualification of products in order to
become an approved supplier for certain potential customers. The Company
believes that the pre-qualification of hot rolled engineered bar products will
generally take from three to twelve months depending on the products and
customers the Company intends to pursue. The Company is also targeting accounts
with longer pre-qualification requirements, such as the "Big Three" automotive
producers, North American-based Japanese and European automotive original
equipment manufacturers and their parts suppliers. The Company expects that its
volume of shipments will gradually increase as the Company satisfies product
pre-qualification requirements.
The Company's cold finished bar products marketing efforts will
continue to target the steel service center market segment, original equipment
manufacturers and other selected regional market segments based on the location
of its facilities. The Company estimates that over 40% of the annual United
States market for cold finished bar products, based on information provided by
AISI and the Cold Finished Steel Bar Institute, is for products purchased by
steel service centers. Over 50% of B&L's net sales in fiscal 1996 were to steel
service centers. The Company believes that its ability to produce a wide range
of shapes, grades and sizes of cold finished bar products and the proximity of
its facilities to major steel service center markets will allow the Company to
continue to effectively serve this market segment. In particular, the Company's
marketing of large round and flat cold finished bar products has allowed it to
provide "one stop shopping" to many of its steel service center customers to
complement its wide variety of smaller cold finished bar products. The Company
also plans to continue to target large end user markets in selected regions, in
order to further diversify its customer base and increase its share of the
overall cold finished bar market.
The Company believes that the B&L Acquisition will provide it with
increased product diversification and an established distribution network,
which will provide both BarTech and B&L with cross-selling and expanded
marketing opportunities.
The Company expects that its principal customers for hot rolled
engineered bar products will be manufacturers in the machinery, automotive,
industrial equipment and tool industries, and independent forgers and steel
service centers. The other category of customers of BarTech further process
engineered bar products, similar to B&L, by employing value-added processes
that include cold drawing, cold heading, cold forging, hot forging and
machining.
<PAGE>
The Company has direct sales representation in the major manufacturing
centers in the Midwest and Great Lakes regions of the United States, including
the Chicago, Detroit and Cleveland markets, and Canada. The Company believes
that the majority of hot rolled and cold finished bar product consumption in
North America is in these markets. The Company has and expects to utilize
additional independent sales agents to cover the remaining areas of the United
States and Canada in which it plans to market its cold finished bar. The
Company also has customer service and sales personnel to staff the inside sales
organization.
Distribution
The Company's facilities are located to serve the majority of
consumers of hot rolled and cold finished bar products in the United States and
Canada. The Lackawanna facility and the Company's cold finishing facilities are
located in or near major hot rolled and cold finished bar market areas in Ohio,
Michigan, Illinois and Canada, and the Company has additional cold finished
facilities located near the growing southeastern United States service center
and original equipment automotive parts market areas. The proximity to these
hot rolled and cold finished bar product consumers is expected to allow the
Company to provide competitive rail and truck freight rates and flexible
deliveries in order to satisfy just-in-time and other customer manufacturing
requirements.
Raw Materials
Scrap Metal. The Company's major raw material for the manufacture of hot
rolled products is ferrous scrap metal, which is generated principally from
industrial, automotive, demolition and railroad sources and is purchased by the
Company in the open market through a number of scrap brokers and dealers. The
long term demand for scrap metal and its importance to the domestic steel
industry is expected to increase as steelmakers continue to expand scrap
metal-based electric furnace capacity, with additions to or replacements of
existing integrated steel manufacturing facilities that use iron ore, coke and
limestone as their raw materials. The market for scrap metal is highly
competitive and its price volatility is influenced by periodic shortages,
freight costs, speculation by scrap brokers and other conditions largely beyond
the control of the Company. The Company believes that adequate supplies of
scrap metal from numerous suppliers will continue to be available for the
foreseeable future.
Semi-finished Billets. The Company restarted the production and shipment of
hot rolled bar products from the Lackawanna facility in February, 1996,
utilizing only semi-finished billets from other steelmakers until the
commencement of steelmaking operations at the Johnstown facility. The Company
has entered into agreements with several suppliers and expects that semi-
finished billets will continue to be readily available for grades the Company
chooses not to produce at the Johnstown facility.
Hot Bar. Approximately 30% of B&L's product is produced from hot rolled bar
from outside sources in sizes outside of BarTech's current capability. These
products include flats, large rounds, and rods. The Company anticipates that
these products will continue to be readily available.
<PAGE>
Energy
Steelmaking and hot rolled steel manufacturing are energy intensive
processes. The Company does not expect to experience difficulty in obtaining
adequate sources of electricity and natural gas, which it uses as its primary
sources of energy at the Lackawanna and Johnstown facilities. The Company has
negotiated a non-binding memorandum of understanding with the major utility
that will provide electricity to the Johnstown facility, at favorable economic
development rates. The Lackawanna facility has received an allocation of
hydropower-generated electricity that is expected to meet its entire demand at
attractive rates. The Company has negotiated attractive transmission rates for
its projected usage levels with the utility that provides natural gas to the
Lackawanna facility, which uses gas fired furnaces to reheat billets for
further processing.
Cold finished manufacturing processes are not energy intensive. Total
energy costs for B&L historically have been less than 2% of its cost of sales.
Competition
The Company competes mainly on the basis of product quality, price,
customer service, breadth of product offerings and delivery capability. Hot
rolled engineered bar products are characterized by special chemistry and
product quality requirements and cold finished bar products require precise
processing. The Company expects that its low cost operating structure and
distinct operating cost advantages over its primary competitors will allow it
to compete effectively on pricing, and it plans to institute strict customer
service guidelines to re-establish a reputation for quality service to
complement its technological and high quality product capabilities. The Company
believes that it has one of the widest selections of cold finished bar product
grades and sizes in the industry, and the successful completion of its
modernization and expansion plan will allow the Company to offer a wide
selection of high quality hot rolled engineered bar products. The ability of
the Company to respond quickly to customer orders will be critical as customers
continue to reduce their in-plant inventories due to increased use of
just-in-time and similar manufacturing strategies.
The Company's primary hot rolled engineered bar products competitors
can be divided into two general categories: primary competitors, which are
large steelmakers such as Republic Engineered Steels, Inc. ("Republic"),
USS/Kobe Steel Company, Inland Steel Industries, Inc., and Stelco Inc., and, to
a lesser extent, specialized mini-mills such as North Star Steel Company and
Quanex Corporation (Mac Steel). Many of the large steelmakers have greater
financial resources than the Company and utilize modern technologies similar to
some of the equipment and processes currently in place or being implemented by
the Company in its modernization and expansion plan.
The North American market for cold finished bar products is very
competitive and highly fragmented. The Company's primary United States
competitors are large steel producers such as Republic and other diversified
domestic corporations, many having substantially greater financial resources
than the Company and some of which are a division or subsidiary of steel
companies that also produce hot rolled products, including Nucor Corporation
and Quanex Corporation. The Company's primary Canadian competitors are Union
Drawn Steel Company and Laurel Steel Inc.
Foreign competition is a significant factor in the North American
engineered bar industry. Imports are substantially affected by fluctuations in
the value of the U.S. dollar versus certain foreign currencies. If the U.S.
<PAGE>
dollar were to strengthen significantly against foreign currencies, the price
and sales volume of the Company's products could be adversely affected. There
can be no assurance, however, that economic changes will not result in
increased foreign competition in the Company's North American markets.
Patents, Trademarks and Trade Names
The Company has the patents, trademarks and trade names necessary for
the operation of its business as now conducted. The loss of any or all of these
patents, trademarks and trade names would not have a material adverse effect on
the Company's business.
Employees
BarTech and the United States Steelworkers of America (the "USWA")
have entered into a collective bargaining agreement relating to certain of
BarTech's employees at the Lackawanna and Johnstown facilities. The agreement
provides for a five-year term expiring in February, 2001. Wage and benefits
provisions under the new collective bargaining agreement are fixed until
expiration of the five-year term of the agreement and will be subject to
further negotiations at that time.
As part of the agreement, the Company agreed to establish an employee
stock ownership plan (the "ESOP"). The Company also agreed that BarTech would
contribute a minimum of 20% of the then outstanding Common Stock of BarTech to
the ESOP (subject to dilution for events occurring subsequent to February,
1994, and is currently 5.4%) and granted to the USWA the power to appoint, and
the USWA has appointed, two of the directors of BarTech.
All production employees at B&L's Medina, Ohio facility are covered by
a collective bargaining agreement with the International Association of
Machinists and Aerospace Workers (the "IAM") that expires in October 1997. The
production employees at B&L's Harvey, Illinois and Hamilton, Ontario, Canada
plants are covered by separate collective bargaining agreements with the USWA
that expire on November 30, 1998 and July 31, 1996, respectively. The
production employees at B&L's Batavia, Illinois and Cartersville, Georgia
facilities are not represented by a union.
As of December 27, 1996, the Company had 864 employees. The Company
believes that it has good relations with its employees.
Environmental Matters
The domestic steel industry is subject to a broad range of Federal and
State and local environmental laws and regulations including those governing
discharges into the air and water, the handling and disposal of solid and
hazardous wastes, the remediation of soil and ground water contaminated by
petroleum products or hazardous substances or wastes, and the health and safety
of employees. The Company has taken, and continues to take, into account the
requirements of such environmental laws and regulations in the improvement,
modernization expansion and start-up of its facilities and believes that it is
currently in substantial compliance with such material laws and regulations.
As is the case with most steel producers, the Company could incur significant
costs related to environmental compliance. To the extent the Company might
incur any such compliance costs, these costs most likely would be incurred over
a number of years; however, no assurance can be given that future regulatory
actions regarding soil or ground water at the Company's facilities, as well as
<PAGE>
continued compliance with environmental requirements, will not require the
Company to incur significant costs that may have a material adverse effect on
the Company's financial condition and results of operations.
The Company has sought to reduce the impact of costs arising from or
related to actual or potential environmental conditions at the BarTech
Facilities caused or created by Bethlehem or its predecessors in title and
attributable to the period in which the Bethlehem BRW Division or its
predecessors operated such facilities through the Company's contractual
arrangements with Bethlehem. Pursuant to such arrangements, Bethlehem has
agreed to indemnify the Company for such costs by limiting the Company's
potential exposure to any such damages incurred (i) through December 1996, to
50% of the first $2.0 million in damages, or $1.0 million, and (ii) thereafter,
to 50% of the first $10.0 million of damages, or $5.0 million in the aggregate.
Although several investigations of certain past or present environmental
conditions at the BarTech Facilities have been conducted by or on behalf of
Bethlehem and certain regulatory agencies, the reports and results of which
have been made available to the Company, an in-depth, environmental review of
the BarTech Facilities to determine the potential scope, if any, of required
remediation at such facilities has not been conducted by or on behalf of the
Company. There can be no assurance that Bethlehem will meet its obligations
under the indemnification arrangements or that there will not be future
contamination for which the Company might be fully liable and that may require
the Company to incur significant costs that could have a material adverse
effect on the Company's financial condition and results of operations.
Bethlehem is conducting remedial activities on a small portion of the
Lackawanna Facility historically used for mill scale storage, which was
identified by the U.S. Environmental Protection Agency (the "EPA") pursuant to
an Administrative Order on Consent issued in August, 1990 as requiring certain
corrective action. Bethlehem currently awaits approval of the Remedial Work
Plan for the former mill scale storage area it submitted to the EPA in
September, 1994. Bethlehem is ultimately liable for compliance with the
Administrative Order on Consent and the Company believes that Bethlehem is
likely to fulfill these obligations, although there can be no assurance such
will occur.
In August, 1995, B&L received a request for information from the EPA
pursuant to section 104(e) of CERCLA with respect to a federal investigation
and potential remediation of two hazardous waste treatment sites in Kansas
City, Kansas and Kansas City, Missouri. In 1985, B&L shipped ten capacitors
from its Harvey, Illinois facility to these sites for disposal. The capacitors
held approximately 88 gallons of oil that may have contained polychlorinated
biphenyls. At this time, B&L has not received any further correspondence from
the EPA and has not been named as a potentially responsible party under CERCLA
at either of these sites; however, there can be no assurance at this time that
further action by the EPA will not occur. The Company has not estimated the
amount of liability it may incur in connection with this disposal. The Company
understands that the EPA has identified approximately 1,300 customers of these
treatment sites, which operated for several years. While no assurances can be
given, the Company does not believe that B&L's liability relating to these
sites will have a material adverse effect on the Company's financial condition
and results of operations.
Various Federal and State and local laws, regulations and ordinances
govern the removal, encapsulation or disturbance of asbestos containing
<PAGE>
materials ("ACMs"). Such laws and regulations may impose liability for the
release of ACMs and may provide for third parties to seek recovery from owners
or operators of facilities at which ACMs were or are located for personal
injury associated with exposure to ACMs. The Company is aware of the presence
of ACMs at its facilities, but it believes that such as materials are in
acceptable condition at this time. The Company believes that any future costs
related to remediation of ACMs at these sites will not be material, either on
an annual basis or in the aggregate, although there can be no assurance with
respect thereto.
The Company has all necessary environmental permits to construct and
operate the improvements that are a part of Phase One of its modernization and
expansion plan. No action has been taken to date with respect to Phase Two of
the plan. Environmental operating permits for the BarTech Facilities are
currently in place in connection with start-up in accordance with applicable
regulatory procedures.
CDSC, B&L's Canadian subsidiary, is also subject to Canadian federal,
provincial, regional and municipal environmental laws and regulations. B&L
believes it is currently in substantial compliance with all applicable material
environmental laws and regulations and does not anticipate any substantial
additional capital expenditures for environmental control facilities in the
near future. However, there can be no assurance that the Company will not have
a material adverse effect on the Company's financial condition and results of
operations.
Some of the steel processing operations presently conducted by BLSC
commenced over 10 years ago by the predecessors of BLSC and included properties
which over the years were sold by BLSC's predecessors. Given the nature and
geographic diversity of its current and its predecessors' former operations, it
is possible that claims would be asserted against B&L in the future based upon
current property ownership of B&L and by historical operations by its
predecessors. However, B&L has received an indemnification from the former
owner and operator of such properties for certain environmental claims or
liabilities relating to activities at B&L's Harvey and Batavia, Illinois and
Medina, Ohio properties prior to October 23, 1984, when BLSC succeeded to
ownership of such properties, and for certain environmental claims or
liabilities relating to properties that were sold by BLSC's predecessors.
There can be no assurance that such former owner and operator will meet its
obligations under the indemnification agreements or that there will not be
future contamination for which the Company might be fully liable and that may
require the Company to incur significant costs that could have a material
adverse effect on the Company's financial condition and results of operations.
While the Company believes that the foregoing environmental matters
will not, individually or in the aggregate, have a material adverse impact on
the Company's financial condition or results of operations, there can be no
assurance to that effect.
Item 2. Properties
The Company owns all of the facilities listed below except the BarTech
executive offices, which are leased:
BarTech Executive Offices. BarTech's executive offices are in Johnstown,
Pennsylvania. The aggregate floor area of these facilities is approximately
7,550 square feet. The lease on these offices expires in September, 1997, by
<PAGE>
which time the Company will either have extended the current lease or relocated
to adequate space at a rate similar to the current lease.
Johnstown Facility. The Johnstown facility, located at Johnstown, Pennsylvania
and having an aggregate floor area of approximately 1.9 million square feet
(including the Caster complex), consists principally of the following
facilities: (i) a steelmaking complex consisting of two 180-ton ultra high
powered electric arc melting furnaces, ladle metallurgy facilities, an R-H
vacuum degasser and a process control computer, (ii) a five-strand continuous
caster, and (iii) chemical and environmental labs.
Lackawanna Facility. The Lackawanna facility, located at Lackawanna, New York
and having an aggregate floor area of approximately 1.1 million square feet, is
a 13" bar mill with the following features: (i) 22 vertical/horizontal stands,
(ii) closed loop bar dimensional control providing the ability to roll to 1/4
standard size tolerance, (iii) interstand cooling, (iv) roll shop, and (v) mill
and material handling equipment designed to produce coils up to 6,000 pounds,
one of the heaviest coil weights in the industry.
Harvey Facility. The Company's cold finished processing plant at Harvey,
Illinois has approximately 331,000 square feet of manufacturing, office and
storage space and consists principally of the following facilities: (i) two
roller hearth furnaces for thermal-treating bars, (ii) shotblasting equipment
for descaling hot rolled bar surfaces, (iii) four drawbenches for cold drawing
hot rolled bars (including a 650,000 pound drawbench, believed to be the
largest in the industry) into numerous shapes and up to 6" in size, (iv) two
mills for turn-finishing bar surfaces, and (v) 13 cold finished bar
straightener/polishers. B&L's executive offices are also located at the Harvey
Facility.
Batavia Facility. The Company's cold finished processing plant at Batavia,
Illinois has approximately 61,000 square feet of manufacturing, office and
storage space and consists principally of the following facilities: (i)
shotblasting equipment for descaling hot rolled bar surfaces, (ii) four
automatic coil-to-bar machines, which produce bars from hot rolled coil
products including rounds from 1/4" to 1 5/8" in diameter and hexagons and
squares from 1/4" to 1" thick, and (iii) one cold finished bar
straightener/polisher.
Cartersville Facility. The Company's cold finished processing plant at
Cartersville, Georgia has approximately 92,000 square feet of manufacturing,
office and storage space and consists principally of the following facilities:
(i) shotblasting equipment for descaling hot rolled bar surfaces, (ii) two
drawbenches for cold drawing hot rolled bars into rounds up to 4" in diameter,
flats up to 6" in width and hexagons and squares up to 2 1/2" thick, (iii) one
automatic coil-to-bar machine, which produces rounds up to 1 1/16" in diameter,
and (iv) four cold finished bar straightener/polishers.
Hamilton Facility. The Company's cold finished processing plant at Hamilton,
Ontario, Canada has approximately 135,000 square feet of manufacturing, office
and storage space and consists principally of the following facilities: (i)
two batch furnaces for thermal treating bars, (ii) shotblasting equipment for
descaling hot rolled bar surfaces, (iii) two drawbenches for cold drawing hot
rolled bars into rounds up to 4" in diameter, flats up to 6" in width and
hexagons and squares up to 2 1/2" thick, (iv) two automatic coil-to-bar
machines which produce rounds up to 1 1/16" in diameter, (v) two mills for
<PAGE>
turn-finishing bar surfaces, and (vi) five cold finished bar
straightener/polishers.
Medina Facility. The Company's cold finished processing plant at Medina, Ohio
has approximately 126,000 square feet of manufacturing, office and storage
space and consists principally of the following facilities: (i) shotblasting
equipment for descaling hot rolled bar surfaces, (ii) two drawbenches for cold
drawing hot rolled bars into rounds up to 4" in diameter, flats up to 4" in
width and hexagons and squares up to 2 1/2" thick, (iii) three automatic
coil-to-bar machines which produce rounds up to 3/4" in diameter, and (iv) four
cold finished bar straightener/polishers.
Item 3. Legal Proceedings
Bethlehem is conducting remedial activities on a small portion of the
Lackawanna Facility historically used for mill scale storage, which was
identified by the U.S. Environmental Protection Agency (the "EPA") pursuant to
an Administrative Order on Consent issued in August, 1990 as requiring certain
corrective action. Bethlehem currently awaits approval of the Remedial Work
Plan for the former mill scale storage area it submitted to the EPA in
September, 1994. Bethlehem is ultimately liable for compliance with the
Administrative Order on Consent and the Company believes that Bethlehem is
likely to fulfill these obligations, although there can be no assurance such
will occur.
In August, 1995, B&L received a request for information from the EPA
pursuant to section 104(e) of CERCLA with respect to a federal investigation
and potential remediation of two hazardous waste treatment sites in Kansas
City, Kansas and Kansas City, Missouri. In 1985, B&L shipped ten capacitors
from its Harvey, Illinois facility to these sites for disposal. These
capacitors held approximately 88 gallons of oil that may have contained
polychlorinated biphenyls. At this time, B&L has not received any further
correspondence from the EPA and has not been named as a potentially responsible
party under CERCLA at either of these sites; however, there can be no assurance
at this time that further action by the EPA will not occur. The Company has not
estimated the amount of liability it may incur in connection with this
disposal. The Company understands that the EPA has identified approximately
1,300 customers of these treatment sites, which operated for several years.
While no assurances can be given, the Company does not believe that B&L's
liability relating to these sites will have a material adverse effect on the
Company's financial condition and results of operations.
Except as described hereunder, the Company is not involved in any
other proceedings which, either individually or in the aggregate, may have a
material adverse effect on the financial condition or results of operations
of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
The Company has two classes of common equity: Class A Common Stock
(the "Class A Common Stock") and Special Class B Common Stock (the "Class B
<PAGE>
Common Stock" and, together with the Class A Common Stock, the "Common Stock").
There is currently no established public trading market for the Common Stock.
Item 6. Selected Financial Data
1994 1995 1996
(Unaudited) ---------- ---------- ----------
Net sales . . . . . . . . . . . . . . $ - $ - $ 77,163
Operating loss . . . . . . . . . . . - (10,658) (31,460)
Net loss . . . . . . . . . . . . . . - (12,832) (43,633)
Net loss per common share . . . . . . - (67.29) (97.81)
Total assets . . . . . . . . . . . . 46,849 46,001 200,979
Long-term debt . . . . . . . . . . . 34,759 44,952 132,426
Redeemable preferred stock . . . . . 5,500 5,500 5,500
Cash dividends declared per preferred
share . . . . . . . . . . . . . . . . - 350 350
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
BarTech acquired certain steelmaking and bar rolling assets (the "BRW
Assets") from the former Bar, Rod and Wire Division (the "Bethlehem BRW
Division") of Bethlehem Steel Corporation ("Bethlehem") in September 1994. The
Bethlehem BRW Division ceased manufacturing operations in December 1992 and no
historical results are presented for the Bethlehem BRW Division due to the
noncomparability of BarTech's operations, management and cost structure.
BarTech restarted operations at the bar mill in Lackawanna, NY on February 9,
1996. Additionally, on August 22, 1996 the Company commissioned the continuous
caster and restarted the melt shop in Johnstown, PA, completing Phase One of
the Modernization and Expansion Plan.
On April 2, 1996, BarTech consummated a Recapitalization and merger
agreement which included the following:
- -- The issuance of $91.6 million in aggregate principal amount of 13 1/2%
Senior Secured Notes due 2001 for proceeds of approximately $90.0 million.
- -- The issuance of 536,829 shares of Class B Common Stock of BarTech in
consideration of the $30.0 million Blackstone investment, representing a
58.6% equity interest in BarTech on a fully diluted basis.
- -- The establishment of a new senior revolving Credit Agreement among BarTech,
B&L and a syndicate of banks led by Chase Manhattan Bank (formerly Chemical
Bank), as agent, which provides BarTech and B&L with a revolving credit
facility in an aggregate principal amount of up to $90.0 million, of which
a portion will be available in the form of letters of credit.
- -- The consummation of the B&L Acquisition and the payment of the aggregate
purchase price of approximately $38.0 million.
- -- The repayment of the following indebtedness: (i) approximately $16.8
million aggregate principal amount of outstanding loans under B&L revolving
credit facilities; (ii) approximately $5.8 million aggregate principal
amount of outstanding loans under the existing BarTech credit facilities;
<PAGE>
and (iii) approximately $6.1 million aggregate principal amount of
outstanding loans under the Master Agreement.
Results of Operations
Overview
BarTech began producing and shipping hot rolled engineered bar products
on a limited basis from the Lackawanna facility in February, 1996. BarTech has
developed a two phase plan to modernize and expand its processes and equipment
to take advantage of proven technologies. Phase One involved replacing the
existing ingot based process with a continuous casting steelmaking process
("Phase One"). The installation of a continuous caster and related equipment
was completed and commercial steelmaking at the Johnstown facility commenced in
August, 1996. Phase Two is designed to enable BarTech to produce products for
the higher quality and larger size hot rolled engineered bar and semi-finished
billet market segments ("Phase Two"). New management has temporarily deferred
Phase Two to review the capability of the existing caster to be converted to a
bloom caster and also is studying the possibility of acquiring existing
capacity and joint ventures or strategic alliances for developing existing or
new capacity. Management continues to believe bloom cast product is a
competitive necessity to achieve it's long term goals.
In fiscal 1997, BarTech will devote substantial efforts to re-enter
the hot rolled engineered bar market and expects that its initial prices will
continue to be below those for the market generally, that its overall average
product margins will initially reflect BarTech's re-entry into the lower
quality segment of the market as BarTech seeks to pre-qualify its products and
that it will experience initial inefficiencies resulting from low volume
production levels.
Among BarTech's 1997 objectives are increasing casting production at
the Johnstown facility to commercial levels and when appropriate increasing
production at the Lackawanna facility by adding additional shifts. The Company
has achieved progress toward these goals since September 30, 1996. For example,
daily casting production through December 27, 1996 was 240% over September's
performance and bar mill performance improved 173% from third quarter to fourth
quarter.
BarTech believes its liquidity position will be sufficient to execute
and complete its modernization and expansion plan, integrate the operations of
BarTech and B&L, effect its hot rolled engineered bar market re-entry strategy
and meet its other capital requirements, although there can be no assurance
that BarTech will be able to do so. See "Liquidity and Capital Resources."
Historical - Fiscal Years ended September 30, 1995 and 1996
The following discussion of results of operations for BarTech covers
the fiscal years ended September 30, 1995 and 1996. The results of B&L are
included for the period from April 2, 1996 (date of acquisition) through
September 30, 1996. However, management does not believe that such results are
indicative of its future results of operations due to the absence of a BarTech
operating history, the absence of an operating history of B&L under BarTech's
management and the consequences of operating BarTech and B&L on a vertically
integrated basis. Comparison of the 1996 consolidated results with the 1995
BarTech only results is limited based on the lack of comparable information for
B&L for the 1995 periods presented.
<PAGE>
BarTech recorded net sales of $77.2 million for the fiscal year ended
September 30. This includes sales of hot rolled bar from the Lackawanna
facility of $4.1 million for the fiscal year ended September 30, 1996. Sales
for B&L of $73.1 million were recorded for the period from April 2, 1996 (date
of acquisition), through September 30, 1996.
During fiscal 1995 and 1996, BarTech undertook preparation for the
start-up of commercial steel production at the Johnstown facility, at which
BarTech commenced operations in August, 1996. This included, among other
things, the purchasing, engineering and commencement of the installation of a
continuous caster, negotiations with vendors, discussions and meetings with
potential customers and the separation of utilities from Bethlehem. Costs for
the portion of these activities that are not directly associated with capital
projects have been charged to the operating expenses in the Statement of
Income. Such costs primarily relate to salaries, utilities, insurance, real
estate taxes and other administrative expenses.
Despite the inclusion of B&L operations for the period from April 2,
1996 (date of acquisition), BarTech continued to incur losses from operations
as a result of its continued investment in organization and start-up
activities. As a result of the above factors, BarTech incurred a net loss from
operations of $31.5 million for the year ending September 30, 1996.
Net interest expense increased by $8.2 million as a result of debt
incurred in the Recapitalization.
The tax provision consists primarily of a provision for foreign taxes.
Pro Forma - Fiscal years ended September 30, 1995 and 1996
The following pro forma financial information gives effect to the
Recapitalization as if it had occurred on October 1, 1994. The unaudited pro
forma financial information is presented for informational purposes only and is
not necessarily indicative of the results that actually would have occurred had
the Recapitalization been consummated on the dates indicated or the results
that may occur or be obtained in the future.
Unaudited Pro Forma
Information
-----------------------------
1995 1996
------------- -------------
Net sales . . . . . . . . . . . . . . . . . . $169,372 $ 154,265
Loss before extraordinary item . . . . . . . (18,150) (47,716)
Net loss . . . . . . . . . . . . . . . . . . (20,807) (52,298)
Net loss per common share . . . . . . . . . . (107.90) (117.07)
Net sales for the fiscal year ended September 30, 1996 include sales
of hot rolled steel bars from the Lackawanna facility of $4.1 million. B&L
sales decreased from $169.4 million to $150.2 million, or 11.3% for the fiscal
year ended September 30, 1995 and 1996 both primarily as a result of decreased
volume.
Gross margins were negative as BarTech continued to start up its
facilities and re-enter the hot rolled engineered bar market. B&L's gross
<PAGE>
margins decreased from 12.6% to 7.9% for the fiscal year ended September 30,
1995 and 1996, primarily due to lower volume.
Depreciation and amortization costs increased from $2 million to $3.1
million for the fiscal years ended September 30, 1995 and 1996, primarily as a
result of additional amortization of goodwill and other purchase price
allocations from the acquisition of B&L, as well as increasing depreciation of
the BarTech facilities.
Selling, general and administrative expenses decreased from $22.3
million to $21.0 million for the fiscal years ended September 30, 1995 and
1996. Selling, general and administrative expenses in 1995 reflected the cost
of maintaining the business prior to commencing bar operations at the
Lackawanna facility.
Interest expense increased from $17.0 to $19.3 as a result of debt
incurred in the Recapitalization.
The tax provision consists primarily of a provision for foreign taxes.
Liquidity and Capital Resources
BarTech's primary sources of liquidity consist of available excess
cash and cash equivalents, availability under the Credit Agreement and cash
flow from operations. As of September 30, 1996, BarTech had approximately
$24.4 million in available cash and cash equivalents, including $18.9 million
in the Interest Escrow Account, and approximately $42.0 million available
(based on the applicable borrowing base described below) under the Credit
Agreement.
In connection with the Recapitalization, BarTech replaced its existing
credit facilities with the new Credit Agreement, which provides BarTech with a
maximum of $90.0 million of revolving credit loan availability. Borrowings
under the Credit Agreement will be available based upon a borrowing base not to
exceed a specified percentage of the aggregate net book value of accounts
receivable and inventory, which percentage shall be, subject to certain
exceptions, 73.0% for the first 18-month period after April 2, 1996, 71.4% and
69.0% for the two successive 12-month periods thereafter and 66.7% for the
remainder of the term of the Credit Agreement. Borrowings under the Credit
Agreement will bear interest based upon, at BarTech's option, a prime rate plus
2.00% or an adjusted LIBOR rate plus 3.00%, subject to increase under certain
circumstances. The Credit Agreement matures four years from the closing of the
Offering, which was April 2, 1996.
BarTech has various financing arrangements in place in addition to the
Credit Agreement that are committed to funding (i) its working capital and
general corporate requirements during the commencement of operations at the
Lackawanna facility, which began operating in February, 1996, and at the
Johnstown facility, which commenced in the August, 1996, and (ii) Phase One of
BarTech's modernization and expansion plan at the Johnstown facility. As of
September 30, 1996, BarTech had an aggregate amount of approximately $146.4
million of outstanding indebtedness under these committed agreements.
Principal installments required under the long-term debt obligations
will be as follows for the years ending September 30, 1997 and thereafter
(dollars in thousands):
<PAGE>
Principal
-----------------
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,848
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . 3,882
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . 4,267
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . 4,382
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . 97,887
Thereafter . . . . . . . . . . . . . . . . . . . . . . . 29,093
$ 146,359
BarTech's contract with Rokop to modify, install and start-up the
continuous caster to be installed at the Johnstown facility as part of Phase
One of BarTech's modernization and expansion plan required Rokop to provide
$7.2 million in notes to finance a portion of the project, of which $4.3
million was secured by liens on the caster and $2.9 million was secured by a
letter of credit under the Credit Agreement. These notes were prepaid on
November 25, 1996 for $5.2 million, which allowed BarTech to realize an
approximate $2.0 million discount. No gain was recognized on the repayment as
the notes had been recorded at the discounted amount.
See Note 7 to the financial statements for a description of the terms
of BarTech's indebtedness, including the interest rates due thereunder.
BarTech has completed implementing Phase One of its modernization and
expansion plan, which includes the acquisition, installation and implementation
of the continuous caster. The total cost of the continuous caster installation
during Phase One was approximately $30.0 million. BarTech is continuing to
analyze all aspects of Phase Two. BarTech believes it has sufficient liquidity
from all sources to complete the modernization and expansion plan.
Since its formation, BarTech has incurred substantial losses as a
result of the ongoing maintenance of its facilities and its general and
administrative expenses. Any substantial delay in completing or a failure to
complete the start-up of its modernized facilities, or to sell its products in
its target markets could have a material adverse effect on BarTech's financial
condition and results of operations. In the event of a substantial delay in
the implementation of its plans or substantial unanticipated costs associated
with the implementation of its plans, BarTech may need to borrow funds under
the Credit Agreement or, to the extent funds are not available thereunder, to
obtain additional financing to meet its cash flow requirements. As a result of
the Recapitalization, BarTech is highly leveraged. Restrictive covenants
included in the indenture and other debt obligations may have the effect of
limiting BarTech's ability to incur additional indebtedness, sell assets, or
acquire other entities and may otherwise limit the operational and financial
flexibility of BarTech. Based on its fiscal 1997 plan, BarTech believes that
its cash flow from operations, combined with the available funds under the
Credit Agreement and financing commitments to fund its modernization and
expansion plan, will be sufficient to enable BarTech to meet its debt service
requirements when due and to fund its capital expenditure, working capital and
general corporate requirements, although there can be no assurances with
respect thereto.
As of September 30, 1996, BarTech had available for federal and state
income tax purposes, net operating loss carryforwards from 1996 losses of
approximately $24.0 million expiring in 2011. In addition, BarTech has prior
year operating loss carryforwards which were limited as a result of the
<PAGE>
Recapitalization. Such amount is estimated to be limited to approximately $1.1
million annually for the next fourteen years.
There are no restrictions on the ability of B&L to transfer funds to
BarTech.
Inflation
BarTech believes that inflation has not had a material effect on its
results of operations.
New Accounting Pronouncements
In May, 1995 the Financial Accounting Standards Board issued SFAS No.
121: "Accounting for the Impairment of Long-Lived Assets to be Disposed Of."
The statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The statement is effective for financial
statements for fiscal years beginning after December 15, 1995. BarTech does
not believe that adoption of such statement will have a material effect on its
financial statements.
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
BAR TECHNOLOGIES INC.:
We have audited the accompanying consolidated balance sheet of Bar
Technologies Inc. (a Delaware corporation) and subsidiaries as of September 30,
1996 and 1995, and the related consolidated statements of income, stockholders'
equity (deficit) and cash flows for the years ended September 30, 1996 and 1995
and the statements of stockholders' equity (deficit) and cash flows for the
period from December 2, 1993 (inception) through September 30, 1994. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Bar Technologies
Inc. and subsidiaries as of September 30, 1996 and 1995, and the results of
their operations and their cash flows for the years ended September 30, 1996
<PAGE>
and 1995, and its cash flows for the period from December 2, 1993 (inception)
through September 30, 1994, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
November 26, 1996
<PAGE>
BAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND 1996
(Dollars in Thousands)
Assets 1995 1996
Current Assets:
Cash and cash equivalents . . . . . . . . $ 1,650 $ 5,523
Accounts receivable, less
allowances of $0 and
$549, respectively . . . . . . . 952 18,894
Inventories . . . . . . . . . . . . . . . 1,000 45,658
Prepaid expenses . . . . . . . . . . . . 464 3,027
Restricted interest escrow . . . . . . . - 12,344
Total current assets . . . . . . 4,066 85,446
Property, Plant And Equipment:
Land and improvements . . . . . . . . . . 1,071 2,781
Buildings and improvements . . . . . . . 12,258 22,102
Machinery and equipment . . . . . . . . . 15,681 54,224
Construction-in-progress . . . . . . . . 9,210 1,903
Total property, plant and
equipment . . . . . . . . . . . 38,220 81,010
Accumulated depreciation . . . . . . . . (306) (2,128)
Net property, plant and equipment 37,914 78,882
Goodwill, net of accumulated amortization of
$0 and $163 . . . . . . . . . . . . . . . . . - 12,697
Other Assets, including restricted debt
service fund and restricted interest
escrow of $1,550 and $8,061,
respectively . . . . . . . . . . . . . . 4,021 23,954
Total Assets . . . . . . . . . . . . . . . . $ 46,001 $ 200,979
The accompanying notes are an integral part of these statements.
<PAGE>
BAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND 1996
(Dollars in Thousands, Except Per Share Data)
Liabilities And Stockholders' Equity (Deficit) 1995 1996
- --------------------------------------------- -------------- -------------
Current Liabilities:
Accounts payable . . . . . . . . . . . . $ 948 $ 22,812
Accrued interest . . . . . . . . . . . . - 7,016
Other accrued liabilities . . . . . . . . 2,513 12,598
Current maturities of long-term debt . . 1,713 6,848
Revolving credit facility . . . . . . . . - 22,500
Total current liabilities . . . 5,174 71,774
Long-Term Debt . . . . . . . . . . . . . . . 44,952 132,426
Other Long-Term Liabilities . . . . . . . . . - 9,737
Total liabilities . . . . . . 50,126 213,937
Redeemable Stock:
Series A Preferred Stock $0.001 par value-
Authorized, 5,000 shares;
Issued and outstanding, 1,100 5,500 5,500
shares . . . . . . . . . . . . .
Stockholders' Equity (Deficit):
Series B Preferred Stock $0.001 par value
-
Authorized, issued and
outstanding, 1 share
Class A common stock, $0.001 par value -
Authorized, 1,000,000 shares;
Issued and outstanding, 196,410 - -
and 207,012, shares, respectively
Class B common stock, $0.001 par value-
Authorized, 600,000 shares;
Issued and outstanding, 0 and - 1
536,829, shares, respectively .
Additional paid-in capital . . . . . . . 3,704 33,706
Warrants outstanding . . . . . . . . . . - 5,119
Retained deficit . . . . . . . . . . . . (13,217) (57,235)
Deferred compensation . . . . . . . . . . (112) --
Cumulative translation adjustment . . . . - (49)
Total stockholders' equity (9,625) (18,458)
(deficit) . . . . . . . . . .
Total Liabilities & Stockholders' Equity $46,001 $ 200,979
(Deficit) . . . . . . . . . . . . . . . .
<PAGE>
The accompanying notes are an integral part of these statements.
<PAGE>
BAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
FOR THE PERIOD FROM DECEMBER 2, 1993 (INCEPTION) THROUGH SEPTEMBER 30, 1994
AND FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND 1996
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
---------------- -------------------- ---------------
Series B Series A Class B
Preferred Stock Common Stock Common Stock Cumula-
Warr- tive- Stock-
Addit- ants Re- Deferr- Transla-' holders
---------------- -------------------- ---------------- ional Out- tained ed Com- tion Ad- Equity
Paid-In stand- Defi- pensa- just- (Defi-
Shares Amount Shares Amount Shares Amount Capital ing cit tion ment cit)
------- ------- -------- -------- ------- ------- ------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of 1 $ - 196,410 $ - - $- $3,536 $ $ $ $ $3,536
common
stock
Balance, 1 - 196,410 - - - 3,536 - - - - 3,536
September
30, 1994
Net loss - - - - - - - - (12,832) - - (12,832)
Dividends on - - - - - - - - (385) - - (385)
series A
preferred
stock ($350
per share)
Common stock - - - - - - 168 - - (168) - -
grants
Amortization of - - - - - - - - - 56 - 56
deferred
compensation
Balance, 1 - 196,410 - - - 3,704 - (13,217) (112) - (9,625)
September
30, 1995
Net loss - - - - - - - - (43,633) - (43,633)
Dividends on - - - - - - - - (385) - (385)
series A
preferred
stock ($350
per share)
Amortization of - - - - - - - - - 54 - 54
deferred
compensation
Issuance of common - - 10,602 - 536,829 1 30,002 - - 58 - 30,061
stock
Issuance of - - - - - - - 5,119 - - - 5,119
warrants
Current year - - - - - - - - - - (49) (49)
translation
adjustment
Balance, 1 $ - 207,012 $ - $5,119 $(57,235) - $(49) $(18,458)
September 30, 1996
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
BAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM DECEMBER 2, 1993 (INCEPTION) THROUGH SEPTEMBER 30, 1994
AND FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND 1996
(Dollars in Thousands)
1994 1995 1996
Cash flows from operating activities:
Net loss $ - $(12,832) $(43,633)
Adjustments to reconcile net loss
to net cash used by
operating activities-
Depreciation and - 362 2,036
amortization
Extraordinary loss on - - 2,214
early extinguishment of
debt
Accretion of original - 165 633
issue discount
Amortization of deferred - - 1,396
financing costs
(Increase) decrease in (20) (932) 900
accounts receivable
(Increase) decrease in - - (12,016)
inventory
(Increase) decrease in (518) 53 (1,306)
prepaid expenses
(Increase) decrease in (1,548) 414 (402)
other assets
Increase (decrease) in - 756 5,473
accounts payable
Increase (decrease) in 1,968 546 12,150
other current liabilities
Increase (decrease) in - - (4)
deferred income taxes
Increase (decrease) in - - 277
other long-term
liabilities
Net cash flows used by (118) (11,468) (32,282)
operating activities
Cash flows from investing activities:
Net capital expenditures (32,854) (9,210) (21,300)
Acquisition of B&L, net of cash - - (41,028)
Disposition of nonoperating - 2,689 -
assets
Net cash flows used by investing (32,854) (6,521) (62,328)
activities
Cash flows from financing activities:
<PAGE>
Net receipts under - - 22,500
revolving credit
agreement
Issuance of debt 42,000 11,770 104,363
Repayments of debt (6,000) (1,116) (32,154)
Proceeds from issuance of 3,536 - 30,003
common stock
Proceeds from issuance of - - 5,119
warrants
Proceeds from issuance of 5,500 - -
preferred stock
Preferred stock dividends - (193) (385)
Deferred debt financing (2,886) - (12,398)
costs
Deposit into bond - - (18,516)
interest escrow
Net cash flows provided by 42,150 10,461 98,532
financing activities
Effect of exchange rates on cash - - (49)
Net increase (decrease) in cash and 9,178 (7,528) 3,873
cash equivalents
Cash and cash equivalents, beginning - 9,178 1,650
of period
Cash and cash equivalents, end of $ 9,178 $ 1,650 $ 5,523
period
Supplemental cash flow information:
Interest paid $ - $ 2,328 $ 2,976
Income taxes paid - - 622
The accompanying notes are an integral part of these statements.
<PAGE>
BAR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1996
(Dollars in Thousands, Except Share and Per Share Data)
1. BASIS OF PRESENTATION:
For the year ended and as of September 30, 1996, the financial
statements herein include the accounts of Bar Technologies Inc. ("BarTech") and
its wholly owned subsidiary, Bliss & Laughlin Industries Inc. ("B&L"). Prior
to April 2, 1996, the financial statements include only the accounts of
BarTech.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. ORGANIZATION AND OPERATIONS:
BarTech purchased certain assets of the former Bar Rod and Wire
Division (the "Bethlehem BRW Division") of Bethlehem Steel Corporation
("Bethlehem") in accordance with a Contribution Agreement (the "Contribution
Agreement") dated December 23, 1993. The transaction closed on September 26,
1994. The assets are primarily being used to produce engineered steel
products.
The transaction was accounted for as a purchase with the assets
acquired and liabilities assumed recorded at their estimated fair values. The
purchase price was approximately $26,500, which consisted of $15,500 in cash
paid to Bethlehem, the issuance of $5,500 of preferred stock and a $5,500 note
payable to Bethlehem. In addition, BarTech incurred transaction costs of
$8,200 in completing the acquisition, and acquired inventory from Bethlehem for
$1,000.
BarTech did not assume past service cost for pension and retiree
medical benefits arising from the operations of the Bethlehem BRW Division. In
addition, pursuant to the Contribution Agreement between BarTech and Bethlehem,
BarTech negotiated for the limitation of its liability for and the retention by
Bethlehem of any environmental liabilities relating to Bethlehem's operations
at the BarTech Facilities. Pursuant to the Contribution Agreement, Bethlehem
has agreed to indemnify BarTech for environmental damages related to the
Bethlehem BRW Division's operations as follows: (i) if such damages are
incurred by BarTech prior to January 1, 1997, Bethlehem would pay 50% of the
first $2,000 of damages and 100% of all damages in excess of $2,000; and (ii)
if such damages are incurred by BarTech on or after January 1, 1997, Bethlehem
would pay 50% of the first $10,000 of damages and 100% of all damages in excess
of $10,000. Therefore, through December 1997, BarTech's liability for such
damages is capped at $1,000 and is capped at $5,000 thereafter.
<PAGE>
The accounting principles for a purchase business transaction, as set
forth in Accounting Principles Board Opinion No. 16 ("APB Opinion No. 16"),
were used as a basis for certain purchase accounting adjustments. As a result,
the purchase price, including transaction costs, has been allocated to
property, plant and equipment based upon their fair market value at the date of
acquisition.
The transaction with Bethlehem was consummated on September 26, 1994.
BarTech had no income statement activity prior to the acquisition and such
activity was insignificant for the period from September 26, 1994, through
September 30, 1994. Accordingly, no 1994 activity is disclosed in the
financial statements, other than in the cash flow statement. During 1995,
BarTech was engaged in activities directed towards the start-up of commercial
steel production, which BarTech commenced in the first quarter of calendar
1996. These activities included the purchasing, engineering and installation
of a continuous caster, negotiations with vendors, discussions and meetings
with potential customers and separations of utilities from Bethlehem.
On April 2, 1996, BarTech acquired B&L, a major independent cold
finished processor of steel bars. (See Note 5)
Since its formation, BarTech has incurred substantial losses as a
result of the ongoing maintenance of its facilities and its general and
administrative expenses. Any substantial delay in completing or a failure to
complete the start-up of its modernized facilities, or to sell its products in
its target markets could have a material adverse effect on BarTech's financial
condition and results of operations. In the event of a substantial delay in
the implementation of its plans or substantial unanticipated costs associated
with the implementation of its plans, BarTech may need to borrow funds under
the Credit Agreement or, to the extent funds are not available thereunder, to
obtain additional financing to meet its cash flow requirements. As a result of
the Recapitalization, BarTech is highly leveraged. Restrictive covenants
included in the indenture and other debt obligations may have the effect of
limiting BarTech's ability to incur additional indebtedness, sell assets, or
acquire other entities and may otherwise limit the operational and financial
flexibility of BarTech. Based on its fiscal 1997 plan, BarTech believes that
its cash flow from operations, combined with the available funds under the
Credit Agreement and financing commitments to fund its modernization and
expansion plan, will be sufficient to enable BarTech to meet its debt service
requirements when due and to fund its capital expenditure, working capital and
general corporate requirements, although there can be no assurances with
respect thereto.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying consolidated financial statements reflect the
application of the following significant accounting policies:
Principles of Consolidation
The consolidated financial statements include the accounts of BarTech
and its wholly owned subsidiary. All material intercompany accounts and
transactions have been eliminated in consolidation. Certain prior year amounts
have been reclassified, where necessary, to conform with the current year
presentation.
<PAGE>
Cash Equivalents
BarTech considers all short-term investments with maturities of three
months or less when acquired to be cash equivalents.
Restricted Cash
The restricted interest escrow consists of funds held in escrow for
the benefit of senior noteholders sufficient to pay interest on the Senior
Secured Notes due on the first three interest payment dates. (see Note 7)
The amount included in other assets consists of the noncurrent portion
of the restricted interest escrow and a debt service fund required by the
Marine Midland Term Loan. (see Note 7)
Inventories
Inventories are stated at the lower of cost or market (net realizable
value). Cost is determined under the first-in, first-out (FIFO) method.
Inventory costs include material, labor and overhead. The components
of inventory at September 30, are as follows:
1995 1996
Raw materials $1,000 $10,241
Work-in-progress -- 20,413
Finished goods -- 15,004
Total Inventories $1,000 $45,658
Property, Plant and Equipment
Property, plant and equipment is stated at cost. BarTech provides for
depreciation on the straight-line method based upon the estimated useful lives
of the assets. The estimated useful lives of assets are as follows:
Buildings and improvements 40 years
Machinery and equipment 7-20 years
Expenditures for maintenance and repairs are charged against income as
incurred. Significant expenditures for betterments are capitalized. Capital
expenditures which are not able to be put into use immediately are included in
construction-in-process. As these projects are completed, they are transferred
to depreciable assets. Retirements and disposals are removed from the cost and
accumulated depreciation accounts, with the gain or loss reflected in income.
Goodwill
Goodwill represents the amount paid for B&L in excess of the fair
market value of B&L's net assets. It is being amortized on a straight-line
basis over 40 years.
BarTech evaluates the recoverability of goodwill at each balance sheet
date based on forecasted future operations and undiscounted cash flows and
<PAGE>
other subjective criteria. Management believes that the carrying amount of
goodwill will be realized over its amortization period.
Other Assets
Other assets consist of the following:
September 30,
1995 1996
Deferred financing costs, net of amortization $10,981
of $415 and $1,366, respectively $2,471
Restricted debt service fund (Note 7) 1,550 1,550
Restricted interest escrow (Note 7) - 6,511
Other - 4,912
Total other assets $4,021 $23,954
Net Loss Per Share
The weighted average number of common and common stock equivalent
shares used in the calculation of net loss per common share were 196,410 and
450,023 for the years ended September 30, 1995 and 1996, respectively.
Warrants and options outstanding are excluded from the calculations because of
their antidilutive effect.
Income Taxes
BarTech provides for deferred income tax differences that arise when
items are reported for financial statement purposes in years different from
those for income tax reporting purposes in the accompanying balance sheets in
conformity with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
Foreign Currency Translation
The financial statements of B&L's Canadian subsidiary, Canadian Drawn
Steel Company, Inc. ("CDSC"), are translated into U.S. currency under the
guidelines set forth in Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation."
New Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
The statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The statement is effective for financial
statements for fiscal years beginning after December 15, 1995. BarTech does
not believe that adoption of this statement will have a material impact on its
financial statements.
<PAGE>
4. THE RECAPITALIZATION:
On April 2, 1996, BarTech consummated a Recapitalization which
included the following:
- -- The issuance of $91,609 in aggregate principal amount of 13-1/2%
Senior Secured Notes due 2001 for proceeds of $90,000.
- -- The issuance of 536,829 shares of Class B Common Stock of BarTech in
consideration of $30,000 in cash provided by the Blackstone Capital
Partners II Merchant Banking Fund L.P. and its affiliates ("the
Blackstone Investment"), representing a 58.6% equity interest in
BarTech on a fully diluted basis.
- -- The establishment of a new senior revolving credit agreement ("the
Credit Agreement") among BarTech, B&L and a syndicate of banks led by
Chase Manhattan Bank (formerly Chemical Bank), as agent, which
provides BarTech and B&L with a revolving credit facility in an
aggregate principal amount of up to $90,000, of which a portion will
be available in the form of letters of credit.
- -- The consummation of the B&L Acquisition and the payment of the
aggregate purchase price of approximately $38,000.
- -- The repayment of the following indebtedness: (i) approximately $16,800
aggregate principal amount of outstanding loans under B&L Revolving
Credit Facilities; (ii) approximately $5,800 aggregate principal
amount of outstanding loans under the Existing BarTech Credit
Facilities; and (iii) approximately $6,100 aggregate principal amount
of outstanding loans under the Master Agreement with the Commonwealth
of Pennsylvania and various of its agencies (the "Master Agreement").
5. ACQUISITION OF B&L
On April 2, 1996, BarTech consummated an amended merger agreement with
B&L, a major independent cold finished processor of steel bars. BarTech
acquired B&L for $9.50 per common share in cash for an aggregate equity
purchase price of $37,980, plus the assumption of $3,600 of debt and the
refinancing of $16,800 of debt. The terms of the merger agreement also provide
that, under certain circumstances, holders of B&L common stock will receive
additional consideration if BarTech sells all or substantially all of the stock
or assets of B&L, or merges B&L into an unaffiliated third party within one
year of the date of the merger agreement. BarTech financed the acquisition
with part of the proceeds of the Recapitalization described in Note 4.
The acquisition was accounted for as a purchase, and accordingly, the
results of operations of B&L have been included in the consolidated financial
statements since April 2, 1996. The purchase price, including acquisition
expenses, was allocated to assets acquired and liabilities assumed based on
fair market values at the date of acquisition. The excess of the purchase
price over the fair market value of the net assets acquired was recognized as
goodwill and is being amortized over 40 years. The fair value of assets
acquired and liabilities assumed are summarized as follows:
<PAGE>
Current assets $ 53,743
Property, plant and equipment 21,468
Other assets 5,165
Goodwill 12,860
Current liabilities (38,142)
Long-term liabilities (13,064)
Total $ 42,030
The following unaudited pro forma financial information gives effect
to the acquisition of B&L and the Recapitalization as if it had occurred on
October 1, 1994. Such information primarily reflects adjustments for goodwill
amortization, additional depreciation and additional interest expense.
The information provided below includes a presentation required by APB
Opinion No. 16, labeled "B&L Acquisition," which assumes BarTech only incurred
the debt necessary to acquire B&L. The additional columns labeled
"Recapitalization" reflects the impact of all borrowings incurred and debt
repayments made by BarTech as part of the Recapitalization, in addition to
those needed to acquire B&L. The unaudited pro forma income statements do not
purport to represent what BarTech's results of operations actually would have
been if the foregoing had in fact occurred on such date.
Unaudited Pro Forma Information
"B&L Acquisition" "Recapitalization"
1995 1996 1995 1996
Net sales $169,372 $154,265 $169,372 $154,265
Loss before extraordinary item (13,352) (41,128) (18,150) (47,716)
Net loss (16,009) (45,710) (20,807) (52,298)
Net loss per common share (83.47) (102.43) (107.90) (117.07)
The Senior Secured Notes are fully and unconditionally guaranteed on a
senior basis, jointly and severally, by BarTech's subsidiary B&L and its
subsidiary CDSC. Each of the subsidiary guarantors is a wholly owned
subsidiary of the Company. The subsidiary guarantors comprise all of the
direct and indirect subsidiaries of the Company.
The following is the condensed financial information of the subsidiary
guarantors on a combined basis. The separate financial statements and other
disclosures concerning the subsidiary guarantors are not presented because
management has determined that they are not material to investors. The
following information is as of September 30, 1996 and for the period from April
2, 1996, the B&L acquisition date, to September 30, 1996.
Current assets $52,082
Noncurrent assets 39,871
Current liabilities 41,117
Noncurrent liabilities 13,209
Net sales 73,120
Gross profit 5,118
Operating income 3,165
Net loss (4,414)
<PAGE>
6. REVOLVING CREDIT AGREEMENT:
On April 2, 1996, the Credit Agreement with Chase Manhattan Bank
(formerly Chemical Bank) became effective and represents a new senior revolving
credit agreement (the "Revolver") among BarTech, B&L and a syndicate of banks
led by Chase Manhattan Bank, as agent, which provides BarTech and B&L with a
revolving credit facility in an aggregate principal amount of up to $90,000, of
which a portion will be available in the form of letters of credit. The Credit
Agreement matures four years after the closing, which was April 2, 1996. The
Credit Agreement is initially secured by (i) all of the inventory, accounts
receivable, related intangibles and documents and the proceeds of the
foregoing, (ii) all of the Common Stock of BarTech outstanding on April 2,
1996, subject to dilution and release under certain circumstances, and (iii)
all of the capital stock of each direct or indirect subsidiaries of BarTech.
The pledges of capital stock referred to in (ii) and (iii) will be made on a
first priority basis and will be equal and ratable with the liens on such
capital stock in favor of holders of Senior Secured Notes. Borrowings under
the Credit Agreement will bear interest at a rate per annum equal to, at
BarTech's option, either a prime rate plus 2.00% or an adjusted LIBOR rate plus
3.00%, subject to upward adjustment in certain circumstances.
At of September 30, 1996, $22,500 of borrowings at varying interest
rates ranging from 8.5% to 8.81% and $8,302 of irrevocable letters of credit
were outstanding. BarTech had approximately $42,038 available under the Credit
Agreement based on the applicable borrowing base.
The Credit Agreement contains a number of covenants that, among other
things, will restrict the ability of BarTech and its subsidiaries to dispose of
assets, incur additional indebtedness, prepay other indebtedness or amend other
debt instruments, pay dividends, create liens on assets, enter into sale and
leaseback transactions, make investments, loans or advances, make acquisitions,
engage in mergers or consolidations, change the business conducted by BarTech
and its subsidiaries, make capital expenditures above certain levels or engage
in certain transactions with affiliates and otherwise restrict corporate
activities. In addition, under the Credit Agreement, BarTech will be required
to maintain a minimum Consolidated Interest Coverage Ratio (calculated net of
withdrawals from the Interest Escrow Account and fees). The Credit Agreement
also contains provisions that will prohibit any modification of the Indenture
in any manner adverse to the Lenders and that will limit BarTech's ability to
refinance the Senior Secured Notes without the consent of such Lenders.
7. FINANCING ARRANGEMENTS:
BarTech had the following long-term debt obligations outstanding as of
September 30:
1995 1996
Senior Secured Notes, $91,609, interest at
13-1/2% payable semi-annually on each
April 1 and October 1, beginning October
1, 1996, maturity date April 1, 2001. $ -- $91,609
Marine Midland Term Loan, interest at Prime
or LIBOR, monthly principal payments of
$93 beginning November 1, 1995, maturity
date October 1, 2004. 10,000 8,981
<PAGE>
Congress Term Loan I, interest at Prime plus
1.75%, or Eurodollar plus 3.50%, monthly
principal payments of $69 beginning July
1, 1996, maturity date June 1, 2001. 4,125 --
RDC Loan, interest at 7.75%, quarterly
principal payments of $18 beginning
October 1, 1997, maturity date July 1,
2004. 500 500
Economic Development Partnership ("EDP I"),
total commitment of $6,000, interest at
3%, quarterly principal payments of $118
beginning April 1, 1997, maturity date
October 1, 2009. 6,000 6,000
Sunny Day Fund I ("SDF I"), total commitment
of $7,000, interest at 3%, quarterly
principal payments of $137 beginning
April 1, 1997, maturity date October 1,
2009. 7,000 6,950
Community Development Block Grant Program
("CDBG"), total commitment of $700,
interest at 3%, quarterly principal
payments of $7 and $13 in 1995 and 1996,
respectively, beginning July 1, 1998,
maturity date July 1, 2010. 345 690
Economic Development Partnership ("EDP II"),
total commitment of $5,600, interest at
3%, quarterly principal payments of $27
beginning July 1, 1998 maturity date
July 1, 2010. 1,300 1,300
Sunny Day Fund II ("SDF II"), total
commitment of $6,000, interest at 3%,
quarterly principal payments of $429
beginning July 1, 1998, maturity date
October 1, 2001. 6,000 --
Housing and Urban Development 108 ("HUD")
Bond, total commitment of $8,500,
variable interest rates of 8.12% in 1995
and ranging from 6.59% to 8.15% in 1996,
eight payments ranging from $400 to
$1,450 beginning October 1, 1996,
maturity date September 26, 2003. 5,000 7,600
Pennsylvania Industrial Development
Authority Note ("PIDA I"), total
commitment of $2,000, interest at 2%,
quarterly principal and interest
payments of $39, maturity date October
1, 2009. 1,885 1,797
Pennsylvania Industrial Development
Authority Note ("PIDA II"), total
commitment of $2,000, interest at 3%,
quarterly principal and interest
payments of $41, maturity date March 1,
2011. -- 1,932
Bethlehem Subordinated Note, interest at 7%,
annual principal payments of $1,833
beginning October 1, 2000, maturity date
September 26, 2002. 5,500 5,500
<PAGE>
Business Infrastructure Development ("BID")
Program, total commitment of $2,650,
interest at 3% paid quarterly in
arrears, principal paid in quarterly
installments of $51 beginning July 1,
1998, maturity date July 1, 2010. -- 2,500
Economic Development Partnership ("EDP
III"), total commitment of $3,000,
interest at 3%, quarterly principal and
interest payments of $75, beginning July
1, 1998, maturity date October 1, 2009. -- 3,000
Industrial Revenue Bond ("IRB"), total
commitment of $3,600, interest rate is
calculated weekly, representing the
minimum rate required to sell the bonds
in a secondary market. Principal
payments of $300 beginning on the first
of December 2009 through 2012, payments
of $400 through maturity date, December
1, 2018. -- 3,600
Rokop Corporation, $7,200 original
principal, interest at 6.5%, maturity
beginning June 22, 1997, through
November 22, 2000. -- 4,400
47,655 146,359
Less-Original issue discount 990 7,085
46,665 139,274
Less-Current maturities 1,713 6,848
Total Long-Term Debt $44,952 $
132,426
BarTech incurred an extraordinary charge of $2,214 during the third
quarter of fiscal 1996, to reflect the recognition of premium and previously
deferred charges resulting from the repayment of debt as part of the
Recapitalization.
Senior Secured Notes
The Senior Secured Notes were issued on April 2, 1996, in the amount
of $91,609. Interest on the Notes will accrue at the rate of 13-1/2% per annum
and will be payable semi-annually on each April 1 and October 1, commencing
October 1, 1996, to the holders of record of Notes at the close of business on
March 15 and September 15 immediately preceding such interest payment date.
$18,516 of net proceeds was placed into a Restricted Interest Escrow Account
which will be used to make the interest payments due over the first 18 months.
The Senior Secured Notes are callable after three years, with the
exception noted below, at the following redemption price:
Year Percentage
1999 106.750%
2000 103.375
On or prior to April 1, 1999, BarTech may, at its option, redeem up to
an aggregate of 35% of the principal amount of Senior Secured Notes at a
<PAGE>
redemption price equal to 113-1/2% of the principal amount plus accrued and
unpaid interest, if any, to the date of redemption; provided that not less than
$55,000 aggregate principal amount of Senior Secured Notes would remain
outstanding immediately after giving effect to any such redemption.
The Senior Secured Notes are guaranteed (the "Guarantee") on a senior
basis, jointly and severally, by all of BarTech's existing subsidiaries. The
Senior Secured Notes and the Guarantees will initially be secured by liens on
(i) interests in certain real properties owned or leased by BarTech and the
Guarantors on the issue date, (ii) interests in machinery and equipment owned
on, or acquired after, the issue date by BarTech and the Guarantors located at
such real properties, (iii) all of the Common Stock of BarTech outstanding on
the issue date (which was pledged on a nonrecourse basis and will be subject to
dilution for issuances of Common Stock subsequent to the Offering and release
upon the occurrence of certain events), (iv) all of the outstanding capital
stock of BarTech's existing subsidiaries, (v) certain contract and intellectual
property rights of BarTech and the Guarantors, (vi) the Interest Escrow
Account, and (vii) proceeds of the foregoing.
The Indenture contains certain restrictive covenants including (i)
limitations on additional indebtedness, (ii) limitations on issuances and sales
of preferred stock of certain subsidiaries, (iii) limitations on restricted
payments, (iv) limitations on liens, (v) limitations on sale-leaseback
transactions, (vi) limitations on payment restrictions affecting the
subsidiaries, (vii) limitations on the disposition of proceeds from asset
sales, (viii) limitations on transactions with interested persons and (ix)
limitations on designations of Unrestricted Subsidiaries (as defined). In
addition, the Indenture limits the ability of BarTech and the Guarantors to
consolidate, merge or sell all or substantially all of their assets. These
covenants are subject to important exceptions and qualifications.
If BarTech has Excess Cash Flow for any fiscal year, BarTech will be
required, subject to certain exceptions and limitations (including its ability
to retain the first $10,000 of Excess Cash Flow), to use 75% of such Excess
Cash Flow to make an offer to purchase Senior Secured Notes at a price equal
to 100% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of purchase.
Issued in connection with the Senior Secured Notes are warrants which
entitle the holders thereof to acquire an aggregate of 91,609 shares of Class A
Common Stock, representing approximately 10% of BarTech's outstanding common
stock on a fully diluted basis immediately after giving effect to the
consummation of the Recapitalization and certain other agreed to issuances of
common stock.
The warrants can be exercised at a price of $0.01 per share of common
stock on or after July 1, 1996. The warrants expire on April 1, 2001. The
recording of these warrants created an original issue discount on the Senior
Secured Notes.
Economic Development Financing
In connection with the acquisition of the assets of the Bethlehem BRW
Division and Phase One of its modernization and expansion plan, BarTech entered
into loan agreements with lenders in Pennsylvania and New York to procure
financing for the transaction.
<PAGE>
BarTech entered into the Master Agreement with the Commonwealth of
Pennsylvania and various of its agencies (collectively, the "Commonwealth") on
July 18, 1994. Pursuant to the Master Agreement, BarTech entered into loan
agreements with the Commonwealth, through its Department of Commerce
("Commerce") and Department of Community Affairs. The total amount committed
to BarTech by the Commonwealth pursuant to the Master Agreement is $32,950.
The loans have been or will be made through the Sunny Day Fund ("SDF"), the
Johnstown Industrial Development Corporation ("JIDC"), the Pennsylvania
Industrial Development Authority ("PIDA"), the Business Infrastructure
Development Program ("BID"), the Economic Development Partnership ("EDP"), the
Community Development Block Grant Program ("CDBG") and the Enterprise Zone
Competitive Program ("ECP"). (The loans governed by the Master Agreement are
collectively referred to herein as the "Commonwealth Loans"). As of September
30, 1995 and 1996, approximately $22,530 and $18,669, respectively, in
aggregate principal amount of Commonwealth Loans was outstanding.
New York
JDA Guaranteed Marine Midland Term Loan--BarTech is party to a Loan
and Use Agreement, dated September 21, 1994, with Marine Midland Bank ("Marine
Midland") (the "Marine Midland Loan"), whereby Marine Midland loaned $10,000 to
BarTech for use in connection with the acquisition of Lackawanna, Pennsylvania
real estate from Bethlehem. The Marine Midland Loan is guaranteed by the New
York Job Development Authority ("JDA"). The Marine Midland Loan is payable in
equal monthly principal installments of $93 commencing on November 1, 1995,
together with interest thereon, and matures on March 1, 2003. Interest on the
Marine Midland Loan accrues at a rate based on a Prime Rate, or the LIBOR Rate,
as selected by BarTech, which rate was 6.81% and 6.56% as of September 30, 1995
and 1996, respectively.
RDC Loan--BarTech is party to a Loan Agreement with the Buffalo and
Erie County Regional Development Corporation ("RDC") providing for a loan in
the amount of $500 to be used by BarTech for working capital needs (the "RDC
Loan"). The RDC Loan bears interest at a rate of 7.75% per annum until July 1,
1999, and at an adjustable rate thereafter. The RDC Note matures on July 1,
2004. The RDC Loan is secured by a Security Agreement which grants RDC a
security interest in equipment, fixtures, inventory, accounts, chattel paper,
document, instruments and general intangibles.
Bethlehem Subordinated Loan Agreement
Pursuant to the terms of a Subordinated Loan Agreement, dated
September 21, 1994, Bethlehem loaned to BarTech $5,500 (the "Bethlehem
Loan"). The outstanding principal balance under the Bethlehem Loan is
payable in three equal installments on the first day of October in each
of 2000, 2001, and 2002 at a rate of 7% per annum and matures on
October 1, 2002. The Bethlehem Loan is secured by a subordinated security
interest in certain real and personal property of BarTech and any and all
proceeds therefrom. The outstanding principal amount under the Bethlehem
Loan has been reduced by an original issue discount.
<PAGE>
Rokop Financing Commitment
BarTech is party to an agreement dated July 19, 1995, with Rokop
Corporation (the "Rokop Agreement"), whereby Rokop has agreed to modify and
install for BarTech one five-strand continuous caster and perform the
construction related thereto, for a total contract price of $19,875. Rokop
agreed to make a financing commitment of $7,200 for this project. In
connection with the Rokop Agreement, BarTech executed in advance and delivered
three promissory notes. The Rokop notes were settled on November 25, 1996,
satisfying the contract with Rokop and taking advantage of the pre-payment
discount of approximately $2,000. No gain was recognized on the repayment as
the notes had been recorded at the discounted amount.
Principal installments required under the long-term debt obligations
are summarized as follows for the year ended September 30:
1997 $ 6,848
1998 3,882
1999 4,267
2000 4,382
2001 97,887
Thereafter 29,093
$146,359
8. PENSIONS:
B&L maintains pension plans covering substantially all hourly
employees of the Harvey, Illinois, and Media, Ohio, plants. Employees
of the Batavia, Illinois and Cartersville, Georgia, plants are not covered.
Benefits are based on years of service and employee's age at termination.
CDSC maintains pension plans covering substantially all employees. Benefits
for the salaried employees' plan are based on an average salary for the five
most recent years prior to retirement. Benefits for the bargaining unit
employees' plan are based on years of service. BarTech's policy is to fund
pension cost in accordance with the requirements of the Employee Retirement
Income Security Act of 1974.
The components of the net periodic pension cost for the period after
April 2, 1996 are summarized as follows:
1996
------------------------
Service cost $ 186
Interest cost on projected benefit obligations 614
Actual return on plan assets (896)
Net amortization (deferral) 188
Net periodic pension cost $ 92
The following table set forth the plans' funded status and amount of
prepaid (accrued) pension cost recognized in BarTech's consolidated balance
sheet at September 30, 1996:
1996
<PAGE>
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
Accumulated benefit obligation
Vested $14,242 $825
Nonvested 71 99
Total 14,313 924
Effect of projected future salary increases 820 23
Projected benefit obligation 15,133 947
Plan assets, at fair market value 17,449 919
Plan assets in excess of (less than) projected
benefit obligation 2,316 (28)
Unrecognized actuarial and investment losses (299) (100)
Prepaid (accrued) pension cost recognized in
the consolidated balance sheet $ 2,017 $
(128)
For the B&L plans, the weighted average assumed discount rate used in
determining the actuarial present value of projected benefit obligations was
7.75% in 1996 and the long-term anticipated rate of return was 8.5% in 1996.
For the CDSC plans, the weighted average assumed discount rate was 8.5% in 1996
and the long-term anticipated rate of return was 8.5% in 1996. The assumed
rate of increase in future compensation levels for determining the actuarial
present value of projected benefit obligation for CDSC's salaried employees'
plan was 6% in 1996. At September 30, 1996, the plan assets for all plans were
invested in units of various trust funds administered by a trustee.
In addition, BarTech and its subsidiaries maintain various defined
contribution plans, including salary savings plans, profit sharing plans and a
supplemental incentive compensation plan. Expense related to these plans was
approximately $56 during 1996.
9. OTHER POST EMPLOYMENT BENEFITS:
B&L sponsors a post employment plan for health care and life insurance
that covers most full-time employees. The plan pays stated percentages of most
necessary medical expenses incurred by retirees, after subtracting payments by
Medicare or other providers and after a stated deductible has been met.
Participants become eligible for benefits if they retire from B&L after
reaching age 55 with 10 or more years of service.
BarTech follows the provisions of SFAS No. 106, "Employers' Accounting
for Post Employment Benefits Other Than Pensions," which requires that the
expected cost of post employment benefits be charged to expense during the
years that the employees render service.
The following table set forth the funded status of the plan,
reconciled to the accrued post-employment benefit obligation recognized in the
Company's consolidated balance sheet as of September 30, 1996:
<PAGE>
1996
Accumulated post-retirement benefit obligation
("APBO") -
Retirees $ 1,802
Fully eligible active plan participants 2,049
Other active plan participants 827
Accrued post employment benefit obligation $ 4,678
Net periodic post-employment benefit cost for the period after April
2, 1996 included the following components:
Service cost of benefit earned $ 66
Interest of APBO 184
Net periodic post-employment benefit cost $ 250
For measurement purposes, an 11% annual rate of increase in the per
capital cost of covered health care claims was assumed for 1997; the rate was
assumed to decrease by 1% per year to 6%, and remain at that level thereafter.
To illustrate the health care cost trend on amounts reported, increasing the
assumed health care cost trend rates by one percentage point in each year would
increase the accumulated post-employment benefit obligation as of September 30,
1996, by approximately $600 and the aggregate of the service and interest cost
components of net post-employment health care cost for the six month period
then ended by $37. The weighted average discount rate used in determining the
accumulated post-employment benefit obligation was 7.75%.
10. INCOME TAXES:
BarTech adheres to the provisions of SFAS No. 109, "Accounting for
Income Taxes." SFAS No. 109 requires financial statements to reflect deferred
income taxes for the future tax consequences of events recognized in different
years for financial reporting and tax reporting purposes.
The components of deferred income taxes as of September 30, 1995 and 1996, are
as follows:
Assets (Liabilities) 1995 1996
Net operating loss carryforwards . . . . . . $ 7,751 $16,822
Post-employment benefits . . . . . . . . . . - 1,824
Property basis differences . . . . . . . . . 3,946 (2,843)
Other, net . . . . . . . . . . . . . . . . . - 153
Less-Valuation Allowance . . . . . . . . . . (11,697) (19,142)
Net deferred income taxes . . . . . . . . . . $ - $(3,186)
The net deferred income tax balance is recorded in the balance sheet
as prepaid expenses of $531, other assets of $1,214 offset by other-long term
liabilities of $4,931.
As of September 30, 1996, BarTech had available for federal and state
income tax purposes, net operating loss carryforwards from 1996 losses of
<PAGE>
approximately $24,000 expiring in 2011. In addition, BarTech has prior year
operating loss carryforwards which were limited as a result of the
Recapitalization. Such amount is estimated to be limited to approximately
$1,100 annually for the next fourteen years.
The realization of the above tax benefits depends upon BarTech's
ability to generate future taxable income. BarTech has established a valuation
allowance to offset this deferred tax benefit.
The fiscal 1996 income tax provision consists of currently payable
foreign income taxes owed by CDSC, BarTech recorded a valuation allowance to
offset the tax benefits of current year losses incurred by its domestic
operations.
11. COMMON AND PREFERRED STOCK:
As part of the Recapitalization, the authorized capital stock of
BarTech was amended and now consists of 1,000,000 shares of Class A Common
Stock, 600,000 shares of Special Class B Common Stock and 5,000 shares of
Series A Preferred Stock and one share of Series B Preferred Stock, each with a
par value of $0.001 per share. The Special Class B Common Stock allows the
holders to designate directors who will hold 50% of the voting power of the
board of directors. The Special Class B Common Stock will also have certain
rights in the event of a liquidation, dissolution or winding up of BarTech.
In connection with the Recapitalization, the 66,600 shares of existing
common stock of BarTech were converted into 196,410 shares of Class A Common
Stock. As a result, the number of shares outstanding prior to the
Recapitalization and earnings per share amounts were adjusted to reflect this
reclassification of shares.
On September 26, 1994, BarTech issued 1,100 shares of Series A
cumulative Preferred Stock with a $0.001 par value to Bethlehem in connection
with the Contribution Agreement. The shares were issued at $5,000 per share or
$5,500 in total.
In each year, the Series A Preferred Stock is entitled to receive,
whether or not declared by the Board of Directors, cash dividends equal to $350
per share, which dividends are cumulative. In the event BarTech is liquidated,
the holders of Series A Preferred Stock are entitled to a liquidation
preference, prior to any payment on the Common Stock, of $5,000 per share plus
any unpaid dividends. BarTech is required to redeem all shares of Series A
Preferred Stock on the sixth anniversary of the date of original issuance of
such shares (September 26, 2000) for a total of $5,000 per share plus all
accrued or declared but unpaid dividends, and BarTech may, at its option,
redeem shares of Series A Preferred Stock at an earlier date at the mandatory
redemption price, plus accrued but unpaid dividends. Holders of Series A
Preferred Stock do not generally vote on stockholders' matters. However, the
consent or vote of 66-2/3% in voting power of the Series A Preferred Stock is
required on certain matters, including the issuance of senior equity
securities. The shares of Series A Preferred Stock are only transferable by a
holder of Series A Preferred Stock to an affiliate of such holder or upon the
prior written consent of BarTech. Upon redemption or repurchase by BarTech,
shares of Series A Preferred Stock will not be reissued and will be canceled.
<PAGE>
One share of Series B Preferred Stock was issued to the union
representing BarTech's Johnstown and Lackawanna facilities. The Series B
Preferred Stock is not entitled to receive dividends and is nonredeemable. In
the event that BarTech is liquidated, the holder of Series B Preferred Stock is
to be entitled to a liquidation preference, after payment to the holders of the
Series A Preferred Stock and prior to any payment on the Common Stock, of $100
per share. The Series B Preferred Stock does not generally vote on stockholder
matters; however, the holder of Series B Preferred Stock has the right to
nominate and elect two directors to the Board of Directors, and to remove such
directors as provided in the Bylaws.
12. STOCK PLANS:
As part of its collective bargaining agreement, BarTech agreed to
grant its employees a minimum of 20% equity interest in BarTech's common stock
through one or more employee stock ownership plans ("ESOP") (subject to
dilution for events occurring subsequent to February 1994). Following the
Recapitalization, the ESOP's equity interest in BarTech's common stock has been
reduced to 5.4%, on a fully diluted basis. The allocation methodology and
timing has not yet been determined by the parties. Distributions will commence
within a specified period of time after the end of the year in which a
participant's employment terminates. The ESOP has not been established as of
September 30, 1996.
In the event that no public market exists for its common stock,
BarTech will be obligated to repurchase the shares distributed to an employee
under the ESOPs. The price of the shares shall be the price reflected in the
most recent applicable valuation.
Under Equity Award Agreements with certain executive employees,
BarTech is committed to award common stock grants. Following the
Recapitalization, the common stock grants to certain executive employees of
BarTech represent approximately 1.2%, in the aggregate, of BarTech common stock,
on a fully diluted basis. The value of these awards on the date of commitment
was recorded as deferred compensation and was amortized over the terms of the
employment agreements.
During fiscal 1996, two executives were granted non-qualified options
at a price of $55.89 per share, which approximates fair market value at the
date of grant.
Severance agreements were negotiated with certain former BarTech
executives during fiscal 1996. A $2,900 charge is included in Selling, General
and Administrative Expense for the year ended September 30, 1996 relating to
such agreements.
13. RELATED PARTY TRANSACTIONS:
On September 21, 1994, BarTech entered a management agreement with
Johnstown Advisors Corp. ("Advisors"). Advisors is owned by the principals of
BRW Partners Inc., the general partner of BRW Steel Holdings LP, which owns
approximately 21.6% of the common stock of BarTech, on a fully diluted basis.
Under this agreement, Advisors provided certain management and financial
services relating to the transition, modernization, and operations of BarTech.
Advisors' management fee for its services were $500 per year plus out-of-pocket
<PAGE>
expenses. Pursuant to the Recapitalization, this agreement was terminated
BarTech paid $500 and $0 to Advisors for the years ended September 30, 1995 and
1996, respectively.
14. COMMITMENTS AND CONTINGENCIES
BarTech, in the ordinary course of business, is the subject of or
party to various pending or threatened legal and environmental actions. BarTech
believes that any ultimate liability resulting from these actions will not have
a material adverse affect on its financial position or results of operations.
BarTech uses certain lease arrangements to supplement its financing
activities. Rental expense under operating leases was $0 and $246 for the years
ended September 30, 1995 and 1996, respectively. The minimum future lease
payments under noncancellable operating leases at September 30, 1996 total
$561.
15. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS AND SIGNIFICANT
GROUP CONCENTRATIONS OF CREDIT RISK
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:
Cash and cash equivalents
The carrying amount approximates fair value because of the short
maturity of those investments.
Redeemable Preferred Stock
It is not practicable to estimate the fair value of this preferred
stock, which is not publicly traded.
Long-Term Debt
The fair value of BarTech's long-term debt obligations are estimated
based upon quoted market prices. For certain debt obligations involving fixed
interest rates, it is not practicable to determine the fair values of these
financial instruments.
The estimated fair values of BarTech's financial instruments are as
follows as of September 30, 1995 and 1996, respectively:
<PAGE>
1995 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash and Cash equivalents . . $ 1,650 $ 1,650 $ 5,523 $ 5,523
Long-term debt for which it
is:
Practicable to estimate
fair value . . . . . . . 24,135 24,135 107,105 107,105
Not practicable to
estimate fair value . . . 22,530 -- 323,169 --
Redeemable preferred stock . 5,550 -- 5,500 --
16. SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
1996
First Second Third Fourth
Quarter Quarter Quarter Quarter
Net sales . . . . . . . . . . . $ -- $ 588 $39,368 $37,207
Gross profit . . . . . . . . . (4,801) (2,722) (1,642) (5,667)
Operating loss . . . . . . . . (4,801) (4,853) (6,387) (15,419)
Net loss before extraordinary
loss . . . . . . . . . . . . . (5,516) (5,999) (10,832) (19,073)
Extraordinary loss . . . . . . -- -- 2,214 --
Net loss . . . . . . . . . . . (5,516) (5,999) (13,046) (19,073)
Net loss per common share:
Prior to extraordinary loss . . (28.57) (31.03) (18.24) (25.88)
Extraordinary loss . . . . . . -- -- 3.70 --
Net loss per share of common
stock . . . . . . . . . . . . . (28.57) (31.03) (21.94) (25.88)
1995
Net sales . . . . . . . . . . . $ -- $ -- $ -- $ --
Gross profit . . . . . . . . . -- -- -- --
Operating loss . . . . . . . . (2,995) (2,546) (2,343) (2,774)
Net loss . . . . . . . . . . . (3,410) (3,241) (2,906) (3,275)
Net loss per share of common
stock . . . . . . . . . . . . . (17.85) (16.99) (15.28) (17.16)
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
EXECUTIVE OFFICERS AND DIRECTORY
The Company's executive officers and directors as of December 27, 1996
are as follows:
Name Age Position
Thomas N. Tyrrell . . . . . . . 51 President, Chief Executive Officer and
Director of BarTech
Robert L. Meyer . . . . . . . . 47 Executive Vice President and Chief
Operating Officer of BarTech
John G. Asimou . . . . . . . . 51 Executive Vice President, Quality &
Development
Ben L. Bishop, Jr. . . . . . . 49 Vice President - Commercial
Frederick L. Deichert . . . . . 39 Vice President - Finance and Chief
Financial Officer
Anthony J. Romanovich . . . . . 56 Senior Vice President of B&L
Kenneth R. Brotman(a)(b) . . . 31 Secretary and Director of BarTech
David A. Stockman . . . . . . . 48 Class B Director of BarTech
Anthony Grillo . . . . . . . . 41 Class B Director of BarTech
Robert B. McKeon(a)(b) . . . . 41 Chairman and Director of BarTech
Thomas J. Campbell(a)(b) . . . 37 Director of BarTech
Edward N. Ney(a) . . . . . . . 70 Director of BarTech
Harold A. Poling . . . . . . . 70 Director of BarTech
Daniel R. DeVos(b) . . . . . . 53 Director of BarTech
Anthony Rainaldi . . . . . . . 71 Director of BarTech
Buddy W. Davis(b) . . . . . . . 65 Director of BarTech
(a) Member of Compensation Committee.
(b) Member of Audit, Budget, and Finance Committees.
Thomas N. Tyrrell has served as President and Chief Executive Officer
of BarTech since August 26, 1996, and has served as a director of BarTech since
December 11, 1996. From 1993 to 1996, Mr. Tyrrell served as Vice Chairman and
Executive Vice President-Commercial of Birmingham Steel Corporation, a producer
of steel bar, rod and wire. Mr. Tyrrell was the President and CEO of American
Steel & Wire Corporation from 1986 to 1993 a producer of steel bar, rod and
wire, when it was acquired by Birmingham Steel Corporation. From 1978 to 1986,
Mr. Tyrrell was Vice President - Commercial of Raritan River Steel Company, a
producer of steel rod. From 1967 to 1978, Mr. Tyrrell was employed by Bethlehem
Steel Corporation, a fully integrated steel producer, in various sales and
product development capacities.
John G. Asimou has served as Executive Vice President of Technology &
Development of BarTech since August 26, 1996. From 1993 to 1996, Mr. Asimou was
Vice President - Quality & Technology for Birmingham Steel Corporation. From
1986 to 1993, Mr. Asimou served as General Manager - Quality and Technology of
American Steel & Wire Corporation. From 1984 to 1986, Mr. Asimou was a
Metallurgical Service Engineer for Bethlehem Steel Corporation. From 1968 to
1984, Mr. Asimou served in various assignments for United States Steel
Corporation, a fully integrated steel producer.
<PAGE>
Robert L. Meyer has served as Executive Vice President & Chief
Operating Officer of BarTech since October 24, 1996. From 1994 to 1996, Mr.
Meyer was President and Chief Operating Officer of Chase Brass & Copper, Inc.,
a producer of copper alloy rod. From 1993 to 1995, Mr. Meyer was Vice President
& General Manager of the Precious Metals Products Division of Handy & Harmon,
Inc., a manufacturer of metal products including automotive parts and wire and
tubing products. From 1986 to 1993, Mr. Meyer was employed by American Steel &
Wire Corporation as general manager of the company's rod mill and, from 1988 to
1993, as Vice President of Operations. From 1970-1986, Mr. Meyer was employed
by United States Steel Corporation in various supervisory capacities.
Ben L. Bishop, Jr. has served as Vice President - Commercial of Bar-
Tech since December 16, 1996. From 1993 to 1996, Mr. Bishop was Vice President
of Sales and Marketing for ARMCO, Inc., a fully integrated steel producer. From
1988 to 1992, Mr. Bishop was Chief Commercial Officer of Cyclops Industries'
Empire Detroit Steel division, until its acquisition by ARMCO, Inc. From 1972 -
1988, Mr. Bishop held a variety of supervisory positions with Bethlehem Steel
Corporation, including Manager of Sales & Marketing - Rod Products from 1986 to
1988.
Frederick L. Deichert has served as Vice President - Finance and Chief
Financial Officer since December 16, 1996. From September, 1996 to December,
1996, Mr. Deichert was a principal with Radel, Smith and Associates, a
Northwest Ohio public accounting firm. From 1990 to September 1996, Mr.
Deichert was Vice President - Finance and Chief Financial Officer of Chase
Brass and Copper Company, Inc., and from 1990 to 1996, as Vice President and
Secretary of Chase Brass Industries, Inc. From 1978 to 1990, Mr. Deichert was
employed by Price Waterhouse in various capacities, including Senior Manager
from 1987 to 1990.
Anthony J. Romanovich became Senior Vice President of B&L and BLSC in
October, 1989. Mr. Romanovich served as Vice President, Commercial of B&L from
November, 1988 to October, 1989. From October, 1984 through September, 1989,
Mr. Romanovich served as Vice President, Commercial, of BLSC. Since October,
1984, Mr. Romanovich has served as a director of BLSC, and he has been a
director of B&L since November, 1988.
Kenneth R. Brotman has served as Secretary and a director of BarTech
since September, 1993. He has served as a partner of Veritas Capital Inc., a
New York-based merchant banking and private equity investment firm, since its
formation in 1992. Prior to that time, he was an associate at Bain Capital, a
Boston-based leveraged buy-out firm and was a principal member of Wasserstein
Perella Management Partners, Inc. a New York-based merchant banking fund, from
1988 to 1992. Mr. Brotman is also a director of HITCO Technologies Inc. and
Colorado West Transportation Co.
David A. Stockman was elected as a Class B Director of BarTech upon
the consummation of the Recapitalization. He is a Senior Managing Director of
The Blackstone Group L.P., with which he has been associated since 1988. Mr.
Stockman is also a director of UCAR International Inc. and Co-Chairman of the
board of directors of Collins & Aikman Corporation.
Anthony Grillo was elected as a Class B Director of BarTech on
December 11, 1996. He is a Senior Managing Director of The Blackstone Group
L.P., with which he has been associated since 1991. Mr. Grillo is also a
director of Littlefuse, Inc., Tracor, Inc., KDI-D/H Holdings, Inc., Joule,
Inc., General Aquatics, Inc., and People's Choice TV Corp.
<PAGE>
Robert B. McKeon has served as Chairman and director of BarTech since
September, 1993. He has served as President of Veritas Capital Inc., a New
York-based merchant banking and private equity investment firm, since its
formation in 1992. From 1990 to 1992, Mr. McKeon was Chairman and from 1988 to
1990 was President of Wasserstein Perella Management Partners, Inc., a New
York-based merchant banking fund. Mr. McKeon was formerly Chairman of
Maybelline Inc. from 1990 to 1992 and Co-Chairman and Co-Chief Executive
Officer of Collins and Aikman Inc. from 1989 to 1992. Mr. McKeon also serves as
Chairman of the Connecticut Health and Educational Facilities Authority,
Chairman of HITCO Technologies Inc., and Chairman of H. Koch & Sons Inc.
Thomas J. Campbell has served as a director of BarTech since September,
1993. He has served as a partner and is a director of Veritas Capital Inc., a
New York-based merchant banking and private equity investment firm, since its
formation in 1992. From 1988 to 1992, Mr. Campbell was Vice President of
Wasserstein Perella Management Partners, Inc., a New York-based merchant
banking fund. He also served as a director of Collins & Aikman Inc. from 1988
to 1992 and as a director of Maybelline Inc. from 1990 to 1992. Mr. Campbell is
also a director of HITCO Technologies Inc.
Edward N. Ney has served as a director of BarTech since December, 1994.
He has served as the Chairman of the Board of Advisors of Burson-Marsteller
since September 1, 1992 and on August 1, 1995 became the chairman of Marsteller
Advertising. Prior to that time, Mr. Ney was U.S. ambassador to Canada from
1989 to 1992. Mr. Ney is also director of Mattel Inc., Barrack Gold and Power
Financial Corporation.
Harold A. Poling has served as a director of BarTech since December,
1994. He served as Chairman and Chief Executive Officer of Ford Motor Company
from March, 1990 until October, 1993, when he retired. Mr. Poling is also a
director of Chicago and North Western Transportation Co., Flint Ink Corp.,
Kellogg Company, LTV Steel Company, Inc. and Shell Oil Company.
Daniel R. DeVos has served as a director of BarTech since December,
1994. He has served as the President and Chief Executive Officer of Concurrent
Technologies Corporation since 1992. Mr. DeVos was President and Chief
Executive Officer of Metalworking Technology, Inc. and National Defense
Environmental Corporation from 1990 until such corporations were merged into
Concurrent Technologies Corporation in 1992. He serves as the director
representative of the Commonwealth of Pennsylvania. Mr. DeVos is also a
director of United States National Bank, Johnstown, Pennsylvania.
Anthony Rainaldi has served as a director of BarTech since April, 1995.
From 1983 to 1994, Mr. Rainaldi was a District Director and Member of the
International Executive Board of the USWA. He serves as a director
representative of the USWA. Mr. Rainaldi is also a director of Sharpsville
Quality Products.
Buddy W. Davis has served as a director of BarTech since December,
1994. Mr. Davis was a District Director of the USWA from 1974 to April, 1993,
when he retired. He serves as a director representative of the USWA.
Item 11. Executive Compensation
Summary Compensation Table
<PAGE>
The following table sets forth for the fiscal years ended September 30,
1996 and 1995 the compensation paid by the Company to its Chief Executive
Officer and each of its four most highly compensated executive officers.
<TABLE>
<CAPTION>
All Other
Name & Principal Position Year Salary ($) Bonus ($) Compensation ($)
<S> <C> <C> <C> <C>
Thomas N. Tyrrell 1996 $35,950 $300,483 <F1>
President & CEO 1995 n/a n/a n/a
James R. Powers 1996 $275,000 $105,000 $2,797 <F2>
Former President & CEO 1995 $300,000 $150,000 $303,051 <F2>
John G. Asimou 1996 $18,585 $135,124 <F1>
Vice President - Technology & Development 1995 n/a n/a n/a
Denny Bozic 1996 $225,000 $78,750 $3,051 <F2>
Former Executive Vice President & COO 1995 $225,000 $112,500 $228,051 <F2>
Birchel S. Brown 1996 $180,000 $3,051 <F2>
Former Senior Vice President, Operations & 1995 $180,000 $75,000 $58,051 <F2>
Quality
Anthony J. Romanovich 1996 $145,000 $10,512 <F3>
Senior Vice President, B&L and BLSC 1995 $145,000 $63,800 $14,257 <F3>
Richard B. Webb 1996 $122,750 $959 <F2>
Former Vice President, Sales & Marketing 1995 $28,750 $20,000 $27,385 <F2>
</TABLE>
[FN]
<F1> The amounts set forth in this column for Messrs. Tyrrell and Asimou
reflect amounts of annual premiums paid by BarTech under group term
life insurance for such officers and one-time signing bonuses paid
to such officers. The life insurance carries a maximum value of two
times base salary for each officer and has no cash surrender value.
Premiums paid by BarTech in fiscal 1996 for Messrs. Tyrrell and Asimou
were $483 and $124, respectively. Messrs. Tyrrell and Asimou received
signing bonuses of $300,000 and $135,000, respectively in September 1996.
<F2> The amounts set forth in this column for Messrs. Powers, Bozic, Brown and
Webb reflect amounts of annual premiums paid by BarTech under group term
life insurance for such officers and one-time signing bonuses paid to such
officers. The life insurance carries a value computed as the lesser of (i)
two times base salary or, (ii) $300,000, for each officer and has no cash
surrender value. Premiums paid by BarTech in fiscal 1996 were $2,797 for
Mr. Powers, $3,051 for each of Messrs. Bozic and Powers and $2,385 for
Mr. Webb. Premiums paid in fiscal 1995 were $3,051 for each of Messrs.
Powers, Bozic and Brown and $959 for Mr. Webb. Mr. Powers received a
signing bonus of $300,000 which was paid in October 1994, Mr. Bozic's
signing bonus of $225,000 was paid in November 1994. Mr. Brown's signing
bonus of $55,000 was paid in two installments in November 1994 and
April 1995. Mr. Webb's signing bonus of $25,000 was paid in July 1995.
<F3> The amounts set forth in this column for Mr. Romanovich pertain to the
following: (i) Split Dollar Life Insurance Program. In 1988, BLSC entered
into a Split Dollar Life Insurance Agreement with Mr. Parker and certain
other executive officers and key employees of BLSC whereby the premiums on
the corresponding insurance policies are paid by BLSC. The amounts set
forth under this column for fiscal years 1996 and 1995 are $9,312 and
13,057. See "--Other Employee Benefit Programs--Split Dollar Life
Insurance Program." (ii) Salary Savings Plan. B&L maintains a salary
savings (401(k)) plan for all BLSC employees who are not covered by a
collective bargaining agreement that serves as the pension plan for such
employees. In fiscal years 1996 and 1995, B&L contributed $200 per
participant plus 60% of the first $1,000 of a participant's contribution
and 40% of the second $1,000 of the participant's contribution. During
fiscal years 1996 and 1995, the Company contributed an aggregate of $1,200
each year to the account of Mr. Romanovich pursuant to this plan.
Those amounts are included under this column.
Employment Agreements
Messrs. Tyrrell, Meyer, Asimou, Bishop and Deichert have entered into
employment agreements with BarTech (the "Employment Agreements"), each of which
contains substantially similar terms and conditions except with respect to
salary provisions. The Employment Agreements will continue until September 30,
1999, and will be renewed for successive one year periods thereafter unless
sooner terminated by Messrs. Tyrrell, Meyer or Asimou, as applicable, or
BarTech. The base salaries of Messrs. Tyrrell, Meyer, Asimou, Bishop and
Deichert currently in effect under these Employment Agreements are $350,000,
$195,000, $180,000, $165,000 and $145,000, respectively, and each Employment
Agreement provides for an annual increase based on performance. Messrs.
Tyrrell, Meyer and Asimou, Bishop and Deichert also are entitled to receive an
annual bonus, which shall be at least $250,000, $150,000, $130,000, $90,000 and
$85,000, respectively, if certain financial targets are achieved by BarTech,
and will be no less than $100,000, $90,000, $70,000, $55,000 and $55,000
respectively, for the fiscal years ending September 30, 1997 and September 30,
1998. In addition, each of the above mentioned executives are entitled to
receive grants of nonqualified options to purchase the common stock of BarTech,
as well as certain other benefits as provided in their respective Employment
Agreements.
Mr. Powers' employment with BarTech terminated on August 30, 1996.
Pursuant to a letter agreement dated September 3, 1996, Mr. Powers received
lump-sum severance and bonus payments in the amount of $75,000 and $105,000,
respectively. Mr. Powers' $300,000 annual base salary and medical benefits will
continue through October 1, 1997, he will be reimbursed for reasonable
relocation costs, and he received 1,091 shares of common stock of BarTech.
Mr. Bozic entered into an employment agreement with BarTech, which
continued until November 1, 1996. Mr. Bozic resigned from his position as
Executive Vice President and Chief Operating Officer of BarTech on November 1,
1996, and presently is serving as Senior Vice President - Special Projects with
remuneration of $15,000 per month. Pursuant to a severance payment provision in
Mr. Bozic's former employment agreement, Mr. Bozic is to be paid $303,750 over
a period of twelve months, which payment is being reduced in the amount of
$6,667 for each month that Mr. Bozic is employed as the Senior Vice President -
<PAGE>
Special Projects. Further, under the severance terms, Mr. Bozic will receive
medical benefits over the twelve month period, and will be reimbursed for
reasonable relocation costs.
Mr. Romanovich is a party to an employment agreement with B&L (the B&L
Employment Agreement). The initial term of the B&L Employment Agreement
continued until December 31, 1994, at which time his employment was
automatically continued until such time as it may be terminated in accordance
with the terms of his B&L Employment Agreement. The B&L Employment Agreement
included, among other things, customary confidentiality and non-compete
provisions and certain severance payment provisions which become applicable
upon a "Change in Control," as defined in the B&L Employment Agreement.
The consummation of the B&L Acquisition constituted a Change in
Control under the B&L Employment Agreement. Pursuant to the B&L Employment
Agreement and certain letter agreements, upon the Change in Control,
Mr. Romanovich was entitled to terminate his employment on or before January
3, 1997 and, upon such termination, receive severance payments in an amount
equal to three times his then annual compensation in one lump sum. Based on
Mr. Romanovich's current annual base salary, the aggregate amount of such
payments is currently estimated (without giving effect to any reduction
pursuant to Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code")) to be approximately $435,000 plus, in each case, the highest
amount that Mr. Romanovich would be entitled to receive as an annual bonus
payment under B&L's Supplemental Incentive Compensation Plan. Notwithstanding
such provisions, the employment agreement provides that in no event shall
Mr. Romanovich, as a consequence of a termination upon a change in control, be
entitled to receive amounts of compensation in excess of certain limits
relating to Section 280G.
Mr. Romanovich has terminated his employment with BarTech effective
December 31, 1997, and entered into a consulting agreement with BarTech for a
twelve month term commencing January 1, 1997 (the Initial Term) and renewable
quarterly thereafter upon the mutual agreement of the parties. During the first
four months of the Initial Term, Mr, Romanovich will receive monthly payments
of $12,500; thereafter, he will receive $1,000 per month and $500 per day for
services rendered and approved by BarTech. Further, under the terms of the
agreement, Mr. Romanovich will also receive medical, life insurance and long
term disability insurance benefits equal to those offered under existing group
plans.
Mr. Webb's employment with BarTech terminated on September 30, 1996.
Pursuant to a letter agreement, Mr. Webb received a lump-sum severance payment
in the amount of $72,000 and his medical benefits will continue through March
31, 1997.
Directors' Compensation and Consulting Arrangements
For fiscal 1996, each non-employee director of BarTech received, as
compensation for serving on the board of directors of BarTech, $25,000, plus
reimbursement of reasonable out-of-pocket expenses.
Other Employee Benefit Programs
Profit Sharing Program. In 1987, B&L established a Profit Sharing
Program (the "B&L Profit Sharing Program") for all non-bargaining unit
employees. The terms of the B&L Profit Sharing Program are determined on an
annual basis by the board of directors of B&L, which administers the B&L Profit
<PAGE>
Sharing Program. Provisions under this program in fiscal years 1996, 1995 and
1994, respectively for Mr. Romanovich were $0, $16,675, and $15,008.
Salary Savings Plan. B&L maintains a salary savings plan for all BLSC
employees who are not covered by a collective bargaining agreement. The salary
savings plan is a 401(k) plan that serves as the pension plan for such B&L
employees. During fiscal 1995 and fiscal 1994, B&L contributed $200 per
participant plus 60% of the first $1,000 of a participant's contribution and
40% of the second $1,000 of the participant's contribution. During fiscal 1993,
B&L contributed $100 per participant plus 50% of the first $1,000 of a
participant's contribution and 25% of the second $1,000 of a participant's
contribution. During fiscal years 1996, 1995 and 1994, respectively, B&L
contributed an aggregate of $1,200 in each year to the account of Mr.
Romanovich.
Split-Dollar Life Insurance Program. In 1988, BLSC entered into a
Split Dollar Life Insurance Agreement with Mr. Romanovich and certain other
officers and key employees of BLSC whereby the premiums on the corresponding
insurance policies are paid by BLSC. Under the agreement, such persons have
each executed a collateral assignment of their policies. BLSC, as assignee,
is entitled to recover the aggregate premium payments it made through any
combination of (i) borrowing against the policies, (ii) the cash surrender
value of the policies if the policies should be surrendered, and (iii)
payment in the event of the insured's death. In the summary compensation
table set forth above, amounts in the "All Other Compensation" column include
totals of (i) the amount of the total annual premium paid by B&L for such
policies representing the economic benefit to the officer for term insurance
death benefit coverage (reportable as taxable income) and (ii) the projected
actuarial value of the benefit provided by the remainder of the premium paid by
B&L using an interest-free term loan approach to measure the benefit received
annually by the officer for the use of the money B&L provides in paying the
premium. The amounts included in fiscal years 1996, 1995 and 1994, respectively,
Mr. Romanovich were $9,312, $13,057, and $14,939.
Supplemental Incentive Compensation Plan. Approximately 28 key
management employees of B&L, including all executive officers of B&L,
participate in B&L's Supplemental Incentive Compensation Plan (the "Incentive
Plan"). The Incentive Plan provides for payment of cash awards depending upon,
among other factors, the degree to which certain specified income levels have
been attained during B&L's fiscal year. Payments made pursuant to the Incentive
Plan in fiscal years 1996, 1995 and 1994, for Mr. Romanovich were $0, $41,688,
and $37,519.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The table below sets forth certain information concerning the
beneficial ownership of BarTech Common Stock by (i) all persons known by
BarTech to own beneficially more than 5% of BarTech Common Stock, (ii) each
director, (iii) each of the named executive officers and (iv) all directors and
named executive officers as a group. Shares beneficially owned by the
Blackstone entities consist entirely of Class B Common Stock. All other shares
of Common Stock consist of shares of Class A Common Stock.
Beneficial Owner Shares Ownership %
Blackstone Management Associates II L.L. C. (a) 536,829 59.2%
(b) (c)
BRW Partners Inc. (a) (d) (e) 196,410 21.6%
<PAGE>
ESOP (f) 49,102 5.4%
Thomas N. Tyrrell (g) 0 0.0%
John G. Asimou (g) 0 0.0%
James R. Powers 3,273 0.4%
Denny Bozic 4,886 0.5%
Birchel S. Brown 2,443 0.3%
Anthony J. Romanovich 0 0.0%
David A. Stockman (c) 0 0.0%
Anthony Grillo (c) 0 0.0%
Kenneth R. Brotman (e) 196,410 21.6%
Robert B. McKeon (e) 196,410 21.6%
Thomas J. Campbell (e) 196,410 21.6%
Edward N. Ney 0 0.0%
Harold A. Poling 0 0.0%
Daniel R. DeVos 0 0.0%
Anthony Rainaldi 0 0.0%
Buddy W. Davis 0 0.0%
All directors and named executive officers as a 207,012 22.8%
group (h)
(a) The Blackstone Investment was made indirectly through BRW Steel Holdings
L.P., a Delaware limited partnership initially organized by persons
associated with Veritas in connection with the acquisition of the BRW
Assets from Bethlehem ("BRWSH"), and BRW Steel Offshore Holdings L.P., a
Delaware limited partnership newly organized by Blackstone and persons
associated with Veritas in connection with the Recapitalization ("Offshore
BRWSH"; together with BRWSH, the "Partnerships"), whereby the Partnerships
became the direct holders of all newly issued shares of Class B Common
Stock and all shares of Class A Common Stock previously held solely by
BRWSH. After the Blackstone Investment, both Blackstone and BRW Partners,
Inc. ("BRWPI"), a corporation controlled by principals of Veritas, hold
partnership interests in each Partnership. The limited partnership
agreement of BRWSH was amended to provide, and the limited partnership
agreement of Offshore BRWSH provides, for certain sharing arrangements
between Blackstone, on the one hand, and BRWPI and the current limited
partners of BRWSH, on the other hand, with respect to proceeds from the
sale of the Common Stock held by such Partnerships. Such limited
partnership agreements also provide that, subject to the Stockholders"
Agreement, Blackstone will exercise all voting and dispositive power with
respect to the Class B Common Stock held by the Partnerships and BRWPI
will exercise all voting and dispositive power with respect to the Class A
Common Stock held by the Partnerships.
(b) Blackstone Management Associates II L.L.C., as the general partner of each
of Blackstone Capital Partners II Merchant Banking Fund L.P., Blackstone
Offshore Capital Partners II L.P. and Blackstone Family Investment
Partnership II L.P., exercises voting and dispositive power with respect
to such 536,829 shares. Of such shares, approximately 385,177 shares,
113,697 shares and 37,955 shares, respectively, are held by Blackstone
Capital Partners II Merchant Banking Fund L.P., Blackstone Offshore
Capital Partners II L.P. and Blackstone Family Investment Partnership II
L.P.
(c) Messrs. Stockman and Grillo are affiliated with Blackstone in the
capacities described under "Management." Their address is c/o The
<PAGE>
Blackstone Group L.P., 345 Park Avenue, New York, New York 10154. Such
individuals disclaim beneficial ownership of any shares of Common Stock
beneficially owned by Blackstone.
(d) BRWPI is one of the two general partners of the Partnerships and exercises
voting and dispositive power with respect to the 196,410 shares of Class A
Common Stock.
(e) BRWPI is owned by Robert B. McKeon, Thomas J. Campbell and Kenneth R.
Brotman, all of whom are principals of Veritas and are directors of
BarTech. Pursuant to the organizational documents of BRWPI, all material
actions to be taken by BRWPI as a general partner of BRWSH require the
approval of Mr. McKeon and either of Mr. Campbell or Mr. Brotman. BRWPI's
address is c/o Veritas Capital Inc., 10 East 50th Street, New York, New
York 10022. Messrs. McKeon, Campbell and Brotman each are considered to
have beneficial ownership of all of the shares included in the table above
beneficially owned by BRWPI due to their control of BRWPI.
(f) Pursuant to the collective bargaining agreement with the USWA, the ESOP is
entitled to receive 49,102 shares of Class A Common Stock (which
represented 20% of the outstanding Common Stock if issued on the date of
such collective bargaining agreement).
(g) Pursuant to various agreements with Messrs. Tyrrell and Asimou, the
Company intends to issue, subject to certain conditions, shares of Class A
Common Stock representing approximately 1.75% and 0.75%, respectively, of
the outstanding Common Stock giving effect to all issuances, including the
Warrants.
(h) Excluding the 196,410 shares of Class A Common Stock beneficially owned by
BRWPI and Messrs. McKeon, Campbell and Brotman, the only shares
beneficially owned by this group are the shares of Class A Common Stock
potentially issuable to Messrs. Tyrrell and Asimou.
Item 13. Certain Relationships and Related Transactions
In connection with the acquisition of the BRW Assets, BarTech has an
agreement with Keilin & Bloom, a financial advisory firm ("K&B") that
represented the USWA during such acquisition, pursuant to which BarTech agreed
to pay to K&B, on behalf of the USWA, certain fees due for services provided by
K&B to the USWA in connection with the negotiation of the collective bargaining
agreement between BarTech and the USWA. These fees totaled $1.5 million, plus
reimbursement of reasonable out-of-pocket expenses not to exceed $25,000.
BarTech paid $1.0 million of these fees in fiscal 1995, and the remaining $0.5
million of fees were paid in December 1995. Messrs. Davis and Rainaldi are
members of the board of directors of BarTech pursuant to the BarTech collective
bargaining agreement and serve as representatives of the USWA and the BarTech
employees covered by the collective bargaining agreement.
In connection with the Recapitalization, an affiliate of Blackstone
received an origination fee and expense reimbursement totaling $2.0 million and
an affiliate of Veritas received a financial advisory fee and expense
reimbursement totaling $2.0 million.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
BAR TECHNOLOGIES INC.:
We have audited, in accordance with generally accepted auditing
standards, the financial statements included in Bar Technologies Inc.'s annual
report to shareholders included in this Form 10-K, and have issued our report
thereon dated November 26, 1996. Our audit was made for the purpose of forming
an opinion on those statements taken as a whole. The schedule listed in the
index in Item 14(a) 2 of this Form 10-K is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not a part of the basic financial
statements. The schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
November 26, 1996
<PAGE>
BAR TECHNOLOGIES INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Additions
---------------------------------------------------------
<C> <S> <S> <S> <S> <S> <S>
Deductions
Balance at Charged to from
Beginning Costs and Other Reserves Balance at
Description of Year Expenses Recoveries Adjustments <F2> End of Year
- ----------------------------------------- ------------- ------------- ------------- ------------- ------------- ------------
1996
Allowance for doubtful accounts . . . . . $ 0 117 - 432<F1> - $ 549
Valuation allowance for deferred tax
assets . . . . . . . . . . . . . . . . . 11,697 7,445 - - - $19,142
1995
Valuation allowance for deferred tax
assets . . . . . . . . . . . . . . . . . $ 5,990 5,707 - - - $11,697
</TABLE>
[FN]
<F1> Represents the allowance recognized in connection with the purchase of
Bliss & Laughlin Industries Inc.
<F2> Represents uncollected accounts charged against the allowance.
<PAGE>
EXHIBIT INDEX
DESCRIPTION OF EXHIBITS
3.1* Amended and Restated Certificate of Incorporation of BarTech.
3.2* Amended and Restated By-Laws of BarTech.
4.1* Indenture, dated as of April 1, 1996, among BarTech, B&L Acquisition
Corporation, Bliss & Laughlin Industries Inc., Bliss & Laughlin Steel
Company, Canadian Drawn Steel Company Inc. and United States Trust
Company of New York.
4.2* Form of Note.
4.3* Common Stock Registration Rights Agreement, dated as of April 1, 1996,
among BarTech, BRW Steel Holdings, L.P., BRW Steel Offshore Holdings,
L.P., Blackstone Capital Partners II Merchant Banking Fund L.P. and
Chase Securities Inc.
4.4* Warrant Agreement, dated as of April 1, 1996, between BarTech and
United States Trust Company of New York.
10.1* Credit Agreement, dated as of April 2, 1996, among BarTech, Bliss &
Laughlin Steel Company and Chemical Bank.
10.2* Master Pledge Agreement, dated as of April 2, 1996, among BRW Steel
Holdings, L.P., BRW Steel Offshore Holdings, L.P., BarTech, Bliss &
Laughlin Industries Inc., Bliss & Laughlin Steel Company and United
States Trust Company of New York.
10.3* Agreement, dated July 18, 1995, by and between Rokop Corporation and
BRW Steel Corporation.
10.4 Employment Agreement, dated August 22, 1996, between BarTech and
Thomas Tyrrell.
10.5 Employment Agreement, dated October 1, 1996, between BarTech and Robert
Meyer.
10.6 Employment Agreement, dated August 24, 1996, between BarTech and John
Asimou.
10.7 Employment Agreement, dated November 27, 1996, between BarTech and Ben
Bishop.
10.8 Employment Agreement, dated December 2, 1996, between BarTech and
Frederick Deichert.
10.9 Employment Agreement, dated May 11, 1990, between Bliss & Laughlin
Industries Inc. and Anthony J. Romanovich (incorporated by reference
to Bliss & Laughlin Industries Inc.'s Annual Report on Form 10-K for
the year ended September 30, 1990).
10.10 Bliss & Laughlin Industries Inc. Employees' Incentive Stock Option
Plan (incorporated by reference to Exhibit 10.13 to Bliss & Laughlin
Industries Inc.'s Registration Statement on Form S-1, Registration No.
33-25421).
10.11* First Amendment to Bliss & Laughlin Industries Inc. Employees'
Incentive Stock Option Plan, dated February 5, 1992.
10.12 Bliss & Laughlin Industries Inc. Directors' Stock Option Plan
(incorporated by reference to Exhibit 10.14 to Bliss & Laughlin
Industries Inc.'s Registration Statement on Form S-1, Registration No.
33-25421).
10.13 Bliss & Laughlin Industries Inc. Directors' Deferred Compensation Plan
effective as of March 1, 1994 (incorporated by reference to Bliss &
Laughlin Industries Inc.'s Annual Report on Form 10-K for the year
ended September 30, 1994).
10.14* Master Agreement, dated July 18, 1994, by and among the Commonwealth
of Pennsylvania, acting by and through the Department of Commerce, the
Pennsylvania Industrial Development Authority, the Commonwealth of
Pennsylvania, acting by and through the Department of Community
<PAGE>
Affairs, the Johnstown Industrial Development Corporation, the County
of Cambria, the City of Johnstown, BarTech and BRW Steel Corporation--
Johnstown.
10.15* Amendment No. 1 to the Master Agreement, dated September 21, 1994, by
and among the Commonwealth of Pennsylvania, acting by and through the
Department of Commerce, the Pennsylvania Industrial Development
Authority, the Commonwealth of Pennsylvania, acting by and through the
Department of Community Affairs, the Johnstown Industrial Development
Corporation, the County of Cambria, the City of Johnstown and BarTech.
10.16* Sunny Day Fund Loan Agreement, dated September 21, 1994, by and
between BarTech and the Commonwealth of Pennsylvania acting by and
through its Department of Commerce.
10.17* Pennsylvania Industrial Development Authority Consent, Subordination
and Assumption Agreement, dated August 4, 1994, effective as of
September 21, 1994, by BarTech and Johnstown Industrial Development
Corporation in favor of the Pennsylvania Industrial Development
Authority.
10.18* Economic Development Partnership Loan Agreement, dated September 21,
1994, between the City of Johnstown and BarTech.
10.19* Economic Development Set-Aside Loan Agreement, dated as of July 6,
1995, between the City of Johnstown and BarTech.
10.20* Economic Development Set-Aside Loan Agreement, dated as of November 6,
1995, between the City of Johnstown and BarTech.
10.21* Section 108 Loan Agreement, dated July 20, 1994, by and between the
City of Johnstown, the County of Cambria and BarTech.
10.22* Amendment No. 1 to Section 108 Loan Agreement, dated August 1994, by
and among the City of Johnstown, the County of Cambria and BarTech.
10.23* Loan and Use Agreement, dated September 21, 1994, by and between
Marine Midland Bank and BarTech.
10.24* Loan Agreement, dated August 12, 1994, by and between BarTech and
Buffalo and Erie County Regional Development Corporation.
10.25* Community Development Block Grant Loan Agreement, dated as of November
3, 1995, between Cambria County and BarTech.
10.26* BID Loan Agreement, dated March 12, 1996, between Johnstown Industrial
Development Corporation and BarTech.
10.27* Contribution Agreement, dated December 1993, by and between BarTech
and Bethlehem Steel Corporation.
10.28* Amendment No. 1 to Contribution Agreement, dated January 1994, by and
between BarTech and Bethlehem Steel Corporation.
10.29* Amendment No. 2 to Contribution Agreement, dated January 7, 1994, by
and between BarTech and Bethlehem Steel Corporation.
10.30* Amendment No. 3 to Contribution Agreement, dated June 7, 1994, by and
between BarTech and Bethlehem Steel Corporation.
10.31* Amendment No. 4 to Contribution Agreement, dated June 29, 1994, by and
between BarTech and Bethlehem Steel Corporation.
10.32* Amendment No. 5 to Contribution Agreement, dated September 21, 1994,
by and between BarTech and Bethlehem Steel Corporation.
10.33* Subordinated Loan Agreement, dated September 21, 1994, by and between
BarTech and Bethlehem Steel Corporation.
10.34 Loan Agreement, dated as of December 1, 1988, between Development
Authority of Cartersville and Bliss & Laughlin Steel Company
(incorporated by reference to Exhibit 10(e) to Bliss & Laughlin
Industries Inc.'s Annual Report on Form 10-K for the year ended
September 30, 1989).
10.35* Collective Bargaining Agreement, dated February 15, 1994, by and
between the United Steelworkers of America, AFL-CIO and BarTech.
<PAGE>
10.36* Amendment No. 1 to the Collective Bargaining Agreement, dated
September 21, 1994, by and between the United Steelworkers of
America, AFL-CIO and BRW Steel Corporation.
10.37* Letter Agreement, dated March 28, 1996, among BRW Steel Holdings,
L.P., BarTech and the United Steel Workers of America.
10.38* Amended and Restated Intercreditor and Subordination Agreement, dated
as of April 2, 1996, by and among United States Trust Company of New
York, Bethlehem Steel Corporation, the Pennsylvania Lenders (as
defined therein), the Lackawanna Lenders (as defined therein),
Chemical Bank, Rokop Corporation, those parties who in the future
become Government Lenders (as defined therein), those parties who in
the future become Notes Refinancing Lenders (as defined therein),
BarTech, Bliss & Laughlin Steel Company, Canadian Drawn Steel Company,
and each of the other Pledgors (as defined therein) from time to time
made party thereto.
10.39* Memorandum of Understanding, dated March 6, 1996, between Pennsylvania
Electric Company and BarTech.
21.1* List of subsidiaries of BarTech.
27 Financial Data Schedule.
* Incorporated by reference to the Registration Statement on Form S-4 of
BarTech, Registration Number 333-4254.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Bar Technologies Inc.
(Registrant)
Date: December 30, 1996 By: /s/ Thomas N. Tyrrell
Name: Thomas N. Tyrrell
Title: President and Chief
Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Robert B. McKeon and Thomas N. Tyrrell and David Stockman, each acting
along, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments or supplements to this
report and to file the same with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1994, this
report has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
/s/ Thomas N. Tyrrell President and Chief December 30, 1996
Thomas N. Tyrrell Executive Officer
and Director (Principal
Executive Officer)
/s/ Robert B. McKeon Chairman and Director December 30, 1996
Robert B. McKeon
/s/ David A. Stockman Class B Director December 30, 1996
David A. Stockman
/s/ Thomas J. Campbell Director December 30, 1996
Thomas J. Campbell
/s/ Anthony Grillo Director December 30, 1996
Anthony Grillo
<PAGE>
Director ___________, 1996
Edward N. Ney
Director ___________, 1996
Harold A. Poling
/s/ Daniel R. DeVos Director December 30, 1996
Daniel R. DeVos
/s/ Anthony Rainaldi Director December 30, 1996
Anthony Rainaldi
Director ___________, 1996
Buddy W. Davis
/s/ Mary Ann Link Controller December 30, 1996
Mary Ann Link (Principal Financial and
Accounting Officer)
EMPLOYMENT AGREEMENT
AGREEMENT, made August 22, 1996 by and between BAR TECHNOLOGIES INC.,
a Delaware corporation (the "Company") and THOMAS N. TYRRELL (the "Executive").
RECITALS
--------
In order to induce the Executive to serve as the President and Chief
Executive Officer of the Company, the Company desires to provide the Executive
with compensation and other benefits on the terms and conditions set forth in
this Agreement.
The Executive is willing to accept such employment and perform
services for the Company, on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as follows:
1. Employment.
1.1 Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the Term hereof as its President and
Chief Executive Officer. In his capacity as the President and Chief Executive
Officer of the Company, the Executive shall report to the Board of Directors of
the Company (the "Board") and shall have the customary powers, responsibilities
and authorities of presidents and chief executive officers of corporations of
the size, type and nature of the Company, as it exists from time to time, and
as are assigned by the Board, including, without limitation, the determination
and execution of an orderly process of succession (including the transfer of
duties from the Executive to other officers of the Company, in contemplation of
the Executive's retirement upon the expiration of the Term hereof).
1.2 Subject to the terms and conditions of this Agreement, the
Executive hereby accepts employment as the President and Chief Executive
Officer of the Company commencing as of August 22, 1996, and agrees to devote
his full business time and efforts to the performance of services, duties and
<PAGE>
responsibilities in connection therewith, subject at all times to review and
control of the Board. The Company shall use its best efforts to get the
Executive elected to the Board of the Company and appointed as Chairman of the
Board. In addition, during the Term of Employment, the Executive also agrees
to serve, if elected, as an officer and/or director of any Subsidiary of the
Company, without the payment of any additional compensation therefor.
1.3 Nothing in this Agreement shall preclude the Executive from
engaging in charitable and community affairs, from managing any passive
investment (i.e., an investment with respect to which the Executive is in no
way involved with the management or operation of the entity in which the
Executive has invested) made by him in publicly traded equity securities or
other property (provided that no such investment may exceed 1% of the equity of
any entity, without the prior approval of the Board) or from serving, subject
to the prior approval of the Board, as a member of boards of directors or as a
trustee of any other corporation, association or entity, to the extent that any
of the above activities do not interfere with the performance of his duties
hereunder. For purposes of the preceding sentence, any approval by the Board
required therein shall not be unreasonably withheld.
2. Term of Employment. The Executive's term of employment under
this Agreement (the "Term of Employment") shall commence on August 22, 1996
and, subject to the terms hereof, shall terminate on the earlier of (i)
September 30, 1999 (the "Initial Term") or (ii) termination of the Executive's
employment pursuant to this Agreement; provided, however, that subsequent to
the Initial Term, the Executive's Term of Employment under this Agreement shall
automatically renew annually for one year renewal terms (the "Renewal Term");
unless the Company shall deliver to the Executive or the Executive shall
deliver to the Company written notice, at least 90 days prior to the expiration
of the Initial Term or any Renewal Term, that the Term of Employment shall not
be extended, in which case the Term of Employment will end at its then
<PAGE>
scheduled expiration date and shall not be further extended except by written
agreement of the Company and the Executive.
3. Compensation.
3.1 Salary. During the Initial Term of the Executive's employment
under the terms of this Agreement, the Company shall pay Executive a base
salary ("Base Salary") at the rate of not less than $350,000 per annum. Base
Salary shall be payable in accordance with the ordinary payroll practices of
the Company. During the Term of Employment, the Board of Directors shall, in
good faith, review and, if determined by the Board of Directors to be
appropriate, increase the Executive's salary at least annually and in
accordance with the Company's customary procedures and practices regarding the
salaries of senior executives, which procedures and practices, for example,
will include a review of the performance of the Company, and the Executive and
any increase in the cost of living during the relevant period. Increases in
the rate of salary, once granted, shall not be subject to revocation or
decrease thereafter.
3.2 Annual Bonus. In addition to his base salary, the Executive
shall be eligible to receive an annual bonus (the "Annual Bonus"). Annual
Bonus amounts payable to the Executive shall be determined in the sole
discretion of those members of the Board of Directors who were nominated and
elected at the request of Blackstone. Subject to the foregoing, the Annual
Bonus shall be determined in accordance with the Company's customary procedures
and practices regarding bonus awards to senior executives, which procedures and
practices, for example, shall include an evaluation of the Company's progress
in meeting its cash flow targets during the relevant period; provided, however,
the Annual Bonus shall not be less than $100,000 for the fiscal years ending
September 30, 1997 and September 30, 1998 (the "Minimum Bonus"). If EBITDA (as
such term is defined in Appendix A attached hereto) equals or exceeds the
EBITDA targets, as set forth in the "Projections" section of the Registration
<PAGE>
Statement of the Company dated as of August 1, 1996 (the "Registration
Statement"), for any fiscal year under this Agreement, the Annual Bonus shall
be at least $250,000; provided, however, that such methodology for the
determination of the Annual Bonus shall only be utilized until such time as a
formula based on increase in shareholder value is mutually agreed upon by the
parties hereto; provided, further, if due to conditions beyond the Executive's
control, the EBITDA targets are not met for any fiscal year during the Term of
this Agreement, or targets are not met under such other methodology as is being
utilized for any fiscal year during the Term of this Agreement, the Board, in
its sole discretion, may override such targets, and award the Executive an
Annual Bonus irrespective of the achievement of such targets. "Blackstone"
shall mean, collectively, Blackstone Capital Partners II Merchant Banking Fund
L.P., Blackstone Offshore Capital Partners II L.P., Blackstone Family
Investment Partnership II L.P., The Blackstone Group L.P. and their affiliates.
The Annual Bonus shall be payable as soon as practicable after
September 30 of each fiscal year in which such Annual Bonus was earned (the
"Bonus Term"); but in any event, the Annual Bonus shall be paid no later than
90 business days following the end of the Bonus Term; provided, however, no
Annual Bonus shall be payable unless the Executive is employed on the last day
of such Bonus Term. The proviso in the previous sentence shall not apply if
the Executive's employment is terminated pursuant to Section 6.1 of this
Agreement.
3.3 Signing Bonus. Within 30 days after the Executive's Term of
Employment commences, the Company shall pay the Executive a signing bonus of
$300,000 (the "Signing Bonus"). If the Executive resigns or the Executive's
Term of Employment is terminated for Cause (as defined in Section 6.2(b)
hereof), the Executive shall immediately repay the following portion of the
Signing Bonus to the Company: if such resignation or termination occurs (i) on
<PAGE>
or before September 30, 1997, 100%; (ii) after September 30, 1997 but on or
before September 30, 1998, 66.67%; or (iii) after September 30, 1998 but on or
before September 30, 1999, 33.33%.
4. Employee Benefits.
4.1 Stock Options. The Executive shall be entitled to the benefits
of an Option Agreement (the "Option Agreement"), which such Option Agreement
shall be drafted subsequent to the signing of this Agreement, and which Option
Agreement shall contain terms substantially similar to the Option Term Sheet, a
copy of which is attached hereto as Appendix A. The Executive shall not be
eligible to receive any stock option or other equity incentive other than as
described in this Section 4.1.
4.2 Employee Benefit Programs, Plans and Practices. The Company
shall provide the Executive while employed hereunder with coverage under all
welfare benefit programs, plans and practices (commensurate with his position
in the Company and to the extent permitted under any employee benefit plan) in
accordance with the terms thereof, which the Company makes available to its
senior executives. In addition, the Company shall provide substantially
similar benefits as provided under The Birmingham Steel Corporation Management
Security Plan (the "Management Security Plan") dated as of July 27, 1993;
provided, however, that such benefits shall be subject to the same terms and
conditions as under the Management Security Plan; provided, further, that the
Executive shall be given credit for his Years of Employment (as such term is
defined in the Management Security Plan) at Birmingham Steel, which such
employment began January 1, 1994, without contribution by the Executive for
years prior to the commencement date of employment hereunder.
4.3 Vacation. The Executive shall be entitled to twenty (20)
business days paid vacation each calendar year, which shall be taken at such
times as are consistent with the Executive's responsibilities hereunder. For
any calendar year in which the Executive is not employed for the entire period
<PAGE>
of such calendar year, the Executive's vacation days shall be prorated pursuant
to the following formula: twenty multiplied by a fraction, the numerator of
which is the number of days during such calendar year that the Executive has
been actively employed by the Company and the denominator of which is 365. Any
vacation days not taken by March 31 of the following year shall be forfeited
without pay.
4.4 Additional Perquisites. During the Executive's employment
hereunder, the Company shall provide the Executive with (i) term life insurance
in an amount equal to two times Base Salary; (ii) payment for initiation fees
at a country club; (iii) the right to participate in any 401(k) plan which the
Company may establish; (iv) payment of reasonable legal fees relating to the
negotiation and execution of this Agreement, not to exceed $10,000 and (v)
long-term disability coverage providing a monthly benefit of $22,500.
5. Expenses. Subject to prevailing Company policy or such
guidelines as may be established by the Board, the Company will reimburse the
Executive for all reasonable expenses incurred by the Executive in carrying out
his duties.
6. Termination of Employment.
6.1 Termination Not for Cause or for Good Reason. (a) The Company
or Executive may terminate the Executive's Term of Employment at any time for
any reason by written notice. If the Executive's employment is terminated (i)
by the Company other than for Cause (as defined in Section 6.2(b) hereof),
Disability (as defined in Section 6.3 hereof) or death or (ii) by the Executive
for Good Reason (as defined in Section 6.1(b) hereof) prior to the end of the
Initial Term or any Renewal Term, the Company shall continue to pay Executive's
Base Salary and the Minimum Bonus for the longer of (i) the remainder of the
Term of Employment as in effect immediately prior to such termination or (ii)
one year, with such payments to be made in accordance with the terms of
Sections 3.1 and 3.2. In addition, Executive shall receive such payments, if
<PAGE>
any, under applicable plans or programs to which he is entitled pursuant to the
terms of such plans or programs.
(b) For purposes of this Agreement, "Good Reason" shall mean any of
the following (without Executive's express prior written consent):
(i) A reduction by the Company in Executive's Base Salary or
material reduction in bonus opportunities; or
(ii) A substantial diminution or material adverse change in the
Executive's duties, responsibilities or reporting responsibility, unless
due to a promotion or increased responsibility.
6.2 Voluntary Termination by the Executive; Discharge for Cause.
(a) In the event that the Executive's employment is terminated (i) by the
Company for Cause, as hereinafter defined or (ii) by the Executive other than
for Good Reason, Disability or death, the Executive shall only be entitled to
receive (i) any Base Salary accrued but unpaid prior to such termination and
(ii) any benefits provided under the employee benefit programs, plans and
practices referred to in Section 4.2 hereof, in accordance with their terms.
After the termination of the Executive's employment under this Section 6.2, the
obligations of the Company under this Agreement to make any further payments,
or provide any benefits specified herein, to the Executive shall thereupon
cease and terminate.
(b) As used herein, the term "Cause" shall be limited to (i) willful
gross misconduct by the Executive in the performance of his duties hereunder,
(ii) willful gross neglect by the Executive of his duties hereunder (other than
due to Disability, as such term is defined in Section 6.3 hereof) or repeated
and willful failure to follow reasonable instructions of the Board, (iii) any
breach of the provisions of Section 11 of this Agreement by the Executive or
(iv) conviction or plea of guilty or nolo contendere by the Executive to any
felony (or indictable offense). Termination of the Executive pursuant to this
Section 6.2 shall be made by delivery to the Executive of written notice, given
at least 30 days prior to such Termination, from the Board specifying the
<PAGE>
particulars of the conduct by the Executive set forth in any of clauses (i)
through (iv) above. Termination shall be effected by a majority vote of the
Board at a meeting at which the Executive shall have had the opportunity (along
with his counsel) to be heard, unless within 30 days after receiving such
notice, the Executive shall have cured Cause to the reasonable satisfaction of
the Board of Directors; provided, however, that no cure shall be possible for
(A) any breach of Section 11 of this Agreement by the Executive or (B) a
conviction or plea of nolo contendere by the Executive to any felony (or
indictable offense). As long as the Executive is on the Board, he shall
cooperate to cause a valid Board meeting to occur.
6.3 Disability. In the event of the Disability (as defined below)
of the Executive during the Term of Employment, the Term of Employment and the
obligation of the Company to make payments under Section 3 shall, except for
earned but unpaid salary and bonuses, cease six months after the date the
Executive's Disability occurs if either the Company or the Executive has given
notice of termination for reasons of Disability or, if later, the date the
Executive becomes entitled to benefits under the Company's long term disability
program with respect to such Disability. The term "Disability," for purposes
of this Agreement, shall mean the Executive's absence from the full-time
performance of the Executive's duties pursuant to a determination made in
accordance with the Company's disability plan that the Executive is disabled as
a result of incapacity due to physical or mental illness that lasts for at
least six months.
6.4 Death. In the event of the Executive's death during his Term of
Employment hereunder or at any time thereafter while payments are still owing
to the Executive under the terms of this Agreement, all obligations of the
Company to make any further payments, other than the obligation to pay any
accrued but unpaid Base Salary and a pro rata share of the prior year's Annual
Bonus, shall terminate upon the Executive's death, and benefits shall become
<PAGE>
payable under the Company's life and accidental death insurance program in
accordance with its terms.
6.5 No Further Notice, Compensation or Indemnity. The Executive
understands and agrees that he shall not be entitled to any further notice,
compensation or indemnity upon Termination of Employment under this Agreement
other than amounts specified in this Section 6 and the Option Shares as set
forth in Appendix A hereto. Executive shall not have any obligation to seek
comparable employment following such termination or resignation; provided,
however, that any payment hereunder shall be offset by any compensation the
Executive earns with a new employer or from self-employment.
6.6 The Executive's Duty to Provide Materials. Upon the termination
of the Term of Employment for any reason, the Executive or his estate shall
surrender to the Company all correspondence, letters, files, contracts, mailing
lists, customer lists, advertising materials, ledgers, supplies, equipment,
checks, and all other materials and records of any kind that are the property
of the Company or any of its subsidiaries or affiliates, that may be in the
Executive's possession or under his control, including all copies of any of the
foregoing; provided, however, the Executive shall not be required to surrender
his personal rolodex, telephone book and personal materials acquired by the
Executive prior to the date hereof.
7. Notices. All notices or communications hereunder shall be in
writing, addressed as follows:
To the Company:
c/o The Blackstone Group
345 Park Avenue, 31st Floor
New York, New York 10154
Attention: Mikael Salovaara
with a copy to:
Alvin H. Brown, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
<PAGE>
To Executive:
Thomas N. Tyrrell
1180 Wehapa Circle
Leeds, Alabama 35094
with a copy to:
Mary Ann Jorgenson, Esq.
Squire Sanders & Dempsey
127 Public Square
Cleveland, Ohio 44114
Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the third business day after the
actual date of mailing shall constitute the time at which notice was given.
8. Separability; Legal Fees. If any provision of this Agreement
shall be declared to be invalid or unenforceable, in whole or in part, such
invalidity or unenforceability shall not affect the remaining provisions hereof
which shall remain in full force and effect. Each party shall bear the costs
of any legal fees and other fees and expenses which may be incurred in respect
of enforcing its respective rights under this Agreement.
9. Assignment. This contract shall be binding upon and inure to the
benefit of the heirs and representatives of the Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights or
obligations hereunder shall be assignable or otherwise subject to hypothecation
by the Executive (except by will or, in the case of the Options, by trust for
the benefit of the Executive's spouse and/or children or by operation of the
laws of intestate succession) or by the Company, except that the Company may
assign this Agreement to any successor (whether by merger, purchase or
otherwise) to all or substantially all of the stock, assets or businesses of
the Company, if such successor expressly agrees to assume the obligations of
the Company hereunder.
<PAGE>
10. Amendment. This Agreement may only be amended by written
agreement of the parties hereto.
11. Nondisclosure of Confidential Information; Non-Competition. (a)
The Executive shall not, without the prior written consent of the Company, use,
divulge, disclose or make accessible to any other person, firm, partnership,
corporation or other entity any Confidential Information pertaining to the
business of the Company or any of its affiliates, except (i) while employed by
the Company, in the business of and for the benefit of the Company, or
(ii) when required to do so by a court of competent jurisdiction, by any
governmental agency having supervisory authority over the business of the
Company, or by any administrative body or legislative body (including a
committee thereof) with jurisdiction to order the Executive to divulge,
disclose or make accessible such information. For purposes of this Section
11(a), "Confidential Information" shall mean non-public information concerning
the financial data, strategic business plans, product development (or other
proprietary product data), customer lists, marketing plans and other non-
public, proprietary and confidential information of the Company, Bliss &
Laughlin Industries Inc. or their respective affiliates or customers, that, in
any case, is not otherwise available to the public (other than by the
Executive's breach of the terms hereof).
(b) In consideration of the Company's obligations under this
Agreement the Executive agrees that during the period of his employment
hereunder and for a period of twelve (12) months thereafter, without the prior
written consent of the Board, (A) he will not, directly or indirectly, either
as principal, manager, agent, consultant, officer, stockholder, partner,
investor, lender or employee or in any other capacity, carry on, be engaged in
or have any financial interest in, any business which is in competition with
the business of the Company and (B) he shall not, on his own behalf or on
behalf of any person, firm or company, directly or indirectly, solicit or offer
<PAGE>
employment to any person who has been employed by the Company at any time
during the 12 months immediately preceding such solicitation.
(c) For purposes of this Section 11, a business shall be deemed to
be in competition with the Company if it is principally involved in the
purchase, sale or other dealing in any property or the rendering of any service
purchased, sold, dealt in or rendered by the Company as a part of the business
of the Company within the same geographic area in which the Company effects
such purchases, sales or dealings or renders such services. Nothing in this
Section 11 shall be construed so as to preclude the Executive from investing in
any publicly or privately held company, provided the Executive's beneficial
ownership of any class of such company's securities does not exceed 1% of the
outstanding securities of such class.
(d) The Executive agrees that this covenant not to compete is
reasonable under the circumstances and will not interfere with his ability to
earn a living or to otherwise meet his financial obligations. The Executive
and the Company agree that if in the opinion of any court of competent
jurisdiction such restraint is not reasonable in any respect, such court shall
have the right, power and authority to excise or modify such provision or
provisions of this covenant as to the court shall appear not reasonable and to
enforce the remainder of the covenant as so amended. The Executive agrees that
any breach of the covenants contained in this Section 11 would irreparably
injure the Company. Accordingly, the Executive agrees that the Company may, in
addition to pursuing any other remedies it may have in law or in equity, cease
making any payments otherwise required by this Agreement and obtain an
injunction against the Executive from any court having jurisdiction over the
matter restraining any further violation of this Agreement by the Executive.
12. Beneficiaries; References. The Executive shall be entitled to
select (and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
<PAGE>
hereunder following the Executive's death, and may change such election, in
either case by giving the Company written notice thereof. In the event of the
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to the Executive shall be deemed, where appropriate, to refer to
his beneficiary, estate or other legal representative. Any reference to the
masculine gender in this Agreement shall include, where appropriate, the
feminine.
13. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section 13 are in addition to the survivorship provisions of
any other section of this Agreement.
14. Arbitration. Except as otherwise provided in Section 11(d)
hereof, any dispute or controversy arising under or in connection with this
Agreement shall be resolved by binding arbitration held in the Commonwealth of
Pennsylvania and conducted in accordance with the commercial arbitration rules
of the American Arbitration Association in effect at the time of the
arbitration. Each party shall bear its own expenses in connection with any
such arbitration and joint expenses shall be borne by both parties in equal
portions.
15. Governing Law. This Agreement shall be construed, interpreted
and governed in accordance with the laws of the Commonwealth of Pennsylvania,
without reference to rules relating to conflicts of law.
16. Effect on Prior Agreements. This Agreement contains the entire
understanding between the parties hereto and supersedes in all respects any
prior or other agreement or understanding, both written and oral, between the
Company, any affiliate of the Company or any predecessor of the Company or
affiliate of the Company and the Executive.
<PAGE>
17. Withholding. The Company shall be entitled to withhold from
payment any amount of withholding required by law.
18. Survival. Notwithstanding the expiration of the term of this
Agreement, the provisions of Section 11 hereunder shall remain in effect as
long as is necessary to give effect thereto.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
COMPANY
By________________________________
Name:
Title:
__________________________________
Thomas N. Tyrrell
EMPLOYMENT AGREEMENT
AGREEMENT, made September __, 1996 by and between BAR TECHNOLOGIES
INC., a Delaware corporation (the "Company") and ROBERT L. MEYER (the
"Executive").
RECITALS
In order to induce the Executive to serve as an Executive Vice
President and the Chief Operating Officer of the Company, the Company desires
to provide the Executive with compensation and other benefits on the terms and
conditions set forth in this Agreement.
The Executive is willing to accept such employment and perform
services for the Company, on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as follows:
1. Employment.
1.1 Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the Term hereof as an Executive Vice
President and its Chief Operating Officer. In his capacity as an Executive
Vice President and the Chief Operating Officer of the Company, the Executive
shall report to the Chief Executive Officer of the Company (the "CEO") and
shall have the customary powers, responsibilities and authorities of executive
vice presidents and chief operating officers of corporations of the size, type
and nature of the Company, as it exists from time to time, and as are assigned
by the CEO.
1.2 Subject to the terms and conditions of this Agreement, the
Executive hereby accepts employment as an Executive Vice President and the
Chief Operating Officer of the Company commencing as of October __, 1996, and
agrees to devote his full business time and efforts to the performance of
<PAGE>
services, duties and responsibilities in connection therewith, subject at all
times to review and control of the CEO. During the Term of Employment, the
Executive also agrees to serve, if elected, as an officer and/or director of
any Subsidiary of the Company, without the payment of any additional
compensation therefor.
1.3 Nothing in this Agreement shall preclude the Executive from
engaging in charitable and community affairs, from managing any passive
investment (i.e., an investment with respect to which the Executive is in no
way involved with the management or operation of the entity in which the
Executive has invested) made by him in publicly traded equity securities or
other property (provided that no such investment may exceed 1% of the equity of
any entity, without the prior approval of the CEO) or from serving, subject to
the prior approval of the CEO, as a member of boards of directors or as a
trustee of any other corporation, association or entity, to the extent that any
of the above activities do not interfere with the performance of his duties
hereunder. For purposes of the preceding sentence, any approval by the CEO
required therein shall not be unreasonably withheld.
2. Term of Employment. The Executive's term of employment under
this Agreement (the "Term of Employment") shall commence on October __, 1996
and, subject to the terms hereof, shall terminate on the earlier of (i)
September 30, 1999 (the "Initial Term") or (ii) termination of the Executive's
employment pursuant to this Agreement; provided, however, that subsequent to
the Initial Term, the Executive's Term of Employment under this Agreement shall
automatically renew annually for one year renewal terms (the "Renewal Term");
unless the Company shall deliver to the Executive or the Executive shall
deliver to the Company written notice, at least 90 days prior to the expiration
of the Initial Term or any Renewal Term, that the Term of Employment shall not
be extended, in which case the Term of Employment will end at its then
<PAGE>
scheduled expiration date and shall not be further extended except by written
agreement of the Company and the Executive.
3. Compensation.
3.1 Salary. During the Initial Term of the Executive's employment
under the terms of this Agreement, the Company shall pay Executive a base
salary ("Base Salary") at the rate of not less than $195,000 per annum. Base
Salary shall be payable in accordance with the ordinary payroll practices of
the Company. During the Term of Employment, the CEO shall, in good faith,
review and, if determined by the CEO to be appropriate, increase the
Executive's salary at least annually and in accordance with the Company's
customary procedures and practices regarding the salaries of senior executives,
which procedures and practices, for example, will include a review of the
performance of the Company, and the Executive and any increase in the cost of
living during the relevant period. Increases in the rate of salary, once
granted, shall not be subject to revocation or decrease thereafter.
3.2 Annual Bonus. In addition to his base salary, the Executive
shall be eligible to receive an annual bonus (the "Annual Bonus"). Annual
Bonus amounts payable to the Executive shall be determined in the sole
discretion of the CEO and those members of the Board of Directors who were
nominated and elected at the request of Blackstone. Subject to the foregoing,
the Annual Bonus shall be determined in accordance with the Company's customary
procedures and practices regarding bonus awards to senior executives, which
procedures and practices, for example, shall include an evaluation of the
Company's progress in meeting its cash flow targets during the relevant period;
provided, however, the Annual Bonus shall not be less than $90,000 for the
fiscal years ending September 30, 1997 and September 30, 1998 (the "Minimum
Bonus"). If EBITDA (as such term is defined in Appendix A attached hereto)
equals or exceeds the EBITDA targets, as set forth in the "Projections" section
of the Registration Statement of the Company dated as of August 1, 1996 (the
<PAGE>
"Registration Statement"), for any fiscal year under this Agreement, the Annual
Bonus shall be at least $150,000; provided, however, that such methodology for
the determination of the Annual Bonus shall only be utilized until such time as
a formula based on increase in shareholder value is mutually agreed upon by the
parties hereto; provided, further, if due to conditions beyond the Executive's
control, the EBITDA targets are not met for any fiscal year during the Term of
this Agreement, or targets are not met under such other methodology as is being
utilized for any fiscal year during the Term of this Agreement, the CEO and the
Board, in their sole discretion, may override such targets, and award the
Executive an Annual Bonus irrespective of the achievement of such targets.
"Blackstone" shall mean, collectively, Blackstone Capital Partners II Merchant
Banking Fund L.P., Blackstone Offshore Capital Partners II L.P., Blackstone
Family Investment Partnership II L.P., The Blackstone Group L.P. and their
affiliates.
The Annual Bonus shall be payable as soon as practicable after
September 30 of each fiscal year in which such Annual Bonus was earned (the
"Bonus Term"); but in any event, the Annual Bonus shall be paid no later than
90 business days following the end of the Bonus Term; provided, however, no
Annual Bonus shall be payable unless the Executive is employed on the last day
of such Bonus Term. The proviso in the previous sentence shall not apply if
the Executive's employment is terminated pursuant to Section 6.1 of this
Agreement.
3.3 Signing Bonus. Within 30 days after the Executive's Term of
Employment commences, the Company shall pay the Executive a signing bonus of
$150,000 (the "Signing Bonus"). If the Executive resigns or the Executive's
Term of Employment is terminated for Cause (as defined in Section 6.2(b)
hereof), the Executive shall immediately repay the following portion of the
Signing Bonus to the Company: if such resignation or termination occurs (i) on
or before September 30, 1997, 100%; (ii) after September 30, 1997 but on or
<PAGE>
before September 30, 1998, 66.67%; or (iii) after September 30, 1998 but on or
before September 30, 1999, 33.33%.
4. Employee Benefits.
4.1 Stock Options. The Executive shall be entitled to the benefits
of an Option Agreement (the "Option Agreement"), which such Option Agreement
shall be drafted subsequent to the signing of this Agreement, and which Option
Agreement shall contain terms substantially similar to the Option Term Sheet, a
copy of which is attached hereto as Appendix A. The Executive shall not be
eligible to receive any stock option or other equity incentive other than as
described in this Section 4.1.
4.2 Employee Benefit Programs, Plans and Practices. The Company
shall provide the Executive while employed hereunder with coverage under all
welfare benefit programs, plans and practices (commensurate with his position
in the Company and to the extent permitted under any employee benefit plan) in
accordance with the terms thereof, which the Company makes available to its
senior executives.
4.3 Vacation. The Executive shall be entitled to twenty (20)
business days paid vacation each calendar year, which shall be taken at such
times as are consistent with the Executive's responsibilities hereunder. For
any calendar year in which the Executive is not employed for the entire period
of such calendar year, the Executive's vacation days shall be prorated pursuant
to the following formula: twenty multiplied by a fraction, the numerator of
which is the number of days during such calendar year that the Executive has
been actively employed by the Company and the denominator of which is 365. Any
vacation days not taken by March 31 of the following year shall be forfeited
without pay.
4.4 Additional Perquisites. During the Executive's employment
hereunder, the Company shall provide the Executive with (i) term life insurance
in an amount equal to two times Base Salary; (ii) payment for initiation fees
<PAGE>
at a country club; (iii) the right to participate in any 401(k) plan which the
Company may establish and (iv) long-term disability coverage providing a
monthly benefit of $12,500.
5. Expenses. Subject to prevailing Company policy or such
guidelines as may be established by the CEO, the Company will reimburse the
Executive for all reasonable expenses incurred by the Executive in carrying out
his duties.
6. Termination of Employment.
6.1 Termination Not for Cause or for Good Reason. (a) The Company
or Executive may terminate the Executive's Term of Employment at any time for
any reason by written notice. If the Executive's employment is terminated (i)
by the Company other than for Cause (as defined in Section 6.2(b) hereof),
Disability (as defined in Section 6.3 hereof) or death or (ii) by the Executive
for Good Reason (as defined in Section 6.1(b) hereof) prior to the end of the
Initial Term or any Renewal Term, the Company shall continue to pay Executive's
Base Salary and the Minimum Bonus for the longer of (i) the remainder of the
Term of Employment as in effect immediately prior to such termination or (ii)
one year, with such payments to be made in accordance with the terms of
Sections 3.1 and 3.2. In addition, Executive shall receive such payments, if
any, under applicable plans or programs to which he is entitled pursuant to the
terms of such plans or programs.
(b) For purposes of this Agreement, "Good Reason" shall mean any of
the following (without Executive's express prior written consent):
(i) A reduction by the Company in Executive's Base Salary or
material reduction in bonus opportunities; or
(ii) A substantial diminution or material adverse change in the
Executive's duties, responsibilities or reporting responsibility, unless
due to a promotion or increased responsibility.
6.2 Voluntary Termination by the Executive; Discharge for Cause.
(a) In the event that the Executive's employment is terminated (i) by the
<PAGE>
Company for Cause, as hereinafter defined or (ii) by the Executive other than
for Good Reason, Disability or death, the Executive shall only be entitled to
receive (i) any Base Salary accrued but unpaid prior to such termination and
(ii) any benefits provided under the employee benefit programs, plans and
practices referred to in Section 4.2 hereof, in accordance with their terms.
After the termination of the Executive's employment under this Section 6.2, the
obligations of the Company under this Agreement to make any further payments,
or provide any benefits specified herein, to the Executive shall thereupon
cease and terminate.
(b) As used herein, the term "Cause" shall be limited to (i) willful
gross misconduct by the Executive in the performance of his duties hereunder,
(ii) willful gross neglect by the Executive of his duties hereunder (other than
due to Disability, as such term is defined in Section 6.3 hereof) or repeated
and willful failure to follow reasonable instructions of the CEO, (iii) any
breach of the provisions of Section 11 of this Agreement by the Executive or
(iv) conviction or plea of guilty or nolo contendere by the Executive to any
felony (or indictable offense). Termination of the Executive pursuant to this
Section 6.2 shall be made by delivery to the Executive of written notice, given
at least 30 days prior to such Termination, from the CEO specifying the
particulars of the conduct by the Executive set forth in any of clauses (i)
through (iv) above. Termination shall be effected by the CEO at a meeting at
which the Executive shall have had the opportunity (along with his counsel) to
be heard, unless within 30 days after receiving such notice, the Executive
shall have cured Cause to the reasonable satisfaction of the CEO; provided,
however, that no cure shall be possible for (A) any breach of Section 11 of
this Agreement by the Executive or (B) a conviction or plea of nolo contendere
by the Executive to any felony (or indictable offense).
6.3 Disability. In the event of the Disability (as defined below)
of the Executive during the Term of Employment, the Term of Employment and the
<PAGE>
obligation of the Company to make payments under Section 3 shall, except for
earned but unpaid salary and bonuses, cease six months after the date the
Executive's Disability occurs if either the Company or the Executive has given
notice of termination for reasons of Disability or, if later, the date the
Executive becomes entitled to benefits under the Company's long term disability
program with respect to such Disability. The term "Disability," for purposes
of this Agreement, shall mean the Executive's absence from the full-time
performance of the Executive's duties pursuant to a determination made in
accordance with the Company's disability plan that the Executive is disabled as
a result of incapacity due to physical or mental illness that lasts for at
least six months.
6.4 Death. In the event of the Executive's death during his Term of
Employment hereunder or at any time thereafter while payments are still owing
to the Executive under the terms of this Agreement, all obligations of the
Company to make any further payments, other than the obligation to pay any
accrued but unpaid Base Salary and a pro rata share of the prior year's Annual
Bonus, shall terminate upon the Executive's death, and benefits shall become
payable under the Company's life and accidental death insurance program in
accordance with its terms.
6.5 No Further Notice, Compensation or Indemnity. The Executive
understands and agrees that he shall not be entitled to any further notice,
compensation or indemnity upon Termination of Employment under this Agreement
other than amounts specified in this Section 6 and the Option Shares as set
forth in Appendix A hereto. Executive shall not have any obligation to seek
comparable employment following such termination or resignation; provided,
however, that any payment hereunder shall be offset by any compensation the
Executive earns with a new employer or from self-employment.
6.6 The Executive's Duty to Provide Materials. Upon the termination
of the Term of Employment for any reason, the Executive or his estate shall
<PAGE>
surrender to the Company all correspondence, letters, files, contracts, mailing
lists, customer lists, advertising materials, ledgers, supplies, equipment,
checks, and all other materials and records of any kind that are the property
of the Company or any of its subsidiaries or affiliates, that may be in the
Executive's possession or under his control, including all copies of any of the
foregoing; provided, however, the Executive shall not be required to surrender
his personal rolodex, telephone book and personal materials acquired by the
Executive prior to the date hereof.
7. Notices. All notices or communications hereunder shall be in
writing, addressed as follows:
To the Company:
c/o The Blackstone Group
345 Park Avenue, 31st Floor
New York, New York 10154
Attention: Mikael Salovaara
with a copy to:
Alvin H. Brown, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
To Executive:
Robert L. Meyer
14645 Deerwood Court
Perrysburg, Ohio 43551
with a copy to:
Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the third business day after the
actual date of mailing shall constitute the time at which notice was given.
<PAGE>
8. Separability; Legal Fees. If any provision of this Agreement
shall be declared to be invalid or unenforceable, in whole or in part, such
invalidity or unenforceability shall not affect the remaining provisions hereof
which shall remain in full force and effect. Each party shall bear the costs
of any legal fees and other fees and expenses which may be incurred in respect
of enforcing its respective rights under this Agreement.
9. Assignment. This contract shall be binding upon and inure to the
benefit of the heirs and representatives of the Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights or
obligations hereunder shall be assignable or otherwise subject to hypothecation
by the Executive (except by will or, in the case of the Options, by trust for
the benefit of the Executive's spouse and/or children or by operation of the
laws of intestate succession) or by the Company, except that the Company may
assign this Agreement to any successor (whether by merger, purchase or
otherwise) to all or substantially all of the stock, assets or businesses of
the Company, if such successor expressly agrees to assume the obligations of
the Company hereunder.
10. Amendment. This Agreement may only be amended by written
agreement of the parties hereto.
11. Nondisclosure of Confidential Information; Non-Competition. (a)
The Executive shall not, without the prior written consent of the Company, use,
divulge, disclose or make accessible to any other person, firm, partnership,
corporation or other entity any Confidential Information pertaining to the
business of the Company or any of its affiliates, except (i) while employed by
the Company, in the business of and for the benefit of the Company, or
(ii) when required to do so by a court of competent jurisdiction, by any
governmental agency having supervisory authority over the business of the
Company, or by any administrative body or legislative body (including a
committee thereof) with jurisdiction to order the Executive to divulge,
<PAGE>
disclose or make accessible such information. For purposes of this Section
11(a), "Confidential Information" shall mean non-public information concerning
the financial data, strategic business plans, product development (or other
proprietary product data), customer lists, marketing plans and other non-
public, proprietary and confidential information of the Company, Bliss &
Laughlin Industries Inc. or their respective affiliates or customers, that, in
any case, is not otherwise available to the public (other than by the
Executive's breach of the terms hereof).
(b) In consideration of the Company's obligations under this
Agreement the Executive agrees that during the period of his employment
hereunder and for a period of twelve (12) months thereafter, without the prior
written consent of the Board, (A) he will not, directly or indirectly, either
as principal, manager, agent, consultant, officer, stockholder, partner,
investor, lender or employee or in any other capacity, carry on, be engaged in
or have any financial interest in, any business which is in competition with
the business of the Company and (B) he shall not, on his own behalf or on
behalf of any person, firm or company, directly or indirectly, solicit or offer
employment to any person who has been employed by the Company at any time
during the 12 months immediately preceding such solicitation.
(c) For purposes of this Section 11, a business shall be deemed to
be in competition with the Company if it is principally involved in the
purchase, sale or other dealing in any property or the rendering of any service
purchased, sold, dealt in or rendered by the Company as a part of the business
of the Company within the same geographic area in which the Company effects
such purchases, sales or dealings or renders such services. Nothing in this
Section 11 shall be construed so as to preclude the Executive from investing in
any publicly or privately held company, provided the Executive's beneficial
ownership of any class of such company's securities does not exceed 1% of the
outstanding securities of such class.
<PAGE>
(d) The Executive agrees that this covenant not to compete is
reasonable under the circumstances and will not interfere with his ability to
earn a living or to otherwise meet his financial obligations. The Executive
and the Company agree that if in the opinion of any court of competent
jurisdiction such restraint is not reasonable in any respect, such court shall
have the right, power and authority to excise or modify such provision or
provisions of this covenant as to the court shall appear not reasonable and to
enforce the remainder of the covenant as so amended. The Executive agrees that
any breach of the covenants contained in this Section 11 would irreparably
injure the Company. Accordingly, the Executive agrees that the Company may, in
addition to pursuing any other remedies it may have in law or in equity, cease
making any payments otherwise required by this Agreement and obtain an
injunction against the Executive from any court having jurisdiction over the
matter restraining any further violation of this Agreement by the Executive.
12. Beneficiaries; References. The Executive shall be entitled to
select (and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following the Executive's death, and may change such election, in
either case by giving the Company written notice thereof. In the event of the
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to the Executive shall be deemed, where appropriate, to refer to
his beneficiary, estate or other legal representative. Any reference to the
masculine gender in this Agreement shall include, where appropriate, the
feminine.
13. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section 13 are in addition to the survivorship provisions of
any other section of this Agreement.
<PAGE>
14. Arbitration. Except as otherwise provided in Section 11(d)
hereof, any dispute or controversy arising under or in connection with this
Agreement shall be resolved by binding arbitration held in the Commonwealth of
Pennsylvania and conducted in accordance with the commercial arbitration rules
of the American Arbitration Association in effect at the time of the
arbitration. Each party shall bear its own expenses in connection with any
such arbitration and joint expenses shall be borne by both parties in equal
portions.
15. Governing Law. This Agreement shall be construed, interpreted
and governed in accordance with the laws of the Commonwealth of Pennsylvania,
without reference to rules relating to conflicts of law.
16. Effect on Prior Agreements. This Agreement contains the entire
understanding between the parties hereto and supersedes in all respects any
prior or other agreement or understanding, both written and oral, between the
Company, any affiliate of the Company or any predecessor of the Company or
affiliate of the Company and the Executive.
17. Withholding. The Company shall be entitled to withhold from
payment any amount of withholding required by law.
18. Survival. Notwithstanding the expiration of the term of this
Agreement, the provisions of Section 11 hereunder shall remain in effect as
long as is necessary to give effect thereto.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
COMPANY
By______________________________
Name:
Title:
________________________________
Robert L. Meyer
EMPLOYMENT AGREEMENT
AGREEMENT, made August 24, 1996 by and between BAR TECHNOLOGIES INC.,
a Delaware corporation (the "Company") and JOHN G. ASIMOU (the "Executive").
RECITALS
--------
In order to induce the Executive to serve as the Vice President of
Technology and Development of the Company, the Company desires to provide the
Executive with compensation and other benefits on the terms and conditions set
forth in this Agreement.
The Executive is willing to accept such employment and perform
services for the Company, on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as follows:
1. Employment.
1.1 Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the Term hereof as its Vice President
of Technology and Development. In his capacity as the Vice President of
Technology and Development of the Company, the Executive shall report to the
Chief Executive Officer of the Company (the "CEO") and shall have the customary
powers, responsibilities and authorities of vice presidents of corporations of
the size, type and nature of the Company, as it exists from time to time, and
as are assigned by the CEO.
1.2 Subject to the terms and conditions of this Agreement, the
Executive hereby accepts employment as the Vice President of Technology and
Development of the Company commencing as of August 24, 1996, and agrees to
devote his full business time and efforts to the performance of services,
duties and responsibilities in connection therewith, subject at all times to
review and control of the CEO. During the Term of Employment, the Executive
<PAGE>
also agrees to serve, if elected, as an officer and/or director of any
Subsidiary of the Company, without the payment of any additional compensation
therefor.
1.3 Nothing in this Agreement shall preclude the Executive from
engaging in charitable and community affairs, from managing any passive
investment (i.e., an investment with respect to which the Executive is in no
way involved with the management or operation of the entity in which the
Executive has invested) made by him in publicly traded equity securities or
other property (provided that no such investment may exceed 1% of the equity of
any entity, without the prior approval of the CEO) or from serving, subject to
the prior approval of the CEO, as a member of boards of directors or as a
trustee of any other corporation, association or entity, to the extent that any
of the above activities do not interfere with the performance of his duties
hereunder. For purposes of the preceding sentence, any approval by the CEO
required therein shall not be unreasonably withheld.
2. Term of Employment. The Executive's term of employment under
this Agreement (the "Term of Employment") shall commence on August 24, 1996
and, subject to the terms hereof, shall terminate on the earlier of (i)
September 30, 1999 (the "Initial Term") or (ii) termination of the Executive's
employment pursuant to this Agreement; provided, however, that subsequent to
the Initial Term, the Executive's Term of Employment under this Agreement shall
automatically renew annually for one year renewal terms (the "Renewal Term");
unless the Company shall deliver to the Executive or the Executive shall
deliver to the Company written notice, at least 90 days prior to the expiration
of the Initial Term or any Renewal Term, that the Term of Employment shall not
be extended, in which case the Term of Employment will end at its then
scheduled expiration date and shall not be further extended except by written
agreement of the Company and the Executive.
3. Compensation.
<PAGE>
3.1 Salary. During the Initial Term of the Executive's employment
under the terms of this Agreement, the Company shall pay Executive a base
salary ("Base Salary") at the rate of not less than $180,000 per annum. Base
Salary shall be payable in accordance with the ordinary payroll practices of
the Company. During the Term of Employment, the CEO shall, in good faith,
review and, if determined by the CEO to be appropriate, increase the
Executive's salary at least annually and in accordance with the Company's
customary procedures and practices regarding the salaries of senior executives,
which procedures and practices, for example, will include a review of the
performance of the Company, and the Executive and any increase in the cost of
living during the relevant period. Increases in the rate of salary, once
granted, shall not be subject to revocation or decrease thereafter.
3.2 Annual Bonus. In addition to his base salary, the Executive
shall be eligible to receive an annual bonus (the "Annual Bonus"). Annual
Bonus amounts payable to the Executive shall be determined in the sole
discretion of the CEO and those members of the Board of Directors who were
nominated and elected at the request of Blackstone. Subject to the foregoing,
the Annual Bonus shall be determined in accordance with the Company's customary
procedures and practices regarding bonus awards to senior executives, which
procedures and practices, for example, shall include an evaluation of the
Company's progress in meeting its cash flow targets during the relevant period;
provided, however, the Annual Bonus shall not be less than $70,000 for the
fiscal years ending September 30, 1997 and September 30, 1998 (the "Minimum
Bonus"). If EBITDA (as such term is defined in Appendix A attached hereto)
equals or exceeds the EBITDA targets, as set forth in the "Projections" section
of the Registration Statement of the Company dated as of August 1, 1996 (the
"Registration Statement"), for any fiscal year under this Agreement, the Annual
Bonus shall be at least $130,000; provided, however, that such methodology for
the determination of the Annual Bonus shall only be utilized until such time as
<PAGE>
a formula based on increase in shareholder value is mutually agreed upon by the
parties hereto; provided, further, if due to conditions beyond the Executive's
control, the EBITDA targets are not met for any fiscal year during the Term of
this Agreement, or targets are not met under such other methodology as is being
utilized for any fiscal year during the Term of this Agreement, the CEO and the
Board, in their sole discretion, may override such targets, and award the
Executive an Annual Bonus irrespective of the achievement of such targets.
"Blackstone" shall mean, collectively, Blackstone Capital Partners II Merchant
Banking Fund L.P., Blackstone Offshore Capital Partners II L.P., Blackstone
Family Investment Partnership II L.P., The Blackstone Group L.P. and their
affiliates.
The Annual Bonus shall be payable as soon as practicable after
September 30 of each fiscal year in which such Annual Bonus was earned (the
"Bonus Term"); but in any event, the Annual Bonus shall be paid no later than
90 business days following the end of the Bonus Term; provided, however, no
Annual Bonus shall be payable unless the Executive is employed on the last day
of such Bonus Term. The proviso in the previous sentence shall not apply if
the Executive's employment is terminated pursuant to Section 6.1 of this
Agreement.
3.3 Signing Bonus. Within 30 days after the Executive's Term of
Employment commences, the Company shall pay the Executive a signing bonus of
$135,000 (the "Signing Bonus"). If the Executive resigns or the Executive's
Term of Employment is terminated for Cause (as defined in Section 6.2(b)
hereof), the Executive shall immediately repay the following portion of the
Signing Bonus to the Company: if such resignation or termination occurs (i) on
or before September 30, 1997, 100%; (ii) after September 30, 1997 but on or
before September 30, 1998, 66.67%; or (iii) after September 30, 1998 but on or
before September 30, 1999, 33.33%.
4. Employee Benefits.
<PAGE>
4.1 Stock Options. The Executive shall be entitled to the benefits
of an Option Agreement (the "Option Agreement"), which such Option Agreement
shall be drafted subsequent to the signing of this Agreement, and which Option
Agreement shall contain terms substantially similar to the Option Term Sheet, a
copy of which is attached hereto as Appendix A. The Executive shall not be
eligible to receive any stock option or other equity incentive other than as
described in this Section 4.1.
4.2 Employee Benefit Programs, Plans and Practices. The Company
shall provide the Executive while employed hereunder with coverage under all
welfare benefit programs, plans and practices (commensurate with his position
in the Company and to the extent permitted under any employee benefit plan) in
accordance with the terms thereof, which the Company makes available to its
senior executives. In addition, the Company shall provide substantially
similar benefits as provided under The Birmingham Steel Corporation Management
Security Plan (the "Management Security Plan") dated as of July 27, 1993;
provided, however, that such benefits shall be subject to the same terms and
conditions as under the Management Security Plan; provided, further, that the
Executive shall be given credit for his Years of Employment (as such term is
defined in the Management Security Plan) at Birmingham Steel, which such
employment began January 1, 1994, without contribution by the Executive for
years prior to the commencement date of employment hereunder.
4.3 Vacation. The Executive shall be entitled to twenty (20)
business days paid vacation each calendar year, which shall be taken at such
times as are consistent with the Executive's responsibilities hereunder. For
any calendar year in which the Executive is not employed for the entire period
of such calendar year, the Executive's vacation days shall be prorated pursuant
to the following formula: twenty multiplied by a fraction, the numerator of
which is the number of days during such calendar year that the Executive has
been actively employed by the Company and the denominator of which is 365. Any
<PAGE>
vacation days not taken by March 31 of the following year shall be forfeited
without pay.
4.4 Additional Perquisites. During the Executive's employment
hereunder, the Company shall provide the Executive with (i) term life insurance
in an amount equal to two times Base Salary; (ii) payment for initiation fees
at a country club; (iii) the right to participate in any 401(k) plan which the
Company may establish and (iv) long-term disability coverage providing a
monthly benefit of $12,500.
5. Expenses. Subject to prevailing Company policy or such
guidelines as may be established by the CEO, the Company will reimburse the
Executive for all reasonable expenses incurred by the Executive in carrying out
his duties.
<PAGE>
6. Termination of Employment.
6.1 Termination Not for Cause or for Good Reason. (a) The Company
or Executive may terminate the Executive's Term of Employment at any time for
any reason by written notice. If the Executive's employment is terminated (i)
by the Company other than for Cause (as defined in Section 6.2(b) hereof),
Disability (as defined in Section 6.3 hereof) or death or (ii) by the Executive
for Good Reason (as defined in Section 6.1(b) hereof) prior to the end of the
Initial Term or any Renewal Term, the Company shall continue to pay Executive's
Base Salary and the Minimum Bonus for the longer of (i) the remainder of the
Term of Employment as in effect immediately prior to such termination or (ii)
one year, with such payments to be made in accordance with the terms of
Sections 3.1 and 3.2. In addition, Executive shall receive such payments, if
any, under applicable plans or programs to which he is entitled pursuant to the
terms of such plans or programs.
(b) For purposes of this Agreement, "Good Reason" shall mean any of
the following (without Executive's express prior written consent):
(i) A reduction by the Company in Executive's Base Salary or
material reduction in bonus opportunities; or
(ii) A substantial diminution or material adverse change in the
Executive's duties, responsibilities or reporting responsibility, unless
due to a promotion or increased responsibility.
6.2 Voluntary Termination by the Executive; Discharge for Cause.
(a) In the event that the Executive's employment is terminated (i) by the
Company for Cause, as hereinafter defined or (ii) by the Executive other than
for Good Reason, Disability or death, the Executive shall only be entitled to
receive (i) any Base Salary accrued but unpaid prior to such termination and
(ii) any benefits provided under the employee benefit programs, plans and
practices referred to in Section 4.2 hereof, in accordance with their terms.
After the termination of the Executive's employment under this Section 6.2, the
obligations of the Company under this Agreement to make any further payments,
<PAGE>
or provide any benefits specified herein, to the Executive shall thereupon
cease and terminate.
(b) As used herein, the term "Cause" shall be limited to (i) willful
gross misconduct by the Executive in the performance of his duties hereunder,
(ii) willful gross neglect by the Executive of his duties hereunder (other than
due to Disability, as such term is defined in Section 6.3 hereof) or repeated
and willful failure to follow reasonable instructions of the CEO, (iii) any
breach of the provisions of Section 11 of this Agreement by the Executive or
(iv) conviction or plea of guilty or nolo contendere by the Executive to any
felony (or indictable offense). Termination of the Executive pursuant to this
Section 6.2 shall be made by delivery to the Executive of written notice, given
at least 30 days prior to such Termination, from the CEO specifying the
particulars of the conduct by the Executive set forth in any of clauses (i)
through (iv) above. Termination shall be effected by the CEO at a meeting at
which the Executive shall have had the opportunity (along with his counsel) to
be heard, unless within 30 days after receiving such notice, the Executive
shall have cured Cause to the reasonable satisfaction of the CEO; provided,
however, that no cure shall be possible for (A) any breach of Section 11 of
this Agreement by the Executive or (B) a conviction or plea of nolo contendere
by the Executive to any felony (or indictable offense).
6.3 Disability. In the event of the Disability (as defined below)
of the Executive during the Term of Employment, the Term of Employment and the
obligation of the Company to make payments under Section 3 shall, except for
earned but unpaid salary and bonuses, cease six months after the date the
Executive's Disability occurs if either the Company or the Executive has given
notice of termination for reasons of Disability or, if later, the date the
Executive becomes entitled to benefits under the Company's long term disability
program with respect to such Disability. The term "Disability," for purposes
of this Agreement, shall mean the Executive's absence from the full-time
<PAGE>
performance of the Executive's duties pursuant to a determination made in
accordance with the Company's disability plan that the Executive is disabled as
a result of incapacity due to physical or mental illness that lasts for at
least six months.
6.4 Death. In the event of the Executive's death during his Term of
Employment hereunder or at any time thereafter while payments are still owing
to the Executive under the terms of this Agreement, all obligations of the
Company to make any further payments, other than the obligation to pay any
accrued but unpaid Base Salary and a pro rata share of the prior year's Annual
Bonus, shall terminate upon the Executive's death, and benefits shall become
payable under the Company's life and accidental death insurance program in
accordance with its terms.
6.5 No Further Notice, Compensation or Indemnity. The Executive
understands and agrees that he shall not be entitled to any further notice,
compensation or indemnity upon Termination of Employment under this Agreement
other than amounts specified in this Section 6 and the Option Shares as set
forth in Appendix A hereto. Executive shall not have any obligation to seek
comparable employment following such termination or resignation; provided,
however, that any payment hereunder shall be offset by any compensation the
Executive earns with a new employer or from self-employment.
6.6 The Executive's Duty to Provide Materials. Upon the termination
of the Term of Employment for any reason, the Executive or his estate shall
surrender to the Company all correspondence, letters, files, contracts, mailing
lists, customer lists, advertising materials, ledgers, supplies, equipment,
checks, and all other materials and records of any kind that are the property
of the Company or any of its subsidiaries or affiliates, that may be in the
Executive's possession or under his control, including all copies of any of the
foregoing; provided, however, the Executive shall not be required to surrender
<PAGE>
his personal rolodex, telephone book and personal materials acquired by the
Executive prior to the date hereof.
7. Notices. All notices or communications hereunder shall be in
writing, addressed as follows:
To the Company:
c/o The Blackstone Group
345 Park Avenue, 31st Floor
New York, New York 10154
Attention: Mikael Salovaara
with a copy to:
Alvin H. Brown, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
To Executive:
John G. Asimou
31910 Lake Road
Avon Lake, Ohio 44012
with a copy to:
Mary Ann Jorgenson, Esq.
Squire Sanders & Dempsey
127 Public Square
Cleveland, Ohio 44114
Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the third business day after the
actual date of mailing shall constitute the time at which notice was given.
8. Separability; Legal Fees. If any provision of this Agreement
shall be declared to be invalid or unenforceable, in whole or in part, such
invalidity or unenforceability shall not affect the remaining provisions hereof
which shall remain in full force and effect. Each party shall bear the costs
of any legal fees and other fees and expenses which may be incurred in respect
of enforcing its respective rights under this Agreement.
<PAGE>
9. Assignment. This contract shall be binding upon and inure to the
benefit of the heirs and representatives of the Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights or
obligations hereunder shall be assignable or otherwise subject to hypothecation
by the Executive (except by will or, in the case of the Options, by trust for
the benefit of the Executive's spouse and/or children or by operation of the
laws of intestate succession) or by the Company, except that the Company may
assign this Agreement to any successor (whether by merger, purchase or
otherwise) to all or substantially all of the stock, assets or businesses of
the Company, if such successor expressly agrees to assume the obligations of
the Company hereunder.
10. Amendment. This Agreement may only be amended by written
agreement of the parties hereto.
11. Nondisclosure of Confidential Information; Non-Competition. (a)
The Executive shall not, without the prior written consent of the Company, use,
divulge, disclose or make accessible to any other person, firm, partnership,
corporation or other entity any Confidential Information pertaining to the
business of the Company or any of its affiliates, except (i) while employed by
the Company, in the business of and for the benefit of the Company, or
(ii) when required to do so by a court of competent jurisdiction, by any
governmental agency having supervisory authority over the business of the
Company, or by any administrative body or legislative body (including a
committee thereof) with jurisdiction to order the Executive to divulge,
disclose or make accessible such information. For purposes of this Section
11(a), "Confidential Information" shall mean non-public information concerning
the financial data, strategic business plans, product development (or other
proprietary product data), customer lists, marketing plans and other non-
public, proprietary and confidential information of the Company, Bliss &
Laughlin Industries Inc. or their respective affiliates or customers, that, in
<PAGE>
any case, is not otherwise available to the public (other than by the
Executive's breach of the terms hereof).
(b) In consideration of the Company's obligations under this
Agreement the Executive agrees that during the period of his employment
hereunder and for a period of twelve (12) months thereafter, without the prior
written consent of the Board, (A) he will not, directly or indirectly, either
as principal, manager, agent, consultant, officer, stockholder, partner,
investor, lender or employee or in any other capacity, carry on, be engaged in
or have any financial interest in, any business which is in competition with
the business of the Company and (B) he shall not, on his own behalf or on
behalf of any person, firm or company, directly or indirectly, solicit or offer
employment to any person who has been employed by the Company at any time
during the 12 months immediately preceding such solicitation.
(c) For purposes of this Section 11, a business shall be deemed to
be in competition with the Company if it is principally involved in the
purchase, sale or other dealing in any property or the rendering of any service
purchased, sold, dealt in or rendered by the Company as a part of the business
of the Company within the same geographic area in which the Company effects
such purchases, sales or dealings or renders such services. Nothing in this
Section 11 shall be construed so as to preclude the Executive from investing in
any publicly or privately held company, provided the Executive's beneficial
ownership of any class of such company's securities does not exceed 1% of the
outstanding securities of such class.
(d) The Executive agrees that this covenant not to compete is
reasonable under the circumstances and will not interfere with his ability to
earn a living or to otherwise meet his financial obligations. The Executive
and the Company agree that if in the opinion of any court of competent
jurisdiction such restraint is not reasonable in any respect, such court shall
have the right, power and authority to excise or modify such provision or
<PAGE>
provisions of this covenant as to the court shall appear not reasonable and to
enforce the remainder of the covenant as so amended. The Executive agrees that
any breach of the covenants contained in this Section 11 would irreparably
injure the Company. Accordingly, the Executive agrees that the Company may, in
addition to pursuing any other remedies it may have in law or in equity, cease
making any payments otherwise required by this Agreement and obtain an
injunction against the Executive from any court having jurisdiction over the
matter restraining any further violation of this Agreement by the Executive.
12. Beneficiaries; References. The Executive shall be entitled to
select (and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following the Executive's death, and may change such election, in
either case by giving the Company written notice thereof. In the event of the
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to the Executive shall be deemed, where appropriate, to refer to
his beneficiary, estate or other legal representative. Any reference to the
masculine gender in this Agreement shall include, where appropriate, the
feminine.
13. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section 13 are in addition to the survivorship provisions of
any other section of this Agreement.
14. Arbitration. Except as otherwise provided in Section 11(d)
hereof, any dispute or controversy arising under or in connection with this
Agreement shall be resolved by binding arbitration held in the Commonwealth of
Pennsylvania and conducted in accordance with the commercial arbitration rules
of the American Arbitration Association in effect at the time of the
arbitration. Each party shall bear its own expenses in connection with any
<PAGE>
such arbitration and joint expenses shall be borne by both parties in equal
portions.
15. Governing Law. This Agreement shall be construed, interpreted
and governed in accordance with the laws of the Commonwealth of Pennsylvania,
without reference to rules relating to conflicts of law.
16. Effect on Prior Agreements. This Agreement contains the entire
understanding between the parties hereto and supersedes in all respects any
prior or other agreement or understanding, both written and oral, between the
Company, any affiliate of the Company or any predecessor of the Company or
affiliate of the Company and the Executive.
17. Withholding. The Company shall be entitled to withhold from
payment any amount of withholding required by law.
18. Survival. Notwithstanding the expiration of the term of this
Agreement, the provisions of Section 11 hereunder shall remain in effect as
long as is necessary to give effect thereto.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
COMPANY
By_______________________
Name:
Title:
________________________
John G. Asimou
EMPLOYMENT AGREEMENT
AGREEMENT, made November 27, 1996 by and between BAR TECHNOLOGIES
INC., a Delaware corporation (the "Company") and BEN L. BISHOP (the
"Executive").
RECITALS
In order to induce the Executive to serve as the Vice President,
Commercial, Hot Rolled Bar Products of the Company, the Company desires to
provide the Executive with compensation and other benefits on the terms and
conditions set forth in this Agreement.
The Executive is willing to accept such employment and perform
services for the Company, on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as follows:
1. Employment.
1.1 Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the Term hereof as the Vice
President, Commercial, Hot Rolled Bar Products. In his capacity as the Vice
President, Commercial, Hot Rolled Bar Products of the Company, the Executive
shall report to the Chief Executive Officer of the Company (the "CEO") and
shall have the customary powers, responsibilities and authorities of vice
presidents, commercial, of hot rolled bar products of corporations of the size,
type and nature of the Company, as it exists from time to time, and as are
assigned by the CEO.
1.2 Subject to the terms and conditions of this Agreement, the
Executive hereby accepts employment as the Vice President, Commercial, Hot
Rolled Bar Products of the Company commencing as of December 1, 1996, and
agrees to devote his full business time and efforts to the performance of
services, duties and responsibilities in connection therewith, subject at all
times to review and control of the CEO. During the Term of Employment, the
Executive also agrees to serve, if elected, as an officer and/or director of
any Subsidiary of the Company, without the payment of any additional
compensation therefor.
1.3 Nothing in this Agreement shall preclude the Executive from
engaging in charitable and community affairs, from managing any passive
investment (i.e., an investment with respect to which the Executive is in no
way involved with the management or operation of the entity in which the
Executive has invested) made by him in publicly traded equity securities or
other property (provided that no such investment may exceed 1% of the equity of
any entity, without the prior approval of the CEO) or from serving, subject to
the prior approval of the CEO, as a member of boards of directors or as a
trustee of any other corporation, association or entity, to the extent that any
of the above activities do not interfere with the performance of his duties
hereunder. For purposes of the preceding sentence, any approval by the CEO
required therein shall not be unreasonably withheld.
2. Term of Employment. The Executive's term of employment under
this Agreement (the "Term of Employment") shall commence on December 1, 1996
<PAGE>
and, subject to the terms hereof, shall terminate on the earlier of (i)
September 30, 1999 (the "Initial Term") or (ii) termination of the Executive's
employment pursuant to this Agreement; provided, however, that subsequent to
the Initial Term, the Executive's Term of Employment under this Agreement shall
automatically renew annually for one year renewal terms (the "Renewal Term");
unless the Company shall deliver to the Executive or the Executive shall
deliver to the Company written notice, at least 90 days prior to the expiration
of the Initial Term or any Renewal Term, that the Term of Employment shall not
be extended, in which case the Term of Employment will end at its then
scheduled expiration date and shall not be further extended except by written
agreement of the Company and the Executive.
3. Compensation.
3.1 Salary. During the Initial Term of the Executive's employment
under the terms of this Agreement, the Company shall pay Executive a base
salary ("Base Salary") at the rate of not less than $165,000 per annum. Base
Salary shall be payable in accordance with the ordinary payroll practices of
the Company. During the Term of Employment, the CEO shall, in good faith,
review and, if determined by the CEO to be appropriate, increase the
Executive's salary at least annually and in accordance with the Company's
customary procedures and practices regarding the salaries of senior executives,
which procedures and practices, for example, will include a review of the
performance of the Company, and the Executive and any increase in the cost of
living during the relevant period. Increases in the rate of salary, once
granted, shall not be subject to revocation or decrease thereafter.
3.2 Annual Bonus. In addition to his base salary, the Executive
shall be eligible to receive an annual bonus (the "Annual Bonus"). Annual
Bonus amounts payable to the Executive shall be determined in the sole
discretion of the CEO and those members of the Board of Directors who were
nominated and elected at the request of Blackstone. Subject to the foregoing,
the Annual Bonus shall be determined in accordance with the Company's customary
procedures and practices regarding bonus awards to senior executives, which
procedures and practices, for example, shall include an evaluation of the
Company's progress in meeting its cash flow targets during the relevant period;
provided, however, the Annual Bonus shall not be less than $55,000 for the
fiscal years ending September 30, 1997 and September 30, 1998 (the "Minimum
Bonus"). If EBITDA (as such term is defined in Appendix A attached hereto)
equals or exceeds the EBITDA targets, as set forth in the "Projections" section
of the Registration Statement of the Company dated as of August 1, 1996 (the
"Registration Statement"), for any fiscal year under this Agreement, the Annual
Bonus shall be at least $90,000; provided, however, that such methodology for
the determination of the Annual Bonus shall only be utilized until such time as
a formula based on increase in shareholder value is mutually agreed upon by the
parties hereto; provided, further, if due to conditions beyond the Executive's
control, the EBITDA targets are not met for any fiscal year during the Term of
this Agreement, or targets are not met under such other methodology as is being
utilized for any fiscal year during the Term of this Agreement, the CEO and the
Board, in their sole discretion, may override such targets, and award the
Executive an Annual Bonus irrespective of the achievement of such targets.
"Blackstone" shall mean, collectively, Blackstone Capital Partners II Merchant
Banking Fund L.P., Blackstone Offshore Capital Partners II L.P., Blackstone
Family Investment Partnership II L.P., The Blackstone Group L.P. and their
affiliates.
<PAGE>
The Annual Bonus shall be payable as soon as practicable after
September 30 of each fiscal year in which such Annual Bonus was earned (the
"Bonus Term"); but in any event, the Annual Bonus shall be paid no later than
90 business days following the end of the Bonus Term; provided, however, no
Annual Bonus shall be payable unless the Executive is employed on the last day
of such Bonus Term. The proviso in the previous sentence shall not apply if
the Executive's employment is terminated pursuant to Section 6.1 of this
Agreement.
3.3 Signing Bonus. Within 30 days after the Executive's Term of
Employment commences, the Company shall pay the Executive a signing bonus of
$50,000 (the "Signing Bonus"). If the Executive resigns or the Executive's
Term of Employment is terminated for Cause (as defined in Section 6.2(b)
hereof), the Executive shall immediately repay the following portion of the
Signing Bonus to the Company: if such resignation or termination occurs (i) on
or before September 30, 1997, 100%; (ii) after September 30, 1997 but on or
before September 30, 1998, 66.67%; or (iii) after September 30, 1998 but on or
before September 30, 1999, 33.33%.
4. Employee Benefits.
4.1 Stock Options. The Executive shall be entitled to the benefits
of an Option Agreement (the "Option Agreement"), which such Option Agreement
shall be drafted subsequent to the signing of this Agreement, and which Option
Agreement shall contain terms substantially similar to the Option Term Sheet, a
copy of which is attached hereto as Appendix A. The Executive shall not be
eligible to receive any stock option or other equity incentive other than as
described in this Section 4.1.
4.2 Employee Benefit Programs, Plans and Practices. The Company
shall provide the Executive while employed hereunder with coverage under all
welfare benefit programs, plans and practices (commensurate with his position
in the Company and to the extent permitted under any employee benefit plan) in
accordance with the terms thereof, which the Company makes available to its
senior executives.
4.3 Vacation. The Executive shall be entitled to twenty (20)
business days paid vacation each calendar year, which shall be taken at such
times as are consistent with the Executive's responsibilities hereunder. For
any calendar year in which the Executive is not employed for the entire period
of such calendar year, the Executive's vacation days shall be prorated pursuant
to the following formula: twenty multiplied by a fraction, the numerator of
which is the number of days during such calendar year that the Executive has
been actively employed by the Company and the denominator of which is 365. Any
vacation days not taken by March 31 of the following year shall be forfeited
without pay.
4.4 Additional Perquisites. During the Executive's employment
hereunder, the Company shall provide the Executive with (i) term life insurance
in an amount equal to two times Base Salary; (ii) payment for initiation fees
at a country club; (iii) the right to participate in any 401(k) plan which the
Company may establish; (iv) long-term disability coverage providing a monthly
benefit of $10,000 and (v) the use of a company car.
5. Expenses. Subject to prevailing Company policy or such
guidelines as may be established by the CEO, the Company will reimburse the
<PAGE>
Executive for all reasonable expenses incurred by the Executive in carrying out
his duties.
6. Termination of Employment.
6.1 Termination Not for Cause or for Good Reason. (a) The Company
or Executive may terminate the Executive's Term of Employment at any time for
any reason by written notice. If the Executive's employment is terminated (i)
by the Company other than for Cause (as defined in Section 6.2(b) hereof),
Disability (as defined in Section 6.3 hereof) or death or (ii) by the Executive
for Good Reason (as defined in Section 6.1(b) hereof) prior to the end of the
Initial Term or any Renewal Term, the Company shall continue to pay Executive's
Base Salary and the Minimum Bonus for the longer of (i) the remainder of the
Term of Employment as in effect immediately prior to such termination or (ii)
one year, with such payments to be made in accordance with the terms of
Sections 3.1 and 3.2. In addition, Executive shall receive such payments, if
any, under applicable plans or programs to which he is entitled pursuant to the
terms of such plans or programs.
(b) For purposes of this Agreement, "Good Reason" shall mean any of
the following (without Executive's express prior written consent):
(i) A reduction by the Company in Executive's Base Salary or
material reduction in bonus opportunities; or
(ii) A substantial diminution or material adverse change in the
Executive's duties, responsibilities or reporting responsibility, unless due to
a promotion or increased responsibility.
6.2 Voluntary Termination by the Executive; Discharge for Cause.
(a) In the event that the Executive's employment is terminated (i) by the
Company for Cause, as hereinafter defined or (ii) by the Executive other than
for Good Reason, Disability or death, the Executive shall only be entitled to
receive (i) any Base Salary accrued but unpaid prior to such termination and
(ii) any benefits provided under the employee benefit programs, plans and
practices referred to in Section 4.2 hereof, in accordance with their terms.
After the termination of the Executive's employment under this Section 6.2, the
obligations of the Company under this Agreement to make any further payments,
or provide any benefits specified herein, to the Executive shall thereupon
cease and terminate.
(b) As used herein, the term "Cause" shall be limited to (i) willful
gross misconduct by the Executive in the performance of his duties hereunder,
(ii) willful gross neglect by the Executive of his duties hereunder (other than
due to Disability, as such term is defined in Section 6.3 hereof) or repeated
and willful failure to follow reasonable instructions of the CEO, (iii) any
breach of the provisions of Section 11 of this Agreement by the Executive or
(iv) conviction or plea of guilty or nolo contendere by the Executive to any
felony (or indictable offense). Termination of the Executive pursuant to this
Section 6.2 shall be made by delivery to the Executive of written notice, given
at least 30 days prior to such Termination, from the CEO specifying the
particulars of the conduct by the Executive set forth in any of clauses (i)
through (iv) above. Termination shall be effected by the CEO at a meeting at
which the Executive shall have had the opportunity (along with his counsel) to
be heard, unless within 30 days after receiving such notice, the Executive
shall have cured Cause to the reasonable satisfaction of the CEO; provided,
however, that no cure shall be possible for (A) any breach of Section 11 of
<PAGE>
this Agreement by the Executive or (B) a conviction or plea of nolo contendere
by the Executive to any felony (or indictable offense).
6.3 Disability. In the event of the Disability (as defined below)
of the Executive during the Term of Employment, the Term of Employment and the
obligation of the Company to make payments under Section 3 shall, except for
earned but unpaid salary and bonuses, cease six months after the date the
Executive's Disability occurs if either the Company or the Executive has given
notice of termination for reasons of Disability or, if later, the date the
Executive becomes entitled to benefits under the Company's long term disability
program with respect to such Disability. The term "Disability," for purposes
of this Agreement, shall mean the Executive's absence from the full-time
performance of the Executive's duties pursuant to a determination made in
accordance with the Company's disability plan that the Executive is disabled as
a result of incapacity due to physical or mental illness that lasts for at
least six months.
6.4 Death. In the event of the Executive's death during his Term of
Employment hereunder or at any time thereafter while payments are still owing
to the Executive under the terms of this Agreement, all obligations of the
Company to make any further payments, other than the obligation to pay any
accrued but unpaid Base Salary and a pro rata share of the prior year's Annual
Bonus, shall terminate upon the Executive's death, and benefits shall become
payable under the Company's life and accidental death insurance program in
accordance with its terms.
6.5 No Further Notice, Compensation or Indemnity. The Executive
understands and agrees that he shall not be entitled to any further notice,
compensation or indemnity upon Termination of Employment under this Agreement
other than amounts specified in this Section 6 and the Option Shares as set
forth in Appendix A hereto. Executive shall not have any obligation to seek
comparable employment following such termination or resignation; provided,
however, that any payment hereunder shall be offset by any compensation the
Executive earns with a new employer or from self-employment.
6.6 The Executive's Duty to Provide Materials. Upon the termination
of the Term of Employment for any reason, the Executive or his estate shall
surrender to the Company all correspondence, letters, files, contracts, mailing
lists, customer lists, advertising materials, ledgers, supplies, equipment,
checks, and all other materials and records of any kind that are the property
of the Company or any of its subsidiaries or affiliates, that may be in the
Executive's possession or under his control, including all copies of any of the
foregoing; provided, however, the Executive shall not be required to surrender
his personal rolodex, telephone book and personal materials acquired by the
Executive prior to the date hereof.
7. Notices. All notices or communications hereunder shall be in
writing, addressed as follows:
To the Company:
Bar Technologies Inc.
227 Franklin St., Suite 300
Johnstown, PA 15901
Attention: Thomas N. Tyrrell
with a copy to:
<PAGE>
Alvin H. Brown, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
To Executive:
Ben L. Bishop
1948 Lexington Ave.
Mansfield, OH 44907
with a copy to:
Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the third business day after the
actual date of mailing shall constitute the time at which notice was given.
8. Separability; Legal Fees. If any provision of this Agreement
shall be declared to be invalid or unenforceable, in whole or in part, such
invalidity or unenforceability shall not affect the remaining provisions hereof
which shall remain in full force and effect. Each party shall bear the costs
of any legal fees and other fees and expenses which may be incurred in respect
of enforcing its respective rights under this Agreement.
9. Assignment. This contract shall be binding upon and inure to the
benefit of the heirs and representatives of the Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights or
obligations hereunder shall be assignable or otherwise subject to hypothecation
by the Executive (except by will or, in the case of the Options, by trust for
the benefit of the Executive's spouse and/or children or by operation of the
laws of intestate succession) or by the Company, except that the Company may
assign this Agreement to any successor (whether by merger, purchase or
otherwise) to all or substantially all of the stock, assets or businesses of
the Company, if such successor expressly agrees to assume the obligations of
the Company hereunder.
10. Amendment. This Agreement may only be amended by written
agreement of the parties hereto.
11. Nondisclosure of Confidential Information; Non-Competition. (a)
The Executive shall not, without the prior written consent of the Company, use,
divulge, disclose or make accessible to any other person, firm, partnership,
corporation or other entity any Confidential Information pertaining to the
business of the Company or any of its affiliates, except (i) while employed by
the Company, in the business of and for the benefit of the Company, or (ii)
when required to do so by a court of competent jurisdiction, by any
governmental agency having supervisory authority over the business of the
Company, or by any administrative body or legislative body (including a
committee thereof) with jurisdiction to order the Executive to divulge,
disclose or make accessible such information. For purposes of this Section
11(a), "Confidential Information" shall mean non-public information concerning
the financial data, strategic business plans, product development (or other
<PAGE>
proprietary product data), customer lists, marketing plans and other non-
public, proprietary and confidential information of the Company, Bliss &
Laughlin Industries Inc. or their respective affiliates or customers, that, in
any case, is not otherwise available to the public (other than by the
Executive's breach of the terms hereof).
(b) In consideration of the Company's obligations under this
Agreement the Executive agrees that during the period of his employment
hereunder and for a period of twelve (12) months thereafter, without the prior
written consent of the Board, (A) he will not, directly or indirectly, either
as principal, manager, agent, consultant, officer, stockholder, partner,
investor, lender or employee or in any other capacity, carry on, be engaged in
or have any financial interest in, any business which is in competition with
the business of the Company and (B) he shall not, on his own behalf or on
behalf of any person, firm or company, directly or indirectly, solicit or offer
employment to any person who has been employed by the Company at any time
during the 12 months immediately preceding such solicitation.
(c) For purposes of this Section 11, a business shall be deemed to
be in competition with the Company if it is principally involved in the
purchase, sale or other dealing in any property or the rendering of any service
purchased, sold, dealt in or rendered by the Company as a part of the business
of the Company within the same geographic area in which the Company effects
such purchases, sales or dealings or renders such services. Nothing in this
Section 11 shall be construed so as to preclude the Executive from investing in
any publicly or privately held company, provided the Executive's beneficial
ownership of any class of such company's securities does not exceed 1% of the
outstanding securities of such class.
(d) The Executive agrees that this covenant not to compete is
reasonable under the circumstances and will not interfere with his ability to
earn a living or to otherwise meet his financial obligations. The Executive
and the Company agree that if in the opinion of any court of competent
jurisdiction such restraint is not reasonable in any respect, such court shall
have the right, power and authority to excise or modify such provision or
provisions of this covenant as to the court shall appear not reasonable and to
enforce the remainder of the covenant as so amended. The Executive agrees that
any breach of the covenants contained in this Section 11 would irreparably
injure the Company. Accordingly, the Executive agrees that the Company may, in
addition to pursuing any other remedies it may have in law or in equity, cease
making any payments otherwise required by this Agreement and obtain an
injunction against the Executive from any court having jurisdiction over the
matter restraining any further violation of this Agreement by the Executive.
12. Beneficiaries; References. The Executive shall be entitled to
select (and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following the Executive's death, and may change such election, in
either case by giving the Company written notice thereof. In the event of the
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to the Executive shall be deemed, where appropriate, to refer to
his beneficiary, estate or other legal representative. Any reference to the
masculine gender in this Agreement shall include, where appropriate, the
feminine.
13. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
<PAGE>
necessary to the intended preservation of such rights and obligations. The
provisions of this Section 13 are in addition to the survivorship provisions of
any other section of this Agreement.
14. Arbitration. Except as otherwise provided in Section 11(d)
hereof, any dispute or controversy arising under or in connection with this
Agreement shall be resolved by binding arbitration held in the Commonwealth of
Pennsylvania and conducted in accordance with the commercial arbitration rules
of the American Arbitration Association in effect at the time of the
arbitration. Each party shall bear its own expenses in connection with any
such arbitration and joint expenses shall be borne by both parties in equal
portions.
15. Governing Law. This Agreement shall be construed, interpreted
and governed in accordance with the laws of the Commonwealth of Pennsylvania,
without reference to rules relating to conflicts of law.
16. Effect on Prior Agreements. This Agreement contains the entire
understanding between the parties hereto and supersedes in all respects any
prior or other agreement or understanding, both written and oral, between the
Company, any affiliate of the Company or any predecessor of the Company or
affiliate of the Company and the Executive.
17. Withholding. The Company shall be entitled to withhold from
payment any amount of withholding required by law.
18. Survival. Notwithstanding the expiration of the term of this
Agreement, the provisions of Section 11 hereunder shall remain in effect as
long as is necessary to give effect thereto.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
COMPANY
By: __________________________
Name: Thomas N. Tyrrell
Title: President & C.E.O.
__________________________
Ben L. Bishop
EMPLOYMENT AGREEMENT
AGREEMENT, made December 2, 1996 by and between BAR TECHNOLOGIES
INC., a Delaware corporation (the "Company") and FREDERICK L. DEICHERT (the
"Executive").
RECITALS
In order to induce the Executive to serve as the Vice President
Finance & Chief Financial Officer of the Company, the Company desires to
provide the Executive with compensation and other benefits on the terms and
conditions set forth in this Agreement.
The Executive is willing to accept such employment and perform
services for the Company, on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as follows:
1. Employment.
1.1 Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the Term hereof as the Vice President
Finance & Chief Financial Officer. In his capacity as the Vice President
Finance & Chief Financial Officer of the Company, the Executive shall report to
the Chief Executive Officer of the Company (the "CEO") and shall have the
customary powers, responsibilities and authorities of vice president finance &
chief financial officers of corporations of the size, type and nature of the
Company, as it exists from time to time, and as are assigned by the CEO.
1.2 Subject to the terms and conditions of this Agreement, the
Executive hereby accepts employment as the Vice President Finance & Chief
Financial Officer of the Company commencing as of December 2, 1996, and agrees
to devote his full business time and efforts to the performance of services,
duties and responsibilities in connection therewith, subject at all times to
review and control of the CEO. During the Term of Employment, the Executive
also agrees to serve, if elected, as an officer and/or director of any
Subsidiary of the Company, without the payment of any additional compensation
therefor.
1.3 Nothing in this Agreement shall preclude the Executive from
engaging in charitable and community affairs, from managing any passive
investment (i.e., an investment with respect to which the Executive is in no
way involved with the management or operation of the entity in which the
Executive has invested) made by him in publicly traded equity securities or
other property (provided that no such investment may exceed 1% of the equity of
any entity, without the prior approval of the CEO) or from serving, subject to
the prior approval of the CEO, as a member of boards of directors or as a
trustee of any other corporation, association or entity, to the extent that any
of the above activities do not interfere with the performance of his duties
hereunder. For purposes of the preceding sentence, any approval by the CEO
required therein shall not be unreasonably withheld.
2. Term of Employment. The Executive's term of employment under
this Agreement (the "Term of Employment") shall commence on December 2, 1996
and, subject to the terms hereof, shall terminate on the earlier of (i)
<PAGE>
September 30, 1999 (the "Initial Term") or (ii) termination of the Executive's
employment pursuant to this Agreement; provided, however, that subsequent to
the Initial Term, the Executive's Term of Employment under this Agreement shall
automatically renew annually for one year renewal terms (the "Renewal Term");
unless the Company shall deliver to the Executive or the Executive shall
deliver to the Company written notice, at least 90 days prior to the expiration
of the Initial Term or any Renewal Term, that the Term of Employment shall not
be extended, in which case the Term of Employment will end at its then
scheduled expiration date and shall not be further extended except by written
agreement of the Company and the Executive.
3. Compensation.
3.1 Salary. During the Initial Term of the Executive's employment
under the terms of this Agreement, the Company shall pay Executive a base
salary ("Base Salary") at the rate of not less than $145,000 per annum. Base
Salary shall be payable in accordance with the ordinary payroll practices of
the Company. During the Term of Employment, the CEO shall, in good faith,
review and, if determined by the CEO to be appropriate, increase the
Executive's salary at least annually and in accordance with the Company's
customary procedures and practices regarding the salaries of senior executives,
which procedures and practices, for example, will include a review of the
performance of the Company, and the Executive and any increase in the cost of
living during the relevant period. Increases in the rate of salary, once
granted, shall not be subject to revocation or decrease thereafter.
3.2 Annual Bonus. In addition to his base salary, the Executive
shall be eligible to receive an annual bonus (the "Annual Bonus"). Annual
Bonus amounts payable to the Executive shall be determined in the sole
discretion of the CEO and those members of the Board of Directors who were
nominated and elected at the request of Blackstone. Subject to the foregoing,
the Annual Bonus shall be determined in accordance with the Company's customary
procedures and practices regarding bonus awards to senior executives, which
procedures and practices, for example, shall include an evaluation of the
Company's progress in meeting its cash flow targets during the relevant period;
provided, however, the Annual Bonus shall not be less than $55,000 for the
fiscal years ending September 30, 1997 and September 30, 1998 (the "Minimum
Bonus"). If EBITDA (as such term is defined in Appendix A attached hereto)
equals or exceeds the EBITDA targets, as set forth in the "Projections" section
of the Registration Statement of the Company dated as of August 1, 1996 (the
"Registration Statement"), for any fiscal year under this Agreement, the Annual
Bonus shall be at least $85,000; provided, however, that such methodology for
the determination of the Annual Bonus shall only be utilized until such time as
a formula based on increase in shareholder value is mutually agreed upon by the
parties hereto; provided, further, if due to conditions beyond the Executive's
control, the EBITDA targets are not met for any fiscal year during the Term of
this Agreement, or targets are not met under such other methodology as is being
utilized for any fiscal year during the Term of this Agreement, the CEO and the
Board, in their sole discretion, may override such targets, and award the
Executive an Annual Bonus irrespective of the achievement of such targets.
"Blackstone" shall mean, collectively, Blackstone Capital Partners II Merchant
Banking Fund L.P., Blackstone Offshore Capital Partners II L.P., Blackstone
Family Investment Partnership II L.P., The Blackstone Group L.P. and their
affiliates.
The Annual Bonus shall be payable as soon as practicable after
September 30 of each fiscal year in which such Annual Bonus was earned (the
<PAGE>
"Bonus Term"); but in any event, the Annual Bonus shall be paid no later than
90 business days following the end of the Bonus Term; provided, however, no
Annual Bonus shall be payable unless the Executive is employed on the last day
of such Bonus Term. The proviso in the previous sentence shall not apply if
the Executive's employment is terminated pursuant to Section 6.1 of this
Agreement.
3.3 Reimbursement Bonus. Within 30 days after the Executive's Term
of Employment commences, the Company shall pay the Executive a reimbursement
bonus (the "Reimbursement Bonus"). The amount of the Reimbursement Bonus shall
equal the amount of certain out of pocket expenses incurred by Executive and
payable to Executive's former employer, Radel, Smith & Associates, as a result
of Executive's resignation; provided, however, that in no event shall the
Reimbursement Bonus exceed $12,000. If the Executive resigns or the
Executive's Term of Employment is terminated for Cause (as defined in Section
6.2(b) hereof), the Executive shall immediately repay the following portion of
the Signing Bonus to the Company: if such resignation or termination occurs
(i) on or before September 30, 1997, 100%; (ii) after September 30, 1997 but on
or before September 30, 1998, 66.67%; or (iii) after September 30, 1998 but on
or before September 30, 1999, 33.33%.
4. Employee Benefits.
4.1 Stock Options. The Executive shall be entitled to the benefits
of an Option Agreement (the "Option Agreement"), which such Option Agreement
shall be drafted subsequent to the signing of this Agreement, and which Option
Agreement shall contain terms substantially similar to the Option Term Sheet, a
copy of which is attached hereto as Appendix A. The Executive shall not be
eligible to receive any stock option or other equity incentive other than as
described in this Section 4.1.
4.2 Employee Benefit Programs, Plans and Practices. The Company
shall provide the Executive while employed hereunder with coverage under all
welfare benefit programs, plans and practices (commensurate with his position
in the Company and to the extent permitted under any employee benefit plan) in
accordance with the terms thereof, which the Company makes available to its
senior executives.
4.3 Vacation. The Executive shall be entitled to twenty (20)
business days paid vacation each calendar year, which shall be taken at such
times as are consistent with the Executive's responsibilities hereunder. For
any calendar year in which the Executive is not employed for the entire period
of such calendar year, the Executive's vacation days shall be prorated pursuant
to the following formula: twenty multiplied by a fraction, the numerator of
which is the number of days during such calendar year that the Executive has
been actively employed by the Company and the denominator of which is 365. Any
vacation days not taken by March 31 of the following year shall be forfeited
without pay.
4.4 Additional Perquisites. During the Executive's employment
hereunder, the Company shall provide the Executive with (i) term life insurance
in an amount equal to two times Base Salary; (ii) payment for initiation fees
at a country club; (iii) the right to participate in any 401(k) plan which the
Company may establish and (iv) long-term disability coverage providing a
monthly benefit of $10,000.
<PAGE>
5. Expenses. Subject to prevailing Company policy or such
guidelines as may be established by the CEO, the Company will reimburse the
Executive for all reasonable expenses incurred by the Executive in carrying out
his duties.
6. Termination of Employment.
6.1 Termination Not for Cause or for Good Reason. (a) The Company
or Executive may terminate the Executive's Term of Employment at any time for
any reason by written notice. If the Executive's employment is terminated (i)
by the Company other than for Cause (as defined in Section 6.2(b) hereof),
Disability (as defined in Section 6.3 hereof) or death or (ii) by the Executive
for Good Reason (as defined in Section 6.1(b) hereof) prior to the end of the
Initial Term or any Renewal Term, the Company shall continue to pay Executive's
Base Salary and the Minimum Bonus for the longer of (i) the remainder of the
Term of Employment as in effect immediately prior to such termination or (ii)
one year, with such payments to be made in accordance with the terms of
Sections 3.1 and 3.2. In addition, Executive shall receive such payments, if
any, under applicable plans or programs to which he is entitled pursuant to the
terms of such plans or programs.
(b) For purposes of this Agreement, "Good Reason" shall mean any of
the following (without Executive's express prior written consent):
(i) A reduction by the Company in Executive's Base Salary or
material reduction in bonus opportunities; or
(ii) A substantial diminution or material adverse change in the
Executive's duties, responsibilities or reporting responsibility, unless due to
a promotion or increased responsibility.
6.2 Voluntary Termination by the Executive; Discharge for Cause.
(a) In the event that the Executive's employment is terminated (i) by the
Company for Cause, as hereinafter defined or (ii) by the Executive other than
for Good Reason, Disability or death, the Executive shall only be entitled to
receive (i) any Base Salary accrued but unpaid prior to such termination and
(ii) any benefits provided under the employee benefit programs, plans and
practices referred to in Section 4.2 hereof, in accordance with their terms.
After the termination of the Executive's employment under this Section 6.2, the
obligations of the Company under this Agreement to make any further payments,
or provide any benefits specified herein, to the Executive shall thereupon
cease and terminate.
(b) As used herein, the term "Cause" shall be limited to (i) willful
gross misconduct by the Executive in the performance of his duties hereunder,
(ii) willful gross neglect by the Executive of his duties hereunder (other than
due to Disability, as such term is defined in Section 6.3 hereof) or repeated
and willful failure to follow reasonable instructions of the CEO, (iii) any
breach of the provisions of Section 11 of this Agreement by the Executive or
(iv) conviction or plea of guilty or nolo contendere by the Executive to any
felony (or indictable offense). Termination of the Executive pursuant to this
Section 6.2 shall be made by delivery to the Executive of written notice, given
at least 30 days prior to such Termination, from the CEO specifying the
particulars of the conduct by the Executive set forth in any of clauses (i)
through (iv) above. Termination shall be effected by the CEO at a meeting at
which the Executive shall have had the opportunity (along with his counsel) to
be heard, unless within 30 days after receiving such notice, the Executive
<PAGE>
shall have cured Cause to the reasonable satisfaction of the CEO; provided,
however, that no cure shall be possible for (A) any breach of Section 11 of
this Agreement by the Executive or (B) a conviction or plea of nolo contendere
by the Executive to any felony (or indictable offense).
6.3 Disability. In the event of the Disability (as defined below)
of the Executive during the Term of Employment, the Term of Employment and the
obligation of the Company to make payments under Section 3 shall, except for
earned but unpaid salary and bonuses, cease six months after the date the
Executive's Disability occurs if either the Company or the Executive has given
notice of termination for reasons of Disability or, if later, the date the
Executive becomes entitled to benefits under the Company's long term disability
program with respect to such Disability. The term "Disability," for purposes
of this Agreement, shall mean the Executive's absence from the full-time
performance of the Executive's duties pursuant to a determination made in
accordance with the Company's disability plan that the Executive is disabled as
a result of incapacity due to physical or mental illness that lasts for at
least six months.
6.4 Death. In the event of the Executive's death during his Term of
Employment hereunder or at any time thereafter while payments are still owing
to the Executive under the terms of this Agreement, all obligations of the
Company to make any further payments, other than the obligation to pay any
accrued but unpaid Base Salary and a pro rata share of the prior year's Annual
Bonus, shall terminate upon the Executive's death, and benefits shall become
payable under the Company's life and accidental death insurance program in
accordance with its terms.
6.5 No Further Notice, Compensation or Indemnity. The Executive
understands and agrees that he shall not be entitled to any further notice,
compensation or indemnity upon Termination of Employment under this Agreement
other than amounts specified in this Section 6 and the Option Shares as set
forth in Appendix A hereto. Executive shall not have any obligation to seek
comparable employment following such termination or resignation; provided,
however, that any payment hereunder shall be offset by any compensation the
Executive earns with a new employer or from self-employment.
6.6 The Executive's Duty to Provide Materials. Upon the termination
of the Term of Employment for any reason, the Executive or his estate shall
surrender to the Company all correspondence, letters, files, contracts, mailing
lists, customer lists, advertising materials, ledgers, supplies, equipment,
checks, and all other materials and records of any kind that are the property
of the Company or any of its subsidiaries or affiliates, that may be in the
Executive's possession or under his control, including all copies of any of the
foregoing; provided, however, the Executive shall not be required to surrender
his personal rolodex, telephone book and personal materials acquired by the
Executive prior to the date hereof.
7. Notices. All notices or communications hereunder shall be in
writing, addressed as follows:
To the Company:
Bar Technologies Inc.
227 Franklin St., Suite 300
Johnstown, PA 15901
Attention: Thomas N. Tyrrell
<PAGE>
with a copy to:
Alvin H. Brown, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
To Executive:
Frederick L. Deichert
904 Shearwood Drive
Perrysburg, OH 43551
with a copy to:
Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the third business day after the
actual date of mailing shall constitute the time at which notice was given.
8. Separability; Legal Fees. If any provision of this Agreement
shall be declared to be invalid or unenforceable, in whole or in part, such
invalidity or unenforceability shall not affect the remaining provisions hereof
which shall remain in full force and effect. Each party shall bear the costs
of any legal fees and other fees and expenses which may be incurred in respect
of enforcing its respective rights under this Agreement.
9. Assignment. This contract shall be binding upon and inure to the
benefit of the heirs and representatives of the Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights or
obligations hereunder shall be assignable or otherwise subject to hypothecation
by the Executive (except by will or, in the case of the Options, by trust for
the benefit of the Executive's spouse and/or children or by operation of the
laws of intestate succession) or by the Company, except that the Company may
assign this Agreement to any successor (whether by merger, purchase or
otherwise) to all or substantially all of the stock, assets or businesses of
the Company, if such successor expressly agrees to assume the obligations of
the Company hereunder.
10. Amendment. This Agreement may only be amended by written
agreement of the parties hereto.
11. Nondisclosure of Confidential Information; Non-Competition. (a)
The Executive shall not, without the prior written consent of the Company, use,
divulge, disclose or make accessible to any other person, firm, partnership,
corporation or other entity any Confidential Information pertaining to the
business of the Company or any of its affiliates, except (i) while employed by
the Company, in the business of and for the benefit of the Company, or (ii)
when required to do so by a court of competent jurisdiction, by any
governmental agency having supervisory authority over the business of the
Company, or by any administrative body or legislative body (including a
committee thereof) with jurisdiction to order the Executive to divulge,
disclose or make accessible such information. For purposes of this Section
<PAGE>
11(a), "Confidential Information" shall mean non-public information concerning
the financial data, strategic business plans, product development (or other
proprietary product data), customer lists, marketing plans and other non-
public, proprietary and confidential information of the Company, Bliss &
Laughlin Industries Inc. or their respective affiliates or customers, that, in
any case, is not otherwise available to the public (other than by the
Executive's breach of the terms hereof).
(b) In consideration of the Company's obligations under this
Agreement the Executive agrees that during the period of his employment
hereunder and for a period of twelve (12) months thereafter, without the prior
written consent of the Board, (A) he will not, directly or indirectly, either
as principal, manager, agent, consultant, officer, stockholder, partner,
investor, lender or employee or in any other capacity, carry on, be engaged in
or have any financial interest in, any business which is in competition with
the business of the Company and (B) he shall not, on his own behalf or on
behalf of any person, firm or company, directly or indirectly, solicit or offer
employment to any person who has been employed by the Company at any time
during the 12 months immediately preceding such solicitation.
(c) For purposes of this Section 11, a business shall be deemed to
be in competition with the Company if it is principally involved in the
purchase, sale or other dealing in any property or the rendering of any service
purchased, sold, dealt in or rendered by the Company as a part of the business
of the Company within the same geographic area in which the Company effects
such purchases, sales or dealings or renders such services. Nothing in this
Section 11 shall be construed so as to preclude the Executive from investing in
any publicly or privately held company, provided the Executive's beneficial
ownership of any class of such company's securities does not exceed 1% of the
outstanding securities of such class.
(d) The Executive agrees that this covenant not to compete is
reasonable under the circumstances and will not interfere with his ability to
earn a living or to otherwise meet his financial obligations. The Executive
and the Company agree that if in the opinion of any court of competent
jurisdiction such restraint is not reasonable in any respect, such court shall
have the right, power and authority to excise or modify such provision or
provisions of this covenant as to the court shall appear not reasonable and to
enforce the remainder of the covenant as so amended. The Executive agrees that
any breach of the covenants contained in this Section 11 would irreparably
injure the Company. Accordingly, the Executive agrees that the Company may, in
addition to pursuing any other remedies it may have in law or in equity, cease
making any payments otherwise required by this Agreement and obtain an
injunction against the Executive from any court having jurisdiction over the
matter restraining any further violation of this Agreement by the Executive.
12. Beneficiaries; References. The Executive shall be entitled to
select (and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following the Executive's death, and may change such election, in
either case by giving the Company written notice thereof. In the event of the
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to the Executive shall be deemed, where appropriate, to refer to
his beneficiary, estate or other legal representative. Any reference to the
masculine gender in this Agreement shall include, where appropriate, the
feminine.
<PAGE>
13. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section 13 are in addition to the survivorship provisions of
any other section of this Agreement.
14. Arbitration. Except as otherwise provided in Section 11(d)
hereof, any dispute or controversy arising under or in connection with this
Agreement shall be resolved by binding arbitration held in the Commonwealth of
Pennsylvania and conducted in accordance with the commercial arbitration rules
of the American Arbitration Association in effect at the time of the
arbitration. Each party shall bear its own expenses in connection with any
such arbitration and joint expenses shall be borne by both parties in equal
portions.
15. Governing Law. This Agreement shall be construed, interpreted
and governed in accordance with the laws of the Commonwealth of Pennsylvania,
without reference to rules relating to conflicts of law.
16. Effect on Prior Agreements. This Agreement contains the entire
understanding between the parties hereto and supersedes in all respects any
prior or other agreement or understanding, both written and oral, between the
Company, any affiliate of the Company or any predecessor of the Company or
affiliate of the Company and the Executive.
17. Withholding. The Company shall be entitled to withhold from
payment any amount of withholding required by law.
18. Survival. Notwithstanding the expiration of the term of this
Agreement, the provisions of Section 11 hereunder shall remain in effect as
long as is necessary to give effect thereto.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
COMPANY
By _______________________
Name: Thomas N. Tyrrell
Title: President & C.E.O.
_______________________
Frederick L. Deichert
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